I see a few problems with trust networks that are not generally present in the markets. I’m glad that your experience was mostly positive, but I’m aware of many examples where things are more tricky. Part of it comes from two very different but common attitudes towards transactions between friends/family. Some people think that every work should be paid, always. Others expect and provide free help. These positions are clearly non-compatible and predictably lead to conflicts, especially when people don’t communicate their position clearly. They often think that their position is obviously right and don’t even consider the alternative until the conflict arises. Another problem is that in transactions with friends/relatives there’s often a pressure to work informally. Which is a risk—if they fuck it up you can’t even sue them. And it’s not that unlikely that they do—you probably did not select them based on their responsibility and their expertise in whatever field they work in. So you might lose all the resources AND hurt your relationship on top of it.
It’s not that these problems are completely unavoidable, but people do get burned. Some personal examples, so that I don’t just parrot stories I’ve read on the internet.
Extremely bad example. One of my relatives was technical director and de-facto co-owner of one local ISP. De jure he was nobody, he never got around to do all the paperwork—partly because he trusted his “friends”, partly because there were some complicated issues, partly because he is rather lazy. Years and years of no consequences, until they decided to sell the company. Guess who’s opinions was no considered and who got nothing out of the deal. I know, it’s extreme and it’s not only trust related, but these things do happen.
Somewhat good example. Back when I was working in e-shop, our courier got sick. We could not realistically hire replacement in time, and outsourcing would be extremely expensive. My boss asked our sysadmin to help the company out. I remember him discussing that decision with someone—“I know he would not decline, he is a nice guy, but he is too shy to name the fair price, and he would be disappointed if he does not get paid fairly”. He ended up paying him slightly more per hour than he paid out actual courier.
To conclude, my main points are:
Don’t rely purely on trust if stakes are big
Critically evaluate your reasons to trust the person
Clearly communicate your expectations and listen to their expectations
Consider all the risks, not just the material ones
This is a great point that I had overlooked. I have similar bad experiences now that I think about it, mainly from starting a company with a friend, whom I should have questioned more on technical skills, but didn’t because of our high trust. That was a nightmare.
I need to think a bit more deeply about why relying more on trust has worked so well this time, because as you say, it is not a given. Your bullets are a good starting point for a more nuanced understanding of the comparative costs of markets and trust networks. Thanks!
I see a few problems with trust networks that are not generally present in the markets.
I’m glad that your experience was mostly positive, but I’m aware of many examples where things are more tricky.
Part of it comes from two very different but common attitudes towards transactions between friends/family. Some people think that every work should be paid, always. Others expect and provide free help.
These positions are clearly non-compatible and predictably lead to conflicts, especially when people don’t communicate their position clearly. They often think that their position is obviously right and don’t even consider the alternative until the conflict arises.
Another problem is that in transactions with friends/relatives there’s often a pressure to work informally. Which is a risk—if they fuck it up you can’t even sue them. And it’s not that unlikely that they do—you probably did not select them based on their responsibility and their expertise in whatever field they work in. So you might lose all the resources AND hurt your relationship on top of it.
It’s not that these problems are completely unavoidable, but people do get burned.
Some personal examples, so that I don’t just parrot stories I’ve read on the internet.
Extremely bad example.
One of my relatives was technical director and de-facto co-owner of one local ISP. De jure he was nobody, he never got around to do all the paperwork—partly because he trusted his “friends”, partly because there were some complicated issues, partly because he is rather lazy. Years and years of no consequences, until they decided to sell the company. Guess who’s opinions was no considered and who got nothing out of the deal. I know, it’s extreme and it’s not only trust related, but these things do happen.
Somewhat good example.
Back when I was working in e-shop, our courier got sick. We could not realistically hire replacement in time, and outsourcing would be extremely expensive. My boss asked our sysadmin to help the company out. I remember him discussing that decision with someone—“I know he would not decline, he is a nice guy, but he is too shy to name the fair price, and he would be disappointed if he does not get paid fairly”. He ended up paying him slightly more per hour than he paid out actual courier.
To conclude, my main points are:
Don’t rely purely on trust if stakes are big
Critically evaluate your reasons to trust the person
Clearly communicate your expectations and listen to their expectations
Consider all the risks, not just the material ones
This is a great point that I had overlooked. I have similar bad experiences now that I think about it, mainly from starting a company with a friend, whom I should have questioned more on technical skills, but didn’t because of our high trust. That was a nightmare.
I need to think a bit more deeply about why relying more on trust has worked so well this time, because as you say, it is not a given. Your bullets are a good starting point for a more nuanced understanding of the comparative costs of markets and trust networks. Thanks!