Trust Becomes Currency

Shaan Puri and Sam Parr discuss how trust can be monetized through certification and rating agencies, using examples like JD Power and potential new business opportunities in this space.

Key Points:

• Trust as a Business Model:

  • Rating agencies can become billion-dollar businesses by selling trust
  • Must maintain ethical standards to preserve credibility
  • The more established the certification becomes, the more valuable it gets

• JD Power Case Study:

  • Tests and awards ratings to cars
  • Car companies pay membership fees to be part of the organization
  • Sold to McGraw Hill for $400M in 2005
  • Later sold again for over $1B in 2019
  • Operating model involves car companies being members of the organization

• Risks and Challenges:

  • Similar to Standard & Poor's during subprime crisis
  • Can lose credibility if trust is breached
  • Must balance profit motives with maintaining integrity
  • Need to act as a "benevolent dictator"

• Business Opportunities in Trust:

  • Credentialing agencies
  • Standardized testing
  • Vendor verification lists
  • Professional certification programs
  • IQ testing (like Mensa)

• Key Success Factors:

  • Low operating costs
  • Low risk
  • Becomes more valuable over time
  • Network effects as more people recognize the certification
  • Can charge premium prices once established

• Modern Applications:

  • Developer competency verification
  • Professional service provider lists
  • Vendor approval systems
  • Industry-specific certifications

The speakers emphasize that while these businesses can be highly profitable, maintaining actual trust is crucial for long-term success, as the entire business model relies on credibility.