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Potential Delegation Risk Examples

A research compilation of interesting trust architecture examples across domains. Organized by category with notes on what makes each compelling for analysis.

Selection criteria:

  • Something interesting (often bad) happened
  • Unusually successful trust architecture
  • Innovative/novel approach to trust problems

ExampleWhat HappenedWhy It’s Interesting
FTX Collapse (2022)$8B customer funds misappropriated; CEO now imprisonedTrust concentrated in charismatic founder; auditors failed; “effective altruism” reputation as trust signal; crypto’s trust-minimization ideology failed in practice
Bernie Madoff (2008)$65B Ponzi scheme ran for decadesSEC examined multiple times and missed it; feeder funds provided trust laundering; exclusivity created false trust signal
Wirecard (2020)€1.9B that “existed” didn’t; German fintech darlingAuditors (EY) failed; German regulators protected national champion; short sellers attacked as unpatriotic
Barings Bank (1995)Single trader (Nick Leeson) destroyed 233-year-old bankNo separation of front/back office; trader controlled his own oversight; $1.3B loss
LTCM (1998)Nobel laureates’ hedge fund nearly crashed global marketsTrust in quantitative models; correlation assumptions failed; leverage amplified trust failures
Enron/Arthur Andersen (2001)Auditor complicity in fraud destroyed both firmsTrust laundering through auditor; document destruction; Big 5 became Big 4

Common patterns:

  • Trust concentrated in individuals/small groups
  • Auditors as trust launderers who failed
  • Reputation signals (prestige, credentials) substituting for verification
  • Leverage amplifying trust failures
ExampleWhat It IsWhy It’s Interesting
Hawala NetworksInformal value transfer across borders with no paper trailWorks on reputation in tight communities; operates for centuries; trust without legal enforcement (like criminal orgs)
Lloyd’s of LondonInsurance market where individuals (“Names”) personally back policies”Utmost good faith” doctrine; unlimited personal liability created alignment; survived 300+ years
SWIFT NetworkInterbank messaging for $5T+/day in transfersCooperative owned by members; Belgian law; survived being weaponized for sanctions
Letters of CreditBank guarantees enabling trade between strangersTrust intermediation allowing global commerce; standardized by ICC
Credit Card ChargebacksConsumer can dispute charges; merchant bears burdenCreated trust in card-not-present transactions; enabled e-commerce
Credit UnionsMember-owned financial cooperativesMutual structure aligns incentives; lower fraud rates than banks

ExampleWhat HappenedWhy It’s Interesting
Tuskegee Syphilis Study (1932-1972)40 years of withholding treatment from Black men to study disease progressionDestroyed trust in medical research for generations; led to modern IRB system
Thalidomide (1950s-60s)Drug caused birth defects; different approval paths in US vs EuropeFDA’s Frances Kelsey blocked US approval; created modern drug approval regime
Theranos (2003-2018)Fake blood testing technologyAlready covered—trust without verification capacity
Opioid Crisis (ongoing)Pharma companies promoted addictive drugsPurdue’s trust exploitation; doctors trusted pharma; FDA trusted trials
Contaminated Blood Scandal (UK, 1970s-80s)Infected blood products given to hemophiliacsNHS trusted US plasma suppliers; 3,000+ deaths; decades of cover-up
Chinese Vaccine Scandals (2018)Defective vaccines given to childrenState-owned enterprise, weak oversight; destroyed domestic vaccine trust
Surgeons with high mortality ratesSome surgeons operate for years with poor outcomesMedical guild protects members; peer review failure; “M&M” conferences insufficient
ExampleWhat It IsWhy It’s Interesting
Organ Transplant Allocation (UNOS)Algorithm-based organ matching and distributionReplaced corrupt local allocation; trust through algorithm transparency
Blood Supply ChainVolunteer donation → testing → distributionTrust in anonymous donors; rigorous testing; rarely fails
WHO Smallpox EradicationCoordinated global effort eliminated diseaseTrust between Cold War adversaries; verification through surveillance
Cochrane ReviewsSystematic meta-analyses of medical evidenceTrust through methodology transparency; conflicts of interest policies
Surgical ChecklistsSimple protocol reduced surgical deaths 40%+Trust verification through process; Atul Gawande’s work
Second Opinion CultureStandard practice to seek independent verificationInstitutionalized adversarial verification in medicine

