A Trust Bubble?

I read a blogpost about capital ratios entitled The Mystery of Capital.  A commenter to that post introduced an intuitively appealing term I hadn’t heard before: the “trust bubble,” as in

“what has popped is not really the housing bubble, nor even the credit bubble, but the trust bubble. And as always when a bubble bursts, we all rush to the opposite extreme. Now, no one trusts anyone else, economically or politically, and no society can function without trust.”

Credit for the line goes to commenter jrw, whose real name I can’t deduce from the un-hyperlinked initials. It’s an intuitively appealing turn of phrase, and I wasn’t the only one who found it a grabber.

But like so many things trust-related, it doesn’t bear up under examination. A bubble is when things inflate—we have a bubble in tulips, or in gold, or in tech stocks. They get over-valued, then the bubble breaks.

So—did trust get vastly overdone? Was trust over-rated, before it took a crash? Listen closely, and you can be forgiven for being confused; that is language crafted to obfuscate, not to clarify.

Another such grabber line is “trust but verify.” Like light beer, it sounds great–but has less meaning. Let me explain.

Deconstructing Trust

Let’s think very simply about how we use the word ‘trust’ in its most concrete sense. I trust you; or I don’t. You are trustworthy; or you’re not. If I (trust you), and you are (trustworthy), then the result is—trust.

In the above sentence, “I trust” is a verb, "trustworthy" is an adjective, and the resulting “trust” is a noun. Trust is a result, an outcome: it’s not a thing in and of itself.

Yet we have all manners of surveys purporting to measure ‘trust.’ What is it they’re actually measuring? In long run social surveys, ‘trust’ is often used to indicate people’s propensity to trust, i.e. the verb meaning from above.

But in other surveys, for example when we say “trust in Goldman Sachs is down,” do we mean that people are less trusting? Or do we mean that Goldman Sachs is less trustworthy? All we know from “trust in Goldman is down” is the end result.

Identifying the Real Trust Problem

You can’t create good social policy without knowing whether the problem lies with the trustor, or the trustee. Do we have a trust-ing problem? Or a trustworthiness problem?

Professor Roderick Kramer of Stanford doesn’t necessarily state that the problem lies in trust-ing, but that’s where he focuses on for solutions. Consumers can best protect themselves by practicing ‘tempered trust.’

That doesn’t mean he thinks Bernie Madoff is blameless, of course. But if one’s attention tends to be placed on what Madoff’s victims could have been done differently, it tends to draw attention away from Madoff’s assault on trustworthiness. Regardless of Kramer’s intent, the perhaps unintended effect is like what the mortgage brokers’ and credit card industries have said—the solution to abuse is better consumer education.

I want to say to those industries (please imagine here a full Lewis Black rant ‘n rage tone), “No It’s NOT! The solution to abuse is—to stop the abusers! Not to better educate the abused!”

While business surveys often fail to distinguish between ‘trust’ and ‘trusting,’ there are social trends scholars who are extremely precise about their measurements of trust, and about what trust means. A great example is Dr. Eric Uslaner, of the University of Maryland.

When Uslaner says trust is down (and he does), he means long-term propensity to trust, or what I’m calling trusting-ness.  Long-term as in decades and generations. And propensity as in do you tend to leave the door unlocked, do you impute bad motives to strangers. It’s a lot more psychological, broad, and deep-based than a temperature-taking about a specific institution or person compared to the same question a few months prior.

Again: what is it we think we’re measuring when we purport to measure trust?  It makes a difference.

Ronald Reagan Had It Wrong

He may have had it wrong many ways, but here I’m just talking about when he said, “trust, but verify.” Like the “trust bubble,” it sounds great. But in fact it plays on another ambiguity about trust. This ambiguity comes from the relationship between trust and risk.

If you think about it for a moment, there is no trust without risk. If there weren’t risk, we wouldn’t call it trust, we’d call it “probabilistic decision-making.” Bluntly put, if you have to verify, it ain’t trust.

