Trust

‘Trust’ is Francis Fukayama’s difficult second book. It’s hard to write a second book, if your first book is called ‘The End of History and the Last Man’. The end of history meant that, once the East turned West, there was no more international ideological conflict, just individuals competing with each other. It was history’s own grey goo. Fukayama has since recanted ‘The End of History’. He admits he should have called it ‘The End of an Era’. But hey, you gotta eat, it was a great title and, er, it looked right at the time.

‘Trust’ is a different kettle of fish. It’s more of a slow burner. It’s not so much of a time, more something that keeps coming up, all of the time.

Now Fukayama’s big idea here is that trust is good. You can measure economic development by trust. You can measure richer nations against poorer by the level of trust. It’s all good. A high correlation exists.

There’s a bizarre police procedural on the telly called ‘Numbers’. The lead detectives brother, dad, sister-in-law and uncle are all maths geeks. And as he discusses the case, the foppish haired but slightly too intense brother will suggest using a Bayesian filter to analyse the likely early action of the killer.

Now, you can take this at face value – and it’s pretty funny at face value. Or you can ask a Robert Prechter type of question – how does a populist maths geek program get made? The last time I saw a mathematician on telly, he was in black & white, and he had crumbs in his beard. Well, yes, it’s because of trust. And when ‘Numbers’ got commissioned, in 2006, geeks were great.

The last episode of Numbers I watched, the floppy haired maths guy suggested a tit-for-tat strategy with an assassin who promised to give up his scores. Tit-for-tat, as you know, is the way to solve the ‘failure of the commons’ problem. You trust first, and if the other person behaves well, you keep trusting. If they misbehave, you ‘tat’ – or punish them. All’s well if you make clear that’s what you’re doing – the opposition fall in line and behaves. Self preservation prevails. If you don’t pass on the information, well, it’s Dr Strangelove all over again.

Tit-for-tat, in the case of the assassin, did not work. The killer lied. The chisel faced, but tortured, mathematics genius then suggested tit-for-tit-for-tat. The idea behind this strategy is that. Once you’ve punished, yet the opposition has not responded by cooperating, well, be stern, think about it, but, well, give them another go. In repeated computer simulations, as in life, this works well. It certainly did in Numbers. It generally does in a successful society. On account of the general high level of trust.

But in the computer simulations tit-for-tit-for-tit-for-tat, that is one more level of trust, well, that is suboptimal. Forgive once, forgive twice, but three times, well, you’re hurting yourself. It strikes me that the financials are asking us to forgive them thrice. They want us to forgive them for their over-exuberance, er, ok. They want us to forgive them for their failure, well, er, maybe yes, ok. And they want us to forgive them for ‘maintaining confidence’ – the banking sector’s new economics of truth. Fine, most of the time. But when conditions are deteriorating materially again, well, personally I’m not into self harm.

The night before last, I stayed up ‘til 3am. And I’m ashamed to admit that there was no alcohol or drugs involved. I was reading David Einhorn’s ‘Fooling some of the people all of the time’. What turns this book from the good – something well written and financially wordly-wise, like the Zurich Axioms, to the great – is the moral truth of the thing. If most players in the world, in the face of abuse, are a bunch of ‘tits’, this guy is the ‘tat’. And he tells you why. In rather a lot of detail.

The question here, is how many people, faced with the third round of abuse from the financials, will turn from ‘tit’ to ‘tat’. My guess is that self preservation will rule. Most people, most of the time, don’t actually want to hurt themselves.