Rachel Botsman has spent over a decade thinking about the "sharing economy." As an an author and a visiting academic at the University of Oxford, Saïd Business School, who researches how technology is transforming trust, she’s an authority on the subject. She's also one of Fast Company's Most Creative People. She is currently writing a book, due out next fall, about the new decentralized economies and how that has changed trust.
I recently chatted with her about what this means for the future of leadership. What follows is a transcript of our conversation. It has been edited for space and clarity.
Can you talk a bit about your current project and its background?
In 2009, I wrote What's Mine Is Yours about the so-called sharing economy. And there were really two aspects that always interested me about it. One was how you can take these idle assets and unlock their value through technology, and then the second was trust. This notion that technology could breed familiarity and enable strangers to trust one another was fascinating, and the start of something much bigger.
I started to research things like the blockchain and our relationship to artificial intelligence, and all these other technologies that transformed how we trust people, ideas, things, companies. I felt that there was a paradigm shift happening.
At the same time, it's hard to ignore the headlines that trust is really imploding. So whether it's banks, the media, government, churches . . . this institutional trust that is really important to society is disintegrating at an alarming rate. And so how do we trust people enough to get in a car with a total stranger and yet we don't trust a banking executive? So that's essentially what the book unpacks.
And what I've discovered through writing the book is that these systems aren't better—they still bump against human error and greed and market forces. It is very hard to have a decentralized system because you always end up with a center or a monopoly of power. What I find really frightening is this denial—and this is a leadership question—first of all [to accept] that trust is changing. And then the lack of organizations completely rethinking how you build trust, what you do with trust when it's destroyed, whether the basic principles are really changing.
Where did this new paradigm shift come from? Was it from these new companies creating different services? Or was it from more institutional distrust on the consumers’ part?
It's a transfer. So societies can't run without trust, which is a really basic point; it is social glue. If it disappears or dissipates in one way, it's going to rise up in another form. And this has really taken hold in financial services, in everything from peer-to-peer lending to crowdfunding to Bitcoin. The system breaks down and it makes people open to alternatives.
And then the second part is the technology. This technology to transfer assets without intermediaries, to build familiarity, to find social connections with people. This brings us together in ways that have never been possible before.
When you see banks like Goldman Sachs investing in blockchain technology or other similar corporate moves, is that an example of companies trying to keep up with paradigm shifts or institutions trying to cloak themselves in the popular nomenclature to stay relevant?
It comes from a place of fear. It comes from an understandable place, of not wanting to be disintermediated. It's like, ‘Can we embrace the technology that could be our greatest threat?’ Goldman Sachs is a really good example because the cryptocurrency they're developing, the blockchain, is private. It's inside their walls.
They're trying to take a culture—this institutional idea that you can control trust, that it can be top-down and be linear—and apply it to this distributive ledger. And that's where we're going to run into a lot of problems: The architecture doesn't match with the ideology.
You said that despite the distributed model, there is still centralization. What do you mean by that? Could that change business models in the coming years?
There are two very different examples that illustrate the same problem. One example is that you start off with networks and marketplaces like Airbnb, where it's meant to be a distribution of power—let's empower people to make money off their homes. And then a network monopoly results, where Airbnb controls that market. And then commercial landlords become the dominant players on the platform, and rent is driven up as an unintended consequence. So that's an example of a marketplace that results in a network monopoly.
A second example is the collapse of the DAO fund, the crowdfunding experiment they did on the blockchain with Ethereum. [Botsman is referring to the Ethereum project, which created a peer-to-peer blockchain digital contracts platform. It was hacked in 2016 to the tune of $50 million. To fix that, its creator, Vitalik Buterin, decided to do what’s called a "hard fork," which solved the hack by moving the funds, but it ostensibly went against the basic tenets the platform had originally created, which was being a decentralized platform where power lie exclusively with its users.]
And that's really interesting, because, what did they do? It ran into human problems, and Buterin decided on this hard fork. People had to make a choice: Do they stick with the original fund, or do they follow this new thing? And so even in these supposedly decentralized control systems, when something goes wrong, we still look for leadership. If you look at those 24 hours [when the hack first occurred], and everyone was saying ‘Where's Vitalik? What's Vitalik going to do?’ that's human nature.
So it's lovely to believe this libertarian ideal that you don't need a leader, you need a center, but it just doesn't work.
Do you think, organizationally and in a hierarchical sense, things will remain the same down the line, despite these new distributed economies?
This is where it ties to leadership. It really requires a different type of leadership where you understand how to get people to collaborate with different and sometimes misaligned interests. A good example of this is Gerard Ryle and his work with the ICIJ. He's the guy that got the 300 or so reporters to collaborate around the Panama Papers. They all work for their own media organizations; journalists like scoops. And yet he figured out how to get them to all work together. And he used complicated technology, but it was his leadership that meant everyone published on the same day.
What is frightening to me is I can count on my hand the number of people that really understand how to lead these types of systems.
In essence, does it take a new, very different kind of leadership in order to succeed with these decentralized systems?
That's exactly right. And many entrepreneurs I've met they think their role is playing digital God. And it's not. Yet that's what I find.
And then the other end of the spectrum is you speak to leaders at traditional brands—it's not a criticism, but I don't even know where to begin—who sort of form a blockchain team, and then they form a peer-to-peer marketplace team. Yet that's not changing the culture—that's not changing the way you interact with your customers.
If I were an entrepreneur looking to become a leader in this burgeoning sector, and I picked up your book and came upon your research, what is the biggest lesson you’d want me to learn?
As messy as humans are, technology cannot replace the role of humans in relationships. It's thinking about how you inject that humanness into the technology. You put people at the center; [understand] what that means without it being lip service. People are at the center of what you're doing, not the technology. What are the implications of that?