Phares Kariuki

Uri Bram: I'm very glad to be here today with Phares Kariuki, technologist and entrepreneur -- I've been telling people for years that you're my favourite philosopher of technology and it's great to be able to interview you. Phares, what are you thinking about these days?

Phares Kariuki: Thank you Uri for the very kind introduction. My thoughts of late have been focused primarily on the role that trust / justice plays in growing an economy.

There's a direct correlation between trust and economic progress: society isn't trying to ensure that people do what they promise, they simply cooperate.

The secret to the human race isn't so much our intelligence, rather it's our cooperation. The best hunters cooperate; persistence hunting is how human beings evolved in the savannah. Killer whales and African wild dogs also persistence hunt and this leads to some of the highest kill rates of any predators.

Cooperation is based on trust that people will do what they say. We have government to primarily enforce contracts and resolve disputes. When government doesn't do this, people find ways of self governing and end up acting in bad faith - many times to protect themselves as acting in good faith is suboptimal, leading to higher transaction costs when dealing with people in general.

Uri Bram: Absolutely. So, something I think about a lot is how hard it is to get from one equilibrium to another. Once you have that high-trust equilibrium it seems to be fairly resilient -- there's a great deal of ruin in a nation, etc. But when I see low-trust equilibria in practice it feels incredible that anyone ever breaks out of them. What are your observations on that?

Phares Kariuki: How you move from one equilibrium to another, from observation seems to be violence. It is cruel to think about but Europe went through countless wars in order to integrate. And the integration was a series of fiefdoms that largely self govern. (Catalonia is a good example, along with Portugal).

Additionally, I've seen high trust societies get decimated by foreign interference (Korea, Somalia, Germany).

Uri Bram: I’d love to hear more about the Somalia example -- I think some people reading this might be surprised to hear it had a previous high-trust phase.

Phares Kariuki: The Somali were one people, largely Sunni. Their territory covered part of Eastern Ethiopia, North Eastern Kenya. They were split into multiple countries during the colonial era, with Kenya famously oppressing them during the Shifta wars of the 70s. They wanted to secede. The interference in their leadership due to the Cold War led to oppression and clan based mistrust; the fallout stands until today.

Uri Bram: Thanks, that’s an impressively concise summary.

To pick up a different thread, I'm generally skeptical of national statistics -- Ghana and Nigeria both famously doubled their GDPs overnight because they decided they'd been miscounting before -- but there's this stat that the Mezaggiorno in Italy still has half the GDP per capita than the north, hundreds of years after integration. What do you make of that?

Phares Kariuki: There's a book by Daron Acemoglu and James Robinson that kinda captures this. Northern Italy has higher respect for institutions (which generally translates to higher trust) than the South. Institutions are respected when they aren't predatory

The issue with GDP though is that it's difficult to capture a lot of what the economies were producing. The reason for the rebasing was wrong, but the output was correct. African countries were doing it to tap into the sovereign debt market, but the fact of the matter was GDP stats had been miscounted for a while.

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Uri Bram: On the positive side of the ledger, what do you think can be done to increase trust within a society?

Phares Kariuki: The primary thing that can be done to increase trust in society is to have a level of justice for crime / breach of contract. This enforces good behaviour and dissuades bad behaviour; places with high trust have the highest rates of contract enforcement but also contracts aren't needed -- folks can shake on it.

The mafia were the criminal justice system for criminals; they exist in areas where the law isn't justly enforced. There's something that Jean-Jacques Rousseau said about inequality in his book about the same subject:

“Thus, I would have wished that no one in the state could claim he was above the law, and that no one from outside the state could dictate a law that the state was obliged to recognise. For regardless of how a government is formally constituted, if there is a single man not subject to the law, all the others are necessarily at that man's mercy.”

Uri Bram: I think many modern American people feel like there are now people in their society who are effectively above the law.

A representative quote: "nothing is illegal if one hundred well-placed businessmen decide to do it." (Although, I feel moved to confess: that quote is probably 30+ years old)

What do you think of that -- they don't know how good they've got it? They're right to be worried? Neither, both?

Phares Kariuki: Americans are right. The society has some structural issues that are difficult to resolve -- I think Isabel Wilkerson captured it best in her book, Caste. The country created laws for two tiers of citizens. It's never been truly free and never honoured its creed. It was legal to kill some people; the dual structure gives rights to some citizens and strips others of rights, meaning that the sentiment will hold. Some people can get away with murder.

Uri Bram: From what I hear, Kenya's startup scene has been thriving, and especially so in the last 10 years (since I left, incidentally). Has that scene managed to overcome these kinds of trust and justice problems, somehow? Thrived despite them? Something else?

Phares Kariuki: It has not been able to overcome them. I think it's thriving despite them. The market would be several orders of magnitude larger if the trust issues were fixed. The issues around race / capital are all rooted in trust.

Speaking from personal experience, the criminal justice system can be woefully slow to act. So if you're an investor and you know you can't enforce a contract in Kenya, you force incorporation abroad, or you invest in people who value their social capital in the market you're from.

These are all suboptimal actions of actors in low trust environments. I like to say that Kenya is at times Kakonomics at scale.

Uri Bram: Ah, I'm really sorry to hear that.

Something I've been puzzling about from the trust point of view, lately, is the high-trust equilibrium that is Silicon Valley. Alex Danco for instance has written about the benefits of the social capital scene in SV, including (among other things) the way that nobody wants to cross anyone because you never know which scrawny 19 year old is going to be a powerful billionaire founder/investor next year.

But I think there's a flipside of that, which is that it feels like it's relatively hard to get justice for misdeeds by any of the actors inside the circle, until/unless someone gets ejected from the SV community completely I suppose. I've recently had a lot of trouble with a small-but-growing Silicon Valley company, and felt like my ability to get any justice from them was severely curtailed by them being inside the protective curtain of their investors and partners and even just their own whisper network, while I was outside it.

What do you think of that? And how does the American tech social network interact with the Kenyan one (and other non-American tech networks, if you feel comfortable talking about that)?

Phares Kariuki: You've actually captured something I was trying to bring up but I didn't know how to. It's a touchy subject: high trust networks tend to be unjust to outsiders. White America is high trust, practiced apartheid; same with South Africa. Colonialism was carried out primarily by countries with high levels of trust within themselves that oppressed outsiders. (A similar thing is playing out in Israel with Palestine). If you're outside the SV circle, you will be unfairly treated. It's a very touchy subject, but one that has fascinated me for some time.

Oppressed societies find their freedom and turn around and oppress others. The Kikuyu (my tribe of origin) have done this in Kenya. They were oppressed by the British, took over power and a narrow ruling elite grabbed land, power and now have captured the state for the last 60 years, taking away land from other natives (including the Ethnic Somali).

Uri Bram: Well this is just depressing. But perhaps the right place to end this conversation – Phares, where can people find you online?

Phares Kariuki: You can find me on Twitter at @kaboro, or my consulting work at Pure Infrastructure Limited.

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