Trust Reduces Market Friction

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Vulnerability and differential information significantly affect market dynamics, exemplified by the lemon theory of markets, where uncertainty about product quality leads to skepticism among buyers. This results in a wider bid-ask spread due to the fear of being deceived. Reputation systems mitigate this issue by incentivizing sellers to maintain their reputations, as negative feedback can impact their overall business. As trust in a market increases, transaction costs diminish, encouraging participation and leading to a more efficient marketplace.

This week, Byrne Hobart is joined by Patrick McKenzie (patio11), host of the podcast Complex Systems, to discuss the complexity and endless fascination of financial infrastructures, the role of fraud in finance, talent spotting strategies and the importance of building networks.

🔥Apply to join over 400 founders and execs in the Turpentine Network: https://hmplogxqz0y.typeform.com/to/JCkphVqj

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LINKS:

Byrne’s writing: https://thediff.co

Patrick's Newsletter: https://www.bitsaboutmoney.com/

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X / TWITTER:

https://x.com/patio11 (Patrick)

https://twitter.com/ByrneHobart (Byrne)

https://twitter.com/TurpentineMedia (Turpentine)

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