Craig Newmark: Social Networks Are Shifting the Balance of Power

Craigslist founder Craig Newmark says that he believes social networking and the rise of distributed trust and reputation networks are helping to shift the balance of power in society, away from those with nominal power and money and towards people who emerge from the grassroots. Although personal social networks are relatively small in real life, unless someone is a celebrity or a politician, Newmark says that social networking allows online networks to be much larger and much more powerful by comparison.

While distributed trust systems are just emerging through services such as Facebook and LinkedIn and new ventures such as Unvarnished , the Craigslist founder says the potential implications of such networks are significant.

By the end of this decade, power and influence will shift largely to those people with the best reputations and trust networks, from people with money and nominal power. That is, peer networks will confer legitimacy on people emerging from the grassroots. This shift is already happening, gradually creating a new power and influence equilibrium with new checks and balances. It will seem dramatic when its tipping point occurs, even though we’re living through it now.

Newmark also says in his post — which he is discussing in a live-streamed talk this morning at the Reynolds Journalism Institute — that he sees the need for reputation networks that can manage the distributed identities and trust information of people online, just as banks manage money.

The repositories of trust information are the banks in which we store this big asset. Like any banks, having a lot of this kind of currency confers a lot of power in them. Having some competition provides some checks and balances. We need to be able to move around the currency of trust, whatever that turns out to be, like we move money from one bank to another. That suggests the need for interchange standards, and ethical standards that require the release of that information when requested.

Newmark’s blog post expands on ideas he raised when I had coffee with him recently at his favorite cafe in San Francisco, where I shot a short video embedded below. At the time, he said that managing trust and reputation online was “the next big problem for the web,” and called some form of distributed trust system “the killingest of killer apps.”

Newmark suggested that big players such as Google (s goog), Facebook and Amazon (s amzn) were the kinds of entities that would have the scale to handle such a distributed trust or reputation-management network, and said that despite some occasional missteps by both Google and Facebook when it came to privacy (Google Buzz and Facebook Beacon, respectively), he believed that both were acting in good faith and had a policy of “not being evil.”

Related content from GigaOM Pro (sub req’d): Can Enterprise Privacy Survive Social Networking?