Hack:
No contracts!

What would be the first step in getting people to shed the mountain of documents? Have you ever seen anything like this in practice? I think in general, getting rid of paperwork in all situations is a great idea. I've run across some companies that have 86'd the performance review and all of the associated paperwork. They have a "one sheet of paper" practice where the manager and employee sign a "dummy" form once a year to hand to HR and then practice immediate, continuous feedback throughout the year. Definitely more radical (and interesting) to think of getting rid of the paperwork between organizations.

We need to go back in history to see why the contracts came into existence. Few hundred years back man realised the scientific inventions can make population's life easier, and he needed investment to make the invention into consumable product/service. He charged the consumer a nominal fee plus an extra to improve the service and to sustain oneself. When the motive of individual is to do good to others then there is no need of a contract. The individual/organisations strive to do their best they can. But over the period the organisation's priorities have turned upside down! The sole purpose of organisations is to make money and grow profits and not about betterment of their customers experience. So customers lose the loyalty and need to look after themselves and hence contracts become important in order to protect both parties financial risks.
So when organisations choose the partners, the motto has to be aligned - i.e. to serve the customers, and can agree on shared risks and rewards. We can then get away from contracts . Aligning with multiple partners in this way can enable to develop an ecosystem that combines talents, resources and expertise from all the various organisations to develop the best experience for the customer. The customer will be the winner, and on back of it the ecosystem of organisations will thrive, and money will flow in.

So the contracts are just a piece of paper at the end of the day and are meaningless on their own. However, they served an important purpose in the brokering of two parties. The reminded each other of the duties and obligations of their union. I'm reminded
of marriage vows. We exchange marriage vows, which give each party some basic fundamental principles on what the relationship is based upon. It's a reminder of the virtues of their bonding and thus engenders trust when adhered to.
Can you imagine how men would act if they didn't have anything to recite on the day of their marriage. Some of the more intelligent of our species would obviously get it, and others would be clueless...committing the same mistakes as the generations before.
So at the end of the day, it's not that having a contract is bad or suffocating...it's how the contract is used and what its intentions are.

It seems like a great idea, although it may work better in some cultures than others. Japan is very much based on trust. Their contracts are always broad. Russia, on the other hand, is focused on the party's ability to screw the other party. Russians almost try to find holes in any agreements and would do anything if it brings them profit. I'd be interested in hearing about other people's experience writing contracts in various countries...

Although this hack is aspirational, the reality is that we will continue to need to document our shared understanding. However, that can be accomplished by means far more efficient and empowering than contracts as we know them today.

Let's be radical for a moment. Suppose either one or both counter-parties to an agreement voluntarily chose to assume fiduciary obligations in their relationship. In that scenario all they would need is a trivial agreement in which they accept fiduciary duties to the other party. Remember, fiduciary duties are typically imposed by law between designated parties judged to have an uneven power relationship and where individual contracts are impractical. Most businesses would never voluntarily accept fiduciary obligations because they carry a huge liability risks. By the way, fiduciary law also happens to be founded on principles of trust, whereas contract law is founded on principles of mistrust.

Now, let's get practical. A few years ago, I tested my hypothesis that it would be possible to substitute a traditional contract with a trust enabling agreement, provided it was between two like-mined parties. I was approached by a renowned, visionary author in IT strategy to write a report on trust in collaboration. I felt that since we were collaborating (a high level of trust is required for true collaboration) on a project about trust, it represented an ideal opportunity to experiment with our authenticity by practicing what we were preaching, namely to enter into a novel, trust-based agreement. I had developed a framework for trust a number of years prior that I had been testing on many different areas of business with great success, so I was confident I could apply the same methods to constructing a trust-based agreement; which I succeeded in doing. Upon presenting him with my trust enabling agreement, I know it was highly unlikely that it would be approved by his lawyer, but felt it was worth trying, if for no other reason than to make a point. Sure enough, as expected, my agreement was rejected outright and I was left with little choice but to sign a generic contract with much more specificity. So my challenge was not as much in drafting a comprehensive trust-based agreement, but in getting institutional acceptance for it. Lawyers are not trained to facilitate trust-based relationships and our legal system has not evolved sufficiently to accommodate trust-based commercial relationships.

I think handshakes work well on a small scale, within well-defined stable communities. However, handshakes as a trust mechanism do not scale well. Contracts scale well within a given legal jurisdiction, and we have also created sufficient structures to support their enforcement across legal jurisdictions. So, the current infrastructure that supports business activity is only only designed to scale on the basis of mistrust. That's where my proposed hack, "The Trust Extender" can help. Based on the work I have done to date, I firmly believe that a systemic, structured approach to designing conditions for trust can help to empower relying parties in commercial activities in ways that reduce the need for burdensome contracts. Although the legal system is likely to lag in supporting such instruments, if proven successful over time (likely decades), I expect it will catch up and trust-based agreements will become common-place in certain circumstances.

Hence, I believe my proposed Trust Extender hack could be a critical enabling build for this "No-contracts" hack.

If contracts are built and then if they have no value when situations change - why build contracts in the way they are. The common objective should drive the relationship between partners. The recent news of UK public sector contract re-negotiations when economic situations have changed and also today's article in FT about pharmaceuticals and their contracts with governments of various countries to provide Swine flu vaccine are good example