The Trust Crisis
hbr.org
hbr.org
Its crazy that these institutions, which are fully rational in their pursuit of profit, want to gussy up their relationship with customers and employees as "personal" when it manifestly isn't. They see you as an entry in a spreadsheet but they want you to see them as a warm friend.
> Trust, as defined by organizational scholars, is our willingness to be vulnerable to the actions of others because we believe they have good intentions and will behave well toward us.
By the definition, there are many circumstances where rational, selfish individuals can trust each other: when their interests align in a way that communicating honestly and working together is optimal for their own selfish profit.
So, there is room for trust. In addition, the game-theoretic space is large enough and the lack of global information is severe enough that it is not certain in many situations whether betraying trust is indeed the optimal decision in the long run.
Hence in many situations even in the most supposedly rational institutions there is a lot of leeway for its people to decide how the institution should communicate, and its strategy for profit.
On the other hand, the reality is that many institutions aren't rational at all but heavily embody the culture and motivations of its decision makers. You can even think of it rationally like this: letting X person make decisions, regardless of their irrationality, has Y and Z assets, and it is in the company's best interests to secure Y and Z assets by letting X make decisions.
In any case, I think that viewing institutions as rational machines optimizing for profit is hopelessly naive, and likewise for the conclusion.
If my interests align with theirs, then I also trust them to act in my interests.
If my interests do not align with theirs, then I do not trust them to act in my interests.
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Individually, people have things like religion, families, love interests, mental disorders, etc. There is no singular, easily definable reason for their existence. Each is driven differently. Trusting an individual is a case-by-case thing.
Capitalist businesses, on the other hand, have essentially one universal, defining purpose: to add financial value to their owners. They exist insofar as they accomplish that purpose.
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FWIW, Adam Smith had enormous trust/faith/whatever that groups of people in the market would act in their own interests. It's why he thought of the invisible hand as so reliable.
Your interest would have to be making them money, so you would have to be a shareholder. Otherwise there is a 0% chance your interests will align with their interests.
But if a business provides, say an online marketplace and I am a seller, then we do in fact have some interests in common: we both want me to sell successfully. And insofar as that goes, we are aligned.
If a business benefits financially from manufacturing environmentally harmful products, and I care about the environment, then I have zero expectation that I should trust them to act how I would like.
If you benefit from a company, as an employee, shareholder, customer, or whatever, that doesn't mean that it's in your interest for them to damage the rest of society.
If you have 100 shares of XYZ company, do you want them to be permitted to pollute the river where you live in order to get 0.02% more in dividends per year? Of course not. Neither do you want them to sabotage other companies that you might interact with, or the government that everyone relies on.
if you go to work, do your job as per the job description and contract you signed and, in return, your employer compensates you per the contract then the deal is square.
The "relationship" from business to customer is even more ridiculous. From my perspective as a customer, i'm giving you money in exchange for something of equal value subject to the terms of deal. That's it. To say an organization is a "trusted friend", whether for-profit or not, is crazy.
I so wish this was the case. But in the interest if saving a few dollars now employers have increasingly relied on "the benefits" to offset costs. How many people get a company phone so they can be reached out of the office? Or, in the case of government and education employees, take a smaller paycheck now knowing the pension plan is going to a defined installment later on.
In some cases I've offered to take slightly reduced pay just so I can have a more vacation time. Every time it's been denied. Because they know if they agree to it they are beholden to it. They don't care about the money. They want control of your personal life.
But at most corporations, there are no large punishments, people are very far, psychologically from the results of their actions, they are guided by authority and peer pressure and the punishment for betrayel is pretty bad.
All those conditions are known to generate bad behaviours among people.
As for the self interest of big organizations ?
Eh. There are so many cases of big organizations with quite bad intentions, so it isn't something that could be trusted upon.
It’s easy to be a knee-jerk cynic, but big organizations deliver great products and services all the time. Apple, for example, doesn’t build insane brand loyalty on the back of nickel and dimeing customers. You’re probably very happy with your car, your HVAC unit, your toothbrush, your bicycle, your dish soap, your mattress, stove, fridge, etc. People love Costco, Whole Foods, ALDI, Target, Trader Joe’s, etc. They love their mass-market beer, movies, cereal, burgers, etc. Even companies that people love to hate, for the most part, satisfy their customers. Nearly 3/4 of people report being “happy” with their cellular service: https://qtxasset.com/styles/breakpoint_xl_880px_w/s3/fiercew....
Since happiness with a product is about the comparison to other products that exist in their market, and all choices are virtually identical it is easy to be "(relatively) happy" that they can talk to their friends.
If they considered the % markup on service in the US compared to Europe they would likely be less happy. If they went further and considered the data being sold, ridiculous phone lease contracts, and planned obsolescence, they would likely be not happy. To consider that, though, would require another option which doesn't exist in their market.
