Sunday, March 29, 2009

The Trust Bubble

What do collapsing real estate markets and the geography of food have in common? Both were unsustainable economic bubbles of trust. The current financial crisis is fueling the rise of localism. Increasingly, transactions require a firsthand account. Small banks are growing and continue to back solid mortgages given the intimate knowledge of the loan applicant, as opposed to using an algorithm to assess risk from hundreds or thousands of miles away. The politics of food is undergoing a similar transformation, as more people want to know about where and how their meal was farmed:

“The person who puts that scone in their mouth can now say, ‘Oh my God, there’s a real person behind this,’ ” said Read Smith, 61, who runs Cherry Creek Ranch, a 10,000-acre farm and cattle ranch in Eastern Washington. “They are going to bite into that bread or pastry and know whose hands were on the product.”

The FindtheFarmer site is the brainchild of Josh Dorf, 39, a disaffected entrepreneur who got into the food business six years ago by buying the Stone-Buhr brand from Unilever, the multinational consumer brands company.

Mr. Dorf gathers wheat from 32 farmers in the Pacific Northwest whose methods have been certified by an environmental organization. That wheat is kept segregated from uncertified farmers’ wheat while it is milled at a Spokane, Wash., factory, even though a single flour sack could contain wheat from as many as four farmers.

“Is it gimmicky? Sure, but it has value. Consumers have an interest in dealing directly with and supporting the American farmer,” said Mr. Dorf, who said he was inspired to create the site by “The Omnivore’s Dilemma” a book about the damaging effects of a hyperindustrialized food system.

The author of that best seller, Michael Pollan, a professor at the University of California, Berkeley, said FindtheFarmer was one part of a bigger effort to reintroduce trust into the food system.

The virtual connection to food probably was not the story you were expecting. Dorf's innovation is what I would call a distance trust technology: A tool that facilitates transactions between two different localities (two different geographies of trust). The lack of transparency is what gummed up global finance. The risk modeling used promised more trust than it could deliver and thus all the economic bubbles that burst.

That same dynamic applies to food safety. Some of you might remember the ban on US beef in South Korea. When the ban was lifted, there were numerous demonstrations and some violence. South Koreans simply didn't trust American meat. That's a crisis of globalization and undermines world trade. We need to create the means to restore those long distance transactions that helped the global economy to grow so dramatically. That's the kind of innovation I see happening in Pittsburgh. The trust born of industrial parochialism provides an infrastructure for a functioning global economy thanks to the region's diaspora. Yinzers will do business with other Yinzers halfway around the world because they understand each other.

A diaspora network is an excellent example of a powerful distance trust technology.

1 comment:

Josh said...

Interesting thoughts....