Book Review: Liars and Outliers, by Bruce Schneier

May 27, 2012

Today’s book review is Liars and Outliers: Enabling the Trust that Society Needs to Thrive, by  Bruce Schneier.

Bruce Schneier is an internationally renowned security guru (he even has his own internet meme). He started out as an expert on cryptography, but he now has much wider security interests.

Liars and Outliers is a book that at its core is about trust. What is the optimum level of trust for a society, and how do we make it work for us? How do complex changes in the way our society works change that trust and the trade-offs between cooperating with the group interest and defecting from it?

These are questions in many different areas of our lives, and Schneier talks about many of them, with a framework that helps think through many of our trade-offs between trust and verification.

As Schneier says,

Three critical functions are performed by trust:

  1. It makes social life more predictable
  2. it creates a sense of community and
  3. it makes it easier for people to work together

In some ways, trust in society works like oxygen in the air… The more trust is in the air, the healthier society is and the more it can thrive…. This book explains how society enforces, evokes, elicits, compels, encourages… trustworthiness, through systems of societal pressures… coercive mechanisms that induce people to cooperate, acti in teh group interest, and follow group norms.

Optimal societal pressures balance the need to induce cooperation (to avoid murder, terrorism, theft, industrial pollution, etc) with the need to avoid oppression and injustice, allow innovation, and avoid stagnation.

Societal pressure comes from four broad categories:

  • Moral pressure – what our own heads are telling us to do
  • Reputational pressure – pressure to do something because otherwise our reputation will be tarnished (sometimes there is quite a thin line between moral and reputational pressure
  • Institutional pressure – generally rules or laws – both government ones, and rules inside smaller groups (like the uniform rules at my sons’ schools) or larger groups (like the Universal Declaration of Human Rights)
  • Security systems, such as fences, guards, alarms and forensic systems.
Schneier looks at many dilemmas that arise in the real world, such as belonging to two groups with different interests (a religious group and a nation state, for example). He talks about the differences in effectiveness of many types of social pressure at different scale – the morals of a small group that you belong generally trump those of a larger group that you are also a member of (the way in which many groups enforce “no snitching” types of rules for example).
 
One example of competing group interests that I found thought-provoking was the dilemma for institutions that enforce society’s rules:
If a government agency exists only because of the industry, then it is in its self-preservation insterest to keep that indusry flourishing. And unles there’s some other career path, pretty much everyone with the expertise necessary to become a regulator will be either a former or future employee of the industry, with the obvious implicit and explicit conflicts.
And a more general one which we see all the time in political discussion:
…a battle between diffuse and concentrated interests. If you assume that specific regulations are a trade-off between costs and benefits, a regulatory institution will attempt to strike a balance. On one side is the industry, which is both powerful and very motivated to influence the regulators. On the other side is everyone else, each of whom has many different concerns as they go about their day and none of whom are particularly motivated to try to influence the regulators.
More generally, we can think of societal pressures as defense against defection. None of the pressures can possibly be perfect, and if they were, they would have their own costs. And many societal pressures may have unintended consequences. For example, drug enforcement laws tend to lead to increased violence (as well as hopefully reduced drug use), and bicycle helmet laws lead to fewer bicycle riders (as well as, hopefully, fewer head injuries).
What does matter is that the overall scope of perfection is low enough that the overall level of trust is high enough for society to survive and hopefully thrive.
Schneier’s final section talks about how societal pressures change as society becomes more complex, and technology changes the effect of all of the different types of societal pressure. And his framework for thinking about costs and incentives helps us to think about the best way to respond to technological change (such as the enormous changes in available information from genetic testing).
 
His principles are quite extensive and include:
  • understand the societal dilemma – what is the group norm, what is the group interest?
  • consider all the ways in which societal pressures can be brought to bear – many people commonly think that morals, or reputation pressure are enough, but this is rarely true, even if reputational pressure is the most cost effective way of ensuring compliance
  • pay attention to scale – different societal pressures work best at different scales
  • foster empathy and community, which improve the effectiveness of moral and reputational pressures. These pressures are still responsible for most of the cooperation in a functioning society
  • use security systems to scale moral and reputational pressures
  • Reduce concentrations of power
  • Require transparency – which maximises the effect of reputational pressures
For me this book was great in the way that it gave me different frameworks to think about familiar dilemmas. I found it made me think a lot about examples from my own professional and personal life (underwriting, and trying to decide whether to obey traffic rules as a cyclist). It has a lot of introductory material about the many and varied ways in which scholars have written about trust, economic behaviour, game theory, moral behaviour, and many other relevant areas. Most readers will be familiar with some of this (and hence find it a bit basic) but I doubt whether anyone would be familiar with all of it – the broadness of influence is part of the attraction.
 
If you are interested, as I am, in risk management, Schneier gives you some different tools to think about familiar problems. For me the big insight was in thinking about societal pressures; a single way of influencing people is rarely enough, but the right combination will be different for each different behaviour you are trying to influence. At its root, the vast majority of risk management is about human behaviour. This book gives you some thought-provoking new ways of thinking about and influencing that behaviour.

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2 Responses to Book Review: Liars and Outliers, by Bruce Schneier

  1. Mark Young
    May 27, 2012 at 5:02 pm

    Jennifer,

    I was really pleased to find you’re blog.

    Your observations are so correct. Measurement, policy and management are aspects of risk management. Rather as risk management becomes a profession like any other and not just a collection of tools and ‘rules of thumb’ it is paramount that we understand the social implications that are present in any profession.

    As the role of the CRO becomes as important as the rest of the CXO suite we need to broaden our perspective. Regardless of the GFC but as a result of risk is a key business driver and businesses are people and their actions and behaviours.

    Thanks again for the post I look forward future ones!

    All the best,
    Mark.

    • Jennifer Lang
      May 27, 2012 at 6:39 pm

      Thanks Mark, and great to hear from you. Understanding people is definitely a key part of any risk manager’s role.

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My name is Jennifer Lang, and I am an actuary working in financial services in Sydney. This site consists of my own personal views, and does not necessarily reflect the views of my employers - past, present or future.

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