People and companies are willing to spend a lot more for reputation, with good reason. It's way easier to buy one more of something 10 years later than to switch out a line of hardware (or support more than one style). It's basically a trope to have a new management come in, cut costs, exploit trust in the brand for a short-term profit. So I'm constantly looking out for signals for changes in quality/trust.
You shouldn't.
Many "rational, profit motivated actor" absolutely promote the use of "family and friends of insiders" all the time. And they are obviously promoting an ideology. Maybe you have an affinity with that particular ideology, and that's fine. Just saying that those motivated by profit or power, are the same as those motivated by ideology and religion.
Any one of them would sell you, or your grandmother out in a nanosecond if they could get what they wanted out of that exchange.
There are good alternatives, but they aren’t based on relationships either.
Both Bezos and Stalin had no patience for timewasters, Bezos is known to run tight meetings.
Central planning works on the level of the Firm.
That's just true on your single characterization, which is not relevant to making a equivalency. The ultimate outcomes of those resources are irrelevant and it's a disingenuous comment to re-frame a situation and claim someone is wrong within your frame of reference.
*did not mod your comment either way
Certainly we shouldn't be sopped with hollow rhetoric about "trust".
Does this go for all businesses though? I know plenty of locally owned shops that certainly don't act in this way, and even some corporations like Costco aren't guilty of this, at least in my opinion.
Its no coincidence that these very sectors (locally owned businesses) are being squeezed out of the markets - they aren't "rational" enough.
There is an entire ideology that believes this trust could be the basis for society :^)
How ironic that the idea that businesses only exists to make money for their owners came from the same institution as the article.
Latest example that irritated me: "Thanks for being part of the T-Mobile family". Family, really?
I can't argue with, "Reality: Trust is managed from the inside out — by running a good business." And the article does throw out there companies that tried. But the reality is 99% of the companies of the world are, by their nature, selfish entities, and will eventually degrade into doing untrustworthy things. It's the nature of the beast.
And those of us that deal with them, while potentially gaining some benefit, should treat them with suspicion. Any "faith" is misplaced.
https://news.gallup.com/poll/1597/confidence-institutions.as...
Pew conduct similar research: https://www.pewresearch.org/topics/trust-in-government/
Compare at 68% for small business.
Brands/trademarks are a token of trust, after all.
In fact, a token of trust cannot be created by the company, it has to be created by the people who trust it (the consumer). The fact that people pre-order a game or a Tesla is a token of trust, but the name Tesla is not a token of trust. "Tesla" might be a trusted brand, but it is not a token of trust.
Now the case of Amazon is interesting. Amazon has created a system where the brand actually has no meaning, because they will co-mingle inventory from anyone who claims it is identical, in particular, counterfeits. So I buy something with brand X, but there is actually no guarantee that it actually came from the makers of X. So Amazon's marketplace actually undermines brands. A world without brands/trademarks looks like Fulfilled by Amazon, not like a bunch of untrusted goods and services. The problem with Fulfilled by Amazon is that there is no guarantee that the item is what it claims it is and the whole point of brands/trademarks is to uniquely identify an item.
If that were true, why don't companies switch brands when people lose trust in them? They are free to do so, but somehow they don't.
Often, the brand is a company's greatest asset, and revoking a brand/trademark would be a far greater punishment than a fine, which is often just a slap on the fingers.
Also, it would warn users. If I buy at Amazon, and suddenly have to buy at X then that reminds me that the company cannot be trusted and has to regain my trust. I think it would be the perfect punishment in many cases. A monetary punishment is often difficult to get right.
Another alternative might be forced prominent disclosures of prosecutions or case findings of a sufficient magnitude, in all communications and advertising, for an extended period (5-10 years,say).
Microsoft, Google, and Facebook have all operated under consent decrees at times over the past 20 years. Awareness on that has not been widely established.
Imagine a consent decree site header or popup, say.
The issue with large corporations is that there is no real person behind them. The board can change, the owners can change - and these changes can happen dramatically overnight.
It's impossible to maintain trust in an organization like that because when an organization makes a decision, it's difficult to know who the main actors are and impossible to know who the main actors will be.
But I suppose there can be short term trust for corporations that have dominant individuals with dominant philosophies. We know that as long as Bezos is head, we can trust Amazon to think long term. We knew that was long as Sam Walton was around Walmart would prioritize low prices. But on top of that it's difficult to assign trust to an entity whose actions are the result of an ever changing and difficult to identify set of people.
>When we decide to interact with a company, we believe it won’t deceive us or abuse its relationship with us.
How anyone who's looked at the headlines generated by the grifting of telcos and banks over the last ten years could write this, and then get it a first-tier B-school to publish it, should give us pause for thought.
The revelation comes a bit further on:
>Currently, Sucher and Gupta are cowriting a book on trust, Trusted: How Companies Build It, Lose It, and Regain It.
The selling of trust repair services is the very special own business of the authors.
My belief and hope is that it is a combination of 1 and 3.
