Why Information Grows: The Evolution of Order, from Atoms to Economies

Social networks help discriminate among strangers by separating complete strangers from those with whom we share mutual friends or acquaintances. That’s what makes a house party different from a bar. In a house party people know that they must have friends in common. In a bar, that may not be the case.

Trust provides a noncontractual, informal, yet highly efficient mechanism to deter malfeasance and enable otherwise risky commercial interactions.

To hold large volumes of knowledge and knowhow, therefore, we need large networks of people. Yet the relationship between the size of a network and the volume of knowledge and knowhow that it can hold not only makes the accumulation of knowledge and knowhow difficult but also implies that moving or copying the knowledge and knowhow embodied in a la

In fact, when available, trust is a more efficient channel for the formation of economic networks than formal institutions are, since it works without the burden of costly paperwork and enforcement procedures. By making links cheaper, trust enables the formation of larger networks that can accumulate more personbytes of knowledge.

Steve Jobs was able to wander around Xerox PARC because those who brought him there trusted him. Once again, this shows that trust encourages the formation of the large networks that our society needs to accumulate knowledge and knowhow, even if trust sometimes works in mysterious ways. Trust contributes to network size by reducing the cost of link

the formation of associations among non-kin—in groups such as Rotary Clubs, the Freemasons, the Boy Scouts, or the Red Cross—have been historically powerful means to form the networks where our society accumulates the trust and access to information we know as social capital.

James Coleman,

Trust, which is an essential form of social capital, is the “glue” needed to form and maintain large networks. It is different from the knowledge and knowhow that we accumulate in these networks.9

In his 1995 book Trust, he argues that the ability of a society to form large networks is largely a reflection of that society’s level of trust. Fukuyama makes a strong distinction between what he calls “familial” societies, like those of southern Europe and Latin America, and “high-trust” societies, like those of Germany, the United States, and Ja