The Prism of Reputation
In today's hyper-connected world, trust is a precious currency. Whether it's deciding who to follow or trust for advice on a social trading platform, as well as in other economic decisions such as hiring or purchasing, direct relationships are no longer enough. In digital environments, where actors often do not know each other, what is trust based on?
This is the question that the research study "Prismatic Trust: How Structural and Behavioral Signals in Networks Explain Trust Accumulation" sought to answer. Published in Management Science, it is authored by Giuseppe Soda (Department of Management and Technology, Bocconi University) together with Aks Zaheer and Mani Subramani (both at the University of Minnesota), Michael Park (INSEAD) and Bill McEvily (University of Toronto), and introduces the key concept of “prismatic trust”: a mechanism through which social and digital networks generate trust by observing structural and behavioral signals.
Prismatic trust: the power of observable signals
When we move across a social network, we are not just nodes connected by threads: we also express signals that others observe and interpret. This is where the concept of “prismatic trust” coined by the authors comes into play: trust is not built only through direct relationships, but can emerge from visible signals that the network itself amplifies, like a prism refracting light.
The first type of signal is structural status: the position an individual occupies in the network, measured in terms of followers, and above all, the prestige of those who follow him or her. In practice, having many followers is not enough: it is essential to be followed by other influential users. This status, according to the authors, works as an implicit indicator of competence. If a trader is followed by other high-profile traders, he or she is likely to be perceived as an expert, and therefore trustworthy.
The second signal is behavioral: named relational behavior, it is the way in which one interacts with others. In particular, the research study measures how positive a user’s public messages are, i.e. expressing thanks, encouragement, offers for help. This type of communication conveys benevolence and cooperative intentions, which are essential to inspire trust even in those who observe the interaction from afar.
The researchers explain that the two signals do not act in isolation. On the contrary, they reinforce each other. A trader who enjoys high status and appears friendly and helpful will be perceived as even more trustworthy. It is the combination of structural visibility and relational qualities that creates fertile ground for the accumulation of trust, even between complete strangers.
The social experiment with 28,000 traders
To test the theory, the researchers analyzed 38 weeks of data from EZ-Trade (not actual name), a leading social trading platform. Here, users can automatically “copy” the trades of other traders — an act that implies trust, because it entails financial exposure.
Findings confirmed the research hypothesis: the traders who enjoyed a high status (i.e. were followed by other influential users) and expressed positive feelings in public messages were copied much more frequently. Even more interestingly, the two factors reinforced each other.
In terms of numbers: moving from the 25th to the 75th percentile in status and positivity, accumulated trust (measured in the number of copiers) increased by 211% compared to the mean.
A new paradigm for organizations
Evidently, the conclusions of this research are not only useful to traders. They have profound implications for companies, digital platforms and organizations that want to generate trust on a large scale. Therefore, it is not enough to build reputation by remaining within the circle of direct relationships. We need to design environments in which signals of competence and goodwill are public, visible and interpreted correctly by other users.
In an era in which relationships multiply but certainties are thinning, we have proof that trust is not born only out of direct experience, but from what you let other people glimpse. The theory of prismatic trust highlights that, in social networks, it is not only who you are that counts, but how you appear in the eyes of others: every signal (a prestigious connection, a polite message) is a fragment of reputation that is refracted and amplified. Through these signals, even between strangers, that spark we call trust can be ignited.