ExampleWhat HappenedWhy It’s Interesting
Boeing 737 MAX (2018-2019)Two crashes, 346 deaths; software system (MCAS) not disclosed to pilotsTrust in manufacturer → FAA delegated certification to Boeing; cost-cutting culture; single sensor failure
Tenerife Airport Disaster (1977)583 deaths; deadliest aviation accidentCommunication failures; authority gradient (captain vs. others); led to Crew Resource Management
Challenger Disaster (1986)O-ring failure killed 7 astronautsEngineers’ warnings overridden; “normalization of deviance”; organizational trust failure
Air France 447 (2009)Crashed into Atlantic; pilots mishandled stallAutomation trust → skill atrophy; pilots didn’t understand what automation was doing
Lion Air 610 / Ethiopian 302Both 737 MAX crashesSame as above—systemic trust architecture failure
Costa Concordia (2012)Cruise ship capsized; captain abandoned ship early”Captain’s discretion” trust model failed; 32 deaths
ExampleWhat It IsWhy It’s Interesting
Crew Resource Management (CRM)Training to flatten cockpit hierarchy for safetyReduced authority gradient; anyone can raise concerns; emerged from Tenerife
Aviation Safety Reporting System (ASRS)Anonymous, non-punitive incident reportingNASA-administered; immunity incentivizes reporting; catches near-misses
Air Traffic ControlCentralized management of airspaceTrust through standardization; remarkable safety record
TCAS (collision avoidance)Automated system that overrides ATCTrust in algorithm over humans in specific context; pilots must obey
Ship Classification SocietiesLloyd’s Register, DNV verify vessel safetyPrivate verification trusted for 250+ years; self-regulation that works
Black Box RequirementsMandatory flight recordersTrust through post-hoc verification; changed investigation culture

ExampleWhat HappenedWhy It’s Interesting
Munich Agreement (1938)“Peace for our time” → Hitler invaded anywayTrust in adversary’s commitment; appeasement failure
Bay of Pigs (1961)CIA-backed invasion fiascoTrust in agency over president’s judgment; groupthink
Iran-Contra (1985-87)Secret arms sales funded illegal operationsTrust in “deniability”; parallel trust chains
Intelligence Failures (Iraq WMD)“Slam dunk” case was wrongTrust in intelligence agencies; confirmation bias; groupthink
Cambridge FiveSoviet spies in British intelligence for decadesTrust based on class/education credentials; Philby, Burgess, Maclean, etc.
Aldrich Ames / Robert HanssenCIA/FBI officers spied for SovietsInsider threat in trust-dependent organizations; polygraph theater
ExampleWhat HappenedWhy It’s Interesting
IAEA Nuclear InspectionsInternational verification of nuclear programsTrust through physical access; worked until it didn’t (Iraq, Iran, DPRK)
Vienna Convention on Diplomatic RelationsFramework for diplomatic immunityCreates trust through guaranteed safety; enables communication
Montreal Protocol (1987)Eliminated ozone-depleting substancesTrust between nations on environmental action; actually worked
Antarctic Treaty (1959)Demilitarized continent; open inspectionsTrust through transparency; 60+ years of success
Five Eyes Intelligence AllianceUS/UK/Canada/Australia/NZ intelligence sharingDeep trust between allies; survived decades without major breaches
Hotline (Moscow-Washington)Direct communication to prevent accidental warTrust through communication; used during Cuban Missile Crisis
Open Skies TreatySurveillance flights to verify complianceTrust through reciprocal transparency (US withdrew 2020)