Wikipedia is particularly prone to this, though I'm finding few other reliable sources with a different picture.
https://en.wikipedia.org/wiki/List_of_corporate_collapses_an... \
A 2009 SSRN paper suggests growing pressures:
Dotcom bubble: 3 convictions
Great Recession: 0 convictions
The system has failed.
Then end.
Wow. This slime was almost enough to put me right off reading the rest of the article. It's transparently about putting the "needs" (greed) of investors and shareholders above the "needs" (privacy, safety, etc.) of customers, but let's pretend we're doing a great job for everybody and the only thing that has gone awry is a subjective feeling in the minds of people who are bothered by our actions.
Even after reading the rest of the article, I think maybe the opening sentence should have put me off reading it, because despite all the right things being said about betrayal of trust and a puppy in an overhead storage bin, you're still reading it all in the context of an opening sentence that said, "Don't worry, you're reading the Harvard Business Review, we know you're a good person and doing a great job and you shouldn't really have to bother with this."
LOL at the tone-deafness of the article. Why would/should people trust a bureaucracy that tries to put profit above people?
The other funny thing is whether readers trust advice from B-school professors. Arguably, a lot of the current ails of modern business (including the public's lack of trust in them) result from following wisdom professed by B-school faculty in MBA courses.
> So our need to trust and be trusted has a very real economic impact. More than that, it deeply affects the fabric of society. If we can’t trust other people, we’ll avoid interacting with them, which will make it hard to build anything, solve problems, or innovate.
They've got the priority order backwards.
There's a definition offered of what trust is. Not quite the same one I'd use, but a useful touch point. (My definition would emphasize belief extended in the absence of firm knowledge, and hence risk. I find etymology illuminating: https://www.etymonline.com/word/trust#etymonline_v_17902 )
There is the multidemensional nature of trust relations among business stakeholders, and the inherent conflicts among these. Several comments here are focusing negatively on one interpretation of this part of the message, missing other aspects. Yes, I do think the balance has swung too far, but considering why and what to do might be useful.
I think a key point is actually that there are not shortcuts to acquiring trust, or to regaining it when squandared, and high costs to trust-mining.
There are numerous references and case studies. The Economist article looking at eight cases of business trust betrayals leading to (despite claims to the contrary in comments) very measurable outcomes, includinga long-termreduction in business valuation by a third, to the tune of $300 billion.
https://www.economist.com/business/2018/03/28/getting-a-hand...
Several of the mentioned cases are tech companies, and everybody's favourite Blue Social Network is mentioned, as are Uber and Equifax, among others.
There's the tendency of some businesses to attempt to mine trust, essentially attempting a risk arbitrage, particularly using my definition of trust. This generally ends poorly
And there area few examples given of how trust can be regained -- the J&J response to a third party's exploiting their product to poison numerous people (killing seven), Honeywell and Michelin dealing with recession (or profit) and layoffs, and Recruit Holdings directly addressing corruption. Not cheap or easy or fast (pick ... none), but ultimately effective.
The biggest omission here is what the benefit of trust is: a tremendous amount of efficienct throgh goodwill. David Gerard made this point, regarding Bitcoin, in a 2017 FT interview:
"Decentralisation is the paramount feature in bitcoin, but it turns out that that's a bad idea that's really, really expensive, because it turns out that a tiny bit of trust saves you a fortune."
https://m.soundcloud.com/user-544122300/gerardpod
Going back further in history, John Stuart Mill observed in 1848 that:
"There are countries in Europe . . . where the most serious impediment to conducting business concerns on a large scale, is the rarity of persons who are supposed fit to be trusted with the receipt and expenditure of large sums of money".
https://archive.org/details/in.ernet.dli.2015.216033/page/n1...
The preceding quote and other observations at Naked Capitalism:
https://www.nakedcapitalism.com/2012/05/george-washington-la...
> The biggest omission here is what the benefit of trust is: a tremendous amount of efficienct throgh goodwill.
And the key question is how companies plan to use that goodwill/trust. If they plan to harness it for public benefit, they can expect a virtuous positive feedback loop. If they're going to harness that for profits, then the logical outcome is public cynicism.
I think Barry Schwartz captures several aspects of this well in some of his talks/writings. Check out his talks on practical wisdom, doing the right thing for the right reason, and the way we think about work (available on YouTube).
Also, a minor point in the grand scheme of things but I wouldn't take advice on trust from someone who had a fictional job title at Fidelity. From someone who worked in the industry, the business model of an asset manager is: do a shitty job, tell everyone you how smart you are (preferably with the aid of functionally useless qualifications), and hope no-one calls you on your bullshit. If you perceive yourself to be an expert on trust, don't work for organisations that have made untrustworthiness their business model. Doing so, suggests that you don't know what you are doing (which is likely the case here).
Some businesses are untrusted despite being objectively trustworthy, and the other way around. Would you have trusted VW not to cheat on emissions tests five years ago?
For example: I don't trust netflix to correctly charge me every month, so I review my accounts.