Mental Ledgers

Without interpersonal trust, most modern societies would descend into anarchy. We trust thousands of strangers around us will obey traffic laws as we drive through intersections, that the certification on the wall of our doctor is legitimate and that police will arrive when we call 9-1-1. It is the binding agent of cooperation, which in turn is the driver of innovation and progress. To complete large, complex projects, many people must trust each other’s abilities and assume future actions of other members will align with their interests. Nurturing trust is how cooperative groups, regardless of their size, flourish.

Large cooperative groups like nations or corporations have deeply complex systems of reputation and trust management, but how do small cooperative groups manage trust? How does a group of friends or a small farm cooperative manage interpersonal trust? They utilize something we’ll call a mental ledger.

Each member of a cooperative group has a mental ledger, which they use to track the up-to-date reputation and trustworthiness of all the members of the group. The process is similar to Bayesian inference: every time a member interacts with another member —or gains new information on them— their record is updated in long-term memory and adjusted according to new information. This process is constantly evolving and updating, which changes our relationships day to day. For months, you may have trusted your friend Robert with managing the finances of your non-profit, but recent events showed him slipping up and others have commented on his ability to focus. You update your record of Robert and now you delegate the task to someone else. If in the future Robert changes his behavior and gets his life together, our record will update and we may again trust him with more responsibilities.

Mental ledger is the first mechanism used by small, cooperative groups to manage trust because it is available by default (its substrate is our long-term memory) and easy to implement. It also offers benefits that are not common in similar tools. First, it makes groups highly resilient by duplicating knowledge, since each member of the group contains a record of all other group members. The loss of a single member does not lead to the significant loss of collective knowledge. In a group with n members, you have n - 1 backups.

The second —and possibly more important— benefit of mental ledgers is their intrinsic resistance to corruption. When a small cooperative group leverages mental ledgers to manage interpersonal trust, they have little centralized authority and thus few decisions being made without consensus. Consensus encourages transparency by forcing the involvement of all group members. Contrast this with larger cooperative groups that have forgone mental ledgers in favor of central authorities. These authorities can now make decisions without consensus, reducing the visibility to other members of the group, which provides opportunities for bad actors to act in secret.

For small groups, mental ledgers are more than adequate for maintaining interpersonal trust, however, their benefits quickly become liabilities as the group adds more members. Though they are efficient with small groups, they are vastly less efficient with large groups because they require consensus for decision making. This works for ten members but is far more difficult with 10,000 members. The other issue with mental ledgers is their limited capacity. The human brain can only keep a certain number of individuals in memory before errors are introduced, so they are not useful as mechanisms for managing reputations of cooperative groups with many members. This is exacerbated with age too, as errors in memory become more common as we get older.

Understanding how cooperative groups facilitate and manage interpersonal trust is important for maintaining institutions and societies. Without trust, progress stalls and conflict increases. Any action or entity that reduces interpersonal trust for a cooperative group is a serious threat to its stability. We’ll see in later articles how larger cooperative groups manage trust through central authorities and the dangers that arise from this optimization.