ExampleWhat HappenedWhy It’s Interesting
Volkswagen Emissions Scandal (2015)Software cheated on emissions testsTrust in certification process; 11M vehicles affected; $30B+ cost
Wells Fargo Fake Accounts (2016)3.5M unauthorized accounts createdTrust in bank → massive internal fraud; incentive misalignment
Uber (various)Sexual harassment cover-ups; Greyball program”Move fast and break things” trust culture; regulatory evasion
WeWork (2019)$47B valuation collapsed to near zeroTrust in founder → no governance; SoftBank enabled
Tyco/Kozlowski (2002)CEO looted $400M+ from companyTrust in executives; board failure
WorldCom (2002)$11B accounting fraudAuditor trust failure (Arthur Andersen again); largest bankruptcy at time
Satyam Computer Services (2009)India’s “Enron”; $1B fraudFounder confessed in letter; “cooking the books”
ExampleWhat It IsWhy It’s Interesting
Toyota Production SystemAndon cord lets any worker stop production lineTrust in frontline workers; quality through distributed authority
Franchise Model (McDonald’s)Standardized operations across independent operatorsTrust through process, not people; brand as trust anchor
ISO 9001 CertificationQuality management standardsThird-party certification creates trust; “trust through bureaucracy”
Kimberley ProcessCertification for “conflict-free” diamondsTrust labeling for ethical sourcing; partial success
Fair Trade CertificationSupply chain ethics verificationConsumer trust through certification; market for “verified ethics”
B CorpsBenefit corporation certificationTrust through legal structure change; stakeholder accountability
Employee Ownership (Mondragon)Cooperative network, 80K+ workersTrust through ownership alignment; 65+ years of success
Partnership Model (Law/Consulting)Partners have unlimited liabilityPersonal liability creates alignment; Goldman, McKinsey, etc.

ExampleWhat HappenedWhy It’s Interesting
DigiNotar (2011)Certificate authority hacked; fraudulent certs issuedSingle CA compromise endangered entire PKI; company went bankrupt
SolarWinds (2020)Supply chain attack hit 18,000+ organizationsTrust in software updates weaponized; Russian state attack
Log4j (2021)Critical vulnerability in ubiquitous librarySingle volunteer-maintained library everywhere; patch chaos
Heartbleed (2014)OpenSSL vulnerability exposed private keysCritical infrastructure maintained by few; trust in crypto libraries
Mt. Gox (2014)Bitcoin exchange lost 850,000 BTC”Code is law” ideology met reality; no recourse
The DAO (2016)Smart contract hack drained $60M”Code is law” → hard fork to reverse; trust in immutability violated
Equifax Breach (2017)147M people’s data exposedTrust in credit bureaus with your data; no consent, no recourse
Colonial Pipeline (2021)Ransomware shut down major fuel pipelineCritical infrastructure connected to internet; $4.4M ransom paid
ExampleWhat It IsWhy It’s Interesting
Certificate TransparencyPublic log of all SSL certificatesTrust through transparency; catches rogue CAs
Let’s EncryptFree, automated SSL certificatesDemocratized encryption; reduced trust barrier
Signal ProtocolEnd-to-end encryption standardTrust through open cryptography; even compromised server can’t read
Tor NetworkAnonymous communicationTrust distributed across nodes; no single point of compromise
Bitcoin ConsensusTrustless monetary system (in theory)Trust in math/incentives vs. institutions; Nakamoto consensus
Bug Bounty ProgramsPay hackers to find vulnerabilitiesTrust through adversarial verification; HackerOne, etc.
HTTPS EverywhereMovement to encrypt all web trafficTrust through universal encryption; largely successful
Password Managers1Password, Bitwarden, etc.Trust concentration trade-off; single point of failure vs. better passwords
DNS Root Servers13 organizations manage global DNSDistributed trust for internet infrastructure; remarkably stable
IETF/RFC ProcessInternet standards development”Rough consensus and running code”; trust through process

