There’s a lot of handwringing in business nowadays about the loss of trust–HBR’s June issue features a spotlight on trust. And the news is filled with stories of consumers suspecting the safety and quality of products, manufacturers doubting the reliability of overseas suppliers, and investors wondering if executives are skimming profits through complicated compensation schemes. Meanwhile it’s hard for employees to trust bosses when companies are under enormous pressure to cut costs. I’ve heard colleagues wonder if “trust is at an all-time low.”
So it’s a good time now to reflect on one of the great achievements of the 20th century: the enormous increase in business trust overall.
Let’s focus on the United States, but the same dynamic has played out in much of the rest of the world. Imagine if we could have asked Americans in 1900 the following questions:
Would you be willing to eat vegetables grown in Chile?
Would you be willing to give your children toys made in (what we now call) Vietnam?
Would you entrust part of your retirement savings to Polish companies?
Would you be willing to pay in advance for products costing thousands of dollars from a company you know only from typed messages?
Would you be willing to rely on overseas manufacturers, whom you communicate with only by translation, for key components in your quickly-outdated products?
Would you be willing to work for a company controlled by a Chinese family?
Our survey would have yielded only laughter in most cases. But for Americans in 2008, these were all common activities, often producing no worries at all. Improvements in logistics, marketing, online commerce and portfolio management have made most of these activities feasible, while a variety of legal and regulatory changes–not to mention protections that business has developed on its own–have helped to reassure buyers. Most of these activities are still common today. Yet we still tend to think that business trust is falling, because we’re hypersensitive to scandal.
I was recently talking to a friend about junk bonds. She remembered the insider trading of the 1980s and had assumed the scandal had killed off these disreputable securities. She was astounded when I said junk bonds are now a normal and popular way to invest in companies, at least for institutions, and one that has helped several major companies get crucial funding in their early years.
Some scholars argue, in fact, that we’re too willing to trust, and that we should be more circumspect. What’s dangerous for individuals, though, may have been crucial for business development, because every innovation is a little shaky and needs credible people to try it out until it’s ready for prime time. A little bit of initial trust has gone a long way in creating a situation where trust is commonplace for all sorts of activities crucial to our prosperity.
The usual surveys of business trust, such as the Edelman Trust Barometer, don’t capture these improvements. That’s because they ask such abstract questions as, “Do you trust business to do what’s right.” While useful to get at changes in current prestige (e.g., that until last year, people tended to think better of business than of government)–these questions inevitably miss out on the long-term increase in trust. Surveyors rarely ask about concrete actions that would force people to reflect on how much they implicitly trust business.
People take past gains in trust for granted, and focus on recent reports. News of poisonous toys from China, for example, will dampen trust even though these same consumers may still have no problem buying toys made in Singapore.
And while we’re seeing a lot of concern now, especially with the extreme tightening of credit, there’s no sign that the recession has scared people into long-lasting changes in their commercial habits. It’s entirely likely that, as with other business challenges in the past, companies, government and nonprofits will work together in the usual way to fix the underlying problems and eventually regain the same high levels of trust as before.
How will we know for sure whether this recession has been just a temporary drop in the continuing increase in business trust?
All we can do is watch what people do with their wallet, not what they say.