There is one component of trust that is an exception to that statement—the idea of ‘reliability,’ as in ‘I can trust that pipeline won’t blow’—in which trust very much is linked to verification. But it’s the mechanical sense of trust; it has to do with engineering, physics, the behavior of impersonal forces. In all the other senses of trust—which touch on ideas like intentions, deception and transparency, and vulnerability—verification has precious little to do with it. Reagan was just speechifying.

Finally, there’s the comment that started this blogpost. Was there a bubble in trust? In trusting? Or in trustworthiness?

There certainly was not a trustworthiness bubble: quite the contrary—trustworthiness was declining with every level of derivative abstraction.

Nor does it seem to me there was a ‘trusting’ bubble. I don’t think people’s propensity to trust financial institutions was increasing at the same time general social trust was steadily declining.

And if both trustworthiness and trusting-ness were undergoing declines,then–how could there have been a "bubble of trust?"

The vocabulary of trust is seductive, but the meaning of trust is slippery. Be careful to think simply and clearly when it comes to broad generalizations about trust.  Bad stuff went down; it’s critical we think clearly about what is to be done.

6 replies
  1. Julian Summerhayes
    Julian Summerhayes says:


    WOW this one made me think; thanks for such a great analysis of the blog post. What I am still coming to terms with is how trust can be measured. Prima facie we are all know a trustworthy person or organisation when we see one but how do you then measure that and apply the principles? Where is the best place to try and start building trust? With the brand, the people or the product or service (or an equal combination of all three)?



  2. Barbara Garabedian
    Barbara Garabedian says:

    Charlie, thanks for continuing to enlighten us on the multi-faceted concept of "trust".  Obviously jrw (the blog commentator) hasn’t heard of Dr. Uslaner.

    The Doc’s thoughts regarding trust and the decline of trust contain some concepts that seem so obvious that I wanted to dope slap myself…education and tolerance. Lack of education and tolerance, two key elements that have driven all the tribal & global warfare since the world began…wouldn’t ya think we’d figure it out by now?

  3. Lance E. Osborne
    Lance E. Osborne says:

    Charlie, did I get this right? Can we sing this to the tune of Harry Nilsson’s Coconut song:

    Basic formula:
    I trust (verb) + Trustworthy (adjective) = Trust (noun)
    Comparative social scale (affected by greed, geography, population density, law enforcement, political polarization, rallying points such as world wars or catastrophes):
    + 5’s don’t trust -5’s, -5’s don’t trust +5’s, and neither is trustworthy
    +1’s have much trust for -1’s, -1’s have much trust for +1’s, and all are almost completely trustworthy
    0’s trust each other completely and are completely trustworthy


    Doctor, ain’t there nothing I can take? Doctor, to relieve this belly ache?!

  4. John Gies
    John Gies says:



    Thanks again for another post worth taking the time to think about. Your willingness to dig below the surface of the sound byte to get to the definitions (premisses) of trust helps us all to be precise as we talk about trust. (This is a concept that we all hae an intuitive sense of kind of like porn we know it when we see it). But as the conversation aout trust moves forward in the consciousness of our community it is important that we call share common understanding of the concept.

    And can I say an AMEN to your Lewis Black rant?

    Take Good Care,

  5. jim burke
    jim burke says:


    Thoughtful column. One quibble: Reagan had it right in the sense of another, older saying: good fences make good neighbors. He also was speaking to a number of people who naively believed that the Russians could be trusted, thus, sure, trust them to adhere to a treaty, but (based on their previous conduct) verify.

  6. John W. Taylor
    John W. Taylor says:

    I see the financial build-up as a game of musical chairs where none of the participants realized that a chair was being taken away each time the music stopped.  I think the "trust bubble" (which you pointed out never occurred since that would imply there was a high degree of trust during the good times) was more a belief in the perpetuation of the current state.  The longer the bubble continued the more participants believed that it could continue. 

    I think there was very limited trust between the participants (investment banks, insurance companies, trading firms, mortgage companies, etc.) in the financial build-up; however, no one cared about trust right up until they did care.  Once they acknowledged the importance of trust, the curtain was removed and panic set in. 


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