ExampleWhat HappenedWhy It’s Interesting
Replication Crisis50%+ of psychology findings don’t replicateTrust in published science; p-hacking; publication bias
Diederik Stapel (2011)Social psychologist fabricated data in 50+ papersTrusted professor, no verification; peer review failure
Hwang Woo-suk (2005)Korean stem cell researcher faked resultsNational hero status created trust shield; Science retracted
Andrew Wakefield (1998)Fraudulent MMR-autism link paperLancet took 12 years to retract; anti-vax movement spawned
Jan Hendrik Schön (2002)Bell Labs physicist faked data in 16 papersProlific output created trust; retractions followed
Duke University Anil Potti (2010)Cancer research fraud affected clinical trialsPatients enrolled based on fraudulent research
Theranos (science angle)No peer review, secrecy as strategyDeliberately avoided scientific trust mechanisms
ExampleWhat It IsWhy It’s Interesting
Registered ReportsPeer review before results knownTrust through precommitment; reduces publication bias
arXiv PreprintsOpen access before peer reviewTrust through transparency; faster science
Open Science FrameworkPre-registration and data sharingTrust through verifiability
Retraction WatchTracks scientific retractionsTrust through accountability journalism
CERN Collaboration ModelThousands of physicists, shared authorshipTrust through radical transparency; Higgs discovery
Human Genome ProjectInternational collaboration to sequence genomeTrust between competitors; data sharing norms
Polymath ProjectCollaborative mathematics onlineTrust in open collaboration; solved problems

ExampleWhat It IsWhy It’s Interesting
Papal ConclaveCardinals locked in until they elect popePhysical containment ensures process completion; 2/3 majority; white smoke signal
Seal of ConfessionCatholic priests cannot reveal confessionsAbsolute confidentiality; priests have gone to prison rather than testify
Beth Din (Jewish Courts)Religious arbitration, still usedParallel legal system based on religious trust; binding in civil law
Hawala (Islamic)Already mentioned—religious rootsTrust based on community/religious ties
Waqf (Islamic Endowment)Permanent charitable trustsTrust through religious obligation; some 1000+ years old
Sanctuary TraditionChurches as refuge from lawSacred space trust; occasionally still invoked
Truth and Reconciliation CommissionsPost-conflict justice through testimonyTrust through amnesty; South Africa model
Oaths and VowsSworn statements with religious weightTrust through divine witness; “so help me God”
Kosher/Halal CertificationReligious dietary complianceTrust through religious authority; parallel to secular certification

ExampleWhat HappenedWhy It’s Interesting
Watergate (1972-74)Already covered in trust-across-civilizationsLoyalty-based trust architecture failure
Iran-ContraAlready mentionedParallel chains, deniability
Hurricane Katrina Response (2005)FEMA failure; “heck of a job, Brownie”Trust in incompetent appointees; cronyism
VA Healthcare Scandal (2014)Wait time manipulation; veterans diedTrust in reported metrics; gaming
Flint Water Crisis (2014-present)Lead poisoning from cost-cuttingTrust in state oversight failed; EPA failed to intervene
IRS Targeting Controversy (2013)Alleged targeting of political groupsTrust in nonpartisan administration
NSA Mass Surveillance (Snowden, 2013)Secret programs revealedTrust in “oversight” was theater; FISA court rubber-stamp
ExampleWhat It IsWhy It’s Interesting
Federal Reserve IndependenceCentral bank insulated from politicsTrust through structural independence; 100+ year success
GAO (Government Accountability Office)Congressional watchdogTrust through independent auditing
Inspector General SystemIndependent watchdogs in agenciesDistributed oversight; mixed success
Freedom of Information ActRight to government recordsTrust through transparency; 1966
Administrative Procedure ActRequirements for rulemakingTrust through process; notice and comment
Civil Service SystemMerit-based hiring vs. patronageTrust through professionalization; Pendleton Act 1883
Independent Counsel / Special ProsecutorInvestigation independent of executiveTrust through independence; used for Watergate, Clinton, Trump

