Technology is Devaluing the Most Important Currency, Trust

This piece first appeared on October 8th in icrunchdata news

It comes as no surprise that in a global economy one of the earliest casualties of the U.S. government shutdown was the dollar. In the first hours after the closure, America’s currency hit a one-and-a-half year low as international investors began losing confidence in Washington’s ability to manage its affairs. But ours is also becoming a networked economy where, as Google’s executive chairman Eric Schmidt has put it, “trust is the most important currency.” And that too is being devalued. Although the current battle across Capitol Hill has eclipsed most other government-related matters, including the ongoing NSA controversy, the latter has already done damage. Within weeks of initial news reports about the agency’s surveillance activities, privacy jitters among Internet users more than doubled to over 50%, prompting no less than Mark Zuckerberg to acknowledge that the credibility of a number of technology firms had taken a hit.

It comes as no surprise that in a global economy, one of the earliest casualties of the U.S. government shutdown was the dollar. In the first hours after the closure, America’s currency hit a one-and-a-half year low as international investors began losing confidence in Washington’s ability to manage its affairs. But technology is also becoming a networked economy where, as Google’s executive chairman Eric Schmidt has put it, “trust is the most important currency.” And that too is being devalued.

Although the current battle across Capitol Hill has eclipsed most other government-related matters, including the ongoing NSA controversy, the latter has already done damage. Within weeks of initial news reports about the agency’s surveillance activities, privacy jitters among Internet users more than doubled to over 50%, prompting no less than Mark Zuckerberg to acknowledge that the credibility of a number of technology firms had taken a hit.

Accordingly, the Information Technology and Innovation Foundation estimates that the annual cost to American businesses could be as high as $35 billion, with much of that coming from losses overseas. Hoping to capitalize on this “trust gap,” several countries are creating national or regional havens for privacy, which would permit data access only through their own domestic technology companies; ostensibly locking out the likes of Google, Facebook and Microsoft.

2f20132f102fperson-bar-code1Yet regardless of how staggering the amount of information the government gathers may appear, it pales in comparison to what Corporate America stockpiles. The marketing technology and services firm Acxiom, is amassing a seemingly infinite amount of data. It compiles details on half-a-billion consumers worldwide, including a majority of American adults. At the same time, it processes more than 50 trillion data interactions a year.

What all if this information is actually worth is open to debate, but even among those who do not worry about how much data is being collected, there are concerns about how well it is being protected. Since 2005, the number of “reported” U.S. security breaches into records containing personal information has ballooned beyond 600 million; nearly twice the population. Some studies have also shown that the decline in trust these break-ins engender exceeds anything experienced as a result of lawful data collection.

Of course, while people may be losing confidence in government and business, they can always count on each other. Or not. Conventional wisdom has it that, with respect to recommendations about products and services, consumers rely on their friends and family first. The Nielsen Company has continually underscored this notion for years through its “Global Survey of Trust in Advertising,” the latest of which shows that 84% of consumers worldwide trust such word-of-mouth guidance. But even the most popular person has a limited number confidants from whom to garner information and insights, and must, at some point, turn to strangers. The problem is knowing just who – or what – those strangers really are.

Recently, New York regulators cracked down on 19 companies providing phony online reviews for businesses. In what can be deemed “digital sweatshops,” they were paying reviewers from Bangladesh and the Philippines a dollar per faux rating. Similar firms that mass produce Facebook “likes” pay their workers as little as $15 per thousand and Gartner estimates that by next year, 10-15% of all social media reviews will be fake.

Nonetheless, these establishments may not be long for this world. Not because of any legal maneuvers, but because, as in so many other instances, machines are replacing people. According to media monitoring firm Fisheye Analytics, as much as half of all web traffic already comes from algorithms or bots. Using software applications and procedures, hackers can fashion online personas that closely imitate humans. By Twitter’s own count, as many as 10 million users are neither flesh nor blood. The total is higher on Facebook.

Not surprisingly, growing numbers of consumers are losing confidence in online ratings and reviews. In a study by Maritz Research, upwards of 40% of participants indicated they did not trust “most or all” of the content on sites like TripAdvisor, Yelp or Zagat.

To make matters worse, it is not just consumers who are being duped. Digital security company White Ops claims to have found thousands of web sites that use bots to elicit money from advertisers for fraudulent traffic. More sophisticated than many of their consumer-focused counterparts, some can mimic consumer behaviors such as watching videos, clicking on ads and putting items in shopping carts.

Clearly then, advertisers will have to get a lot better at distinguishing legitimate sites from those that unleash scores of web robots. For their part, government and technology companies must prove that concepts like “transparency” are more than mere buzzwords. And consumers will have to become better informed about such issues, though few have either the desire or inclination to do so, especially since they can likely find alternatives to most afflicted ecommerce sites and social networks.

As for the offenders, they have every incentive to continue what they are doing. The cost of building bots is hardly prohibitive, and it is possible to construct thousands in a matter of days. It is also feasible to infect hundreds of computers with malware so they become unwitting distributors. The results are highly lucrative. Research shows that the market for fake Twitter followers alone may be as much as $360 million. Little wonder that the amount of social media spam has skyrocketed 355% during the first half of this year.

Article written by Howard Gross for icrunchdata news New York, NY