ExampleWhat HappenedWhy It’s Interesting
Tragedy of the Commons (various)Overfishing, overgrazing, pollutionClassic trust failure in collective action
Carbon Markets (early EU ETS)Over-allocation crashed pricesTrust in self-reported baselines
Easter Island DeforestationCivilization collapsedLong-term commons failure
Aral SeaSoviet irrigation destroyed seaCentral planning trust failure
ExampleWhat It IsWhy It’s Interesting
Maine Lobster FisheriesSelf-governed fishing territoriesTrust through community; Ostrom case study
Swiss Alpine MeadowsCommunity grazing management for 500+ yearsLong-term commons success
Acequia Water SystemsNew Mexico irrigation cooperativesTrust through tradition; centuries old
WikipediaCollaborative encyclopediaTrust through radical openness; edit wars resolved
Linux Kernel DevelopmentThousands of contributors, one dictator”Benevolent dictator” model; Linus as trust anchor
Creative CommonsStandardized sharing licensesTrust through legal clarity
Quadratic Voting/FundingNovel voting mechanismsTrust through mechanism design; Gitcoin

ExampleWhat HappenedWhy It’s Interesting
Abu Ghraib (2004)Prisoner abuse by US soldiersTrust in military discipline failed; chain of command
My Lai Massacre (1968)US soldiers killed civiliansTrust in rules of engagement; cover-up
Blackwater Nisour Square (2007)Private contractors killed 17 Iraqi civiliansTrust in private military; accountability gaps
USS Vincennes (1988)Shot down Iranian civilian airlinerTrust in automated systems; 290 deaths
Friendly Fire IncidentsOngoing issue in all militariesTrust in identification systems
Chelsea Manning / Snowden LeaksMassive classified disclosuresTrust in security clearance system; insider threat
ExampleWhat It IsWhy It’s Interesting
Geneva ConventionsRules of war respected (usually)Trust between adversaries; reciprocity
Prisoner ExchangesTrust between enemiesSimultaneous exchange problem; how it’s solved
NATO Command StructureMulti-national military integrationTrust across languages, cultures, doctrines
Rules of EngagementConstraints on use of forceTrust through procedure; varies by context
Security Clearance SystemBackground checks for accessTrust through investigation; periodic reinvestigation
”Two-Person Integrity”Requires two people for sensitive operationsTrust through mutual verification

ExampleWhat HappenedWhy It’s Interesting
Florida 2000Hanging chads, Supreme Court decided electionTrust in counting process; butterfly ballot design
Various Disputed Elections2020 US, Belarus 2020, Venezuela, etc.Trust in election integrity; what makes elections credible?
Diebold Voting MachinesSecurity vulnerabilities demonstratedTrust in electronic voting; no paper trail
Cambridge Analytica (2018)Facebook data used for targetingTrust in social media platforms; election influence
Russian Interference (2016)Social media manipulation, hackingTrust in information ecosystem
ExampleWhat It IsWhy It’s Interesting
Estonian E-VotingNational online voting systemTrust through cryptography; digital identity
Risk-Limiting AuditsStatistical verification of resultsTrust through sampling; Colorado model
Independent Election CommissionsNonpartisan administrationTrust through independence; varies by country
International Election ObserversExternal verificationTrust through third-party oversight
Ranked Choice VotingAlternative voting systemTrust through mechanism design; reduces spoilers
Paper Ballot BackupsPhysical records of votesTrust through verifiability

ExampleWhat It IsWhy It’s Interesting
Prediction MarketsBet on outcomes to aggregate informationTrust in incentive alignment; Polymarket, Metaculus
Futarchy”Vote on values, bet on beliefs”Robin Hanson proposal; trust through markets
Quadratic VotingSquare root of votes to reduce plutocracyTrust through mechanism; Radical Markets
Harberger TaxesSelf-assessed property with forced saleTrust through aligned incentives; experimental
Dominant Assurance ContractsRefund + bonus if threshold not metTrust through guaranteed downside
DAOs (Decentralized Autonomous Organizations)Code-governed organizationsTrust in smart contracts; mixed results
Liquid DemocracyDelegable proxy votingTrust through flexible delegation
Conviction VotingTime-weighted votingTrust through commitment
ExampleWhat It IsWhy It’s Interesting
Anonymous (hacker collective)No leaders, fluid membershipTrust without identity; coordination without hierarchy
Burning ManGift economy, radical inclusionTrust through cultural norms; temporary society
Kibbutz MovementIsraeli collective communitiesTrust through shared ownership; evolution over time
Amish RumspringaYouth experience outside world, then chooseTrust through informed consent
Alcoholics AnonymousPeer support, anonymity, sponsor systemTrust through shared vulnerability; 12-step model
Witnesses Protection Program (WITSEC)New identities for informantsTrust created through dependency
Dead Man’s SwitchAction triggered by lack of actionTrust through mutually assured disclosure

Tier 1: Strong Candidates (Rich material, clear lessons)

Section titled “Tier 1: Strong Candidates (Rich material, clear lessons)”
ExampleTypeKey Insight
Boeing 737 MAXFailureWhen regulator delegates certification to regulated; cost-cutting vs. safety
FTX CollapseFailureTrust in “effective altruist” founder; crypto’s trust-minimization failure
Crew Resource Management (Aviation)SuccessHow to reduce authority gradients; anyone can raise concerns
WikipediaSuccessTrust through radical openness; how 300M+ articles mostly work
SWIFT NetworkSuccessHow $5T/day moves on trust; what happens when weaponized
Prediction MarketsInnovativeTrust through incentive alignment; alternatives to expert panels
Papal ConclaveUnusualPhysical containment, 2/3 majority, centuries of operation
Certificate TransparencySuccessTrust through mandatory disclosure; catching rogue actors
Replication CrisisFailureWhen “published” doesn’t mean “true”; trust in science

Tier 2: Good Candidates (Interesting but narrower)

Section titled “Tier 2: Good Candidates (Interesting but narrower)”
ExampleTypeKey Insight
Hawala NetworksSuccessTrust without legal enforcement; centuries of operation
Toyota Production SystemSuccessTrust in frontline workers; andon cord
IAEA InspectionsMixedWhat verification can and can’t do
Tuskegee StudyFailureDestroyed medical research trust for generations
Truth and ReconciliationInnovativeTrust through amnesty; post-conflict justice
Geneva ConventionsSuccessTrust between adversaries; reciprocity
Mt. Gox / The DAOFailure”Code is law” meets reality
Snowden/ManningMixedInsider threat; security clearance failure
Risk-Limiting AuditsInnovativeTrust through statistical verification

Everything else in this document—interesting but less compelling as standalone pieces.


Based on this research, the most promising next documents would be:

  1. Boeing 737 MAX: When the Regulator Trusted the Regulated — FAA delegated certification; cost-cutting; organizational trust decay

  2. Wikipedia: Trust Through Radical Openness — How 300M+ articles mostly work; edit wars; vandalism defense; neutral point of view

  3. FTX and the Crypto Trust Paradox — Trust-minimization ideology; “don’t trust, verify” met “trust me, bro”; effective altruism as reputation shield

  4. Crew Resource Management: Flattening Authority Gradients — From Tenerife to modern cockpits; how to let juniors challenge seniors

  5. Prediction Markets vs. Expert Panels — Different trust architectures for aggregating information; when each works

  6. The Replication Crisis: When Science Wasn’t Trustworthy — P-hacking; publication bias; registered reports as solution

  7. SWIFT: Moving $5 Trillion a Day on Trust — How interbank messaging works; what happened when weaponized for sanctions

  8. Medical Trust After Tuskegee — How one study destroyed trust for generations; IRB system as response