Trust, Trust, Trust

There’s a major bear market right now—in trust.  Or so it seems reading the papers, blogs and broadcast media.  The only bull market to be found is the bull market in talking about the bear market in trust.

So it’s very appropriate for this blog to have a point of overview.

First, a sampling:

This Tuesday, Henry R. Kravis said trust is the"The Single Biggest Factor" in the economic crisis:

Both the Economist and the NYTimes agree that trust is a Big Deal at Davos this year.

Paul Krugman says trust is a big part of the problem.

Robert Reich agrees with Kravis, that what we are facing is "a crisis of trust.”

Edelman’s Trust Barometer dropped precipitously across institutions this past year.  As the FT’s John Gapper  points out, Edelman’s survey suggests “only 49 per cent of Americans, living in the country of capitalism and free enterprise, thought the free market should be allowed to operate independently.” 

So—what does all this mean?  Above all, it means two Big Things:

1.    we are facing a Big Opportunity cleverly disguised as an economic crisis;
2.    at the heart of all trust is personal trustworthiness.

A Big Opportunity Cleverly Disguised as a Trust Crisis.  The academic research on trust is staggering in the breadth of definitions of “trust.”  We trust stoplights, Amazon book reviews, the kindness of (some)strangers, some businesses more than others, neighbors, those we know, those with similar names or facial features or religions—and we trust each in different ways.

How curious that, despite our inability to provide a concise dictionary definition, we nonetheless know from context pretty much what is meant when we use the word.  Which means, to say “trust is down” is not meaningful without context.

Other statements requiring context include “trust takes time,” “trust takes years to build and only a moment to destroy,” and “trust but verify.”   All are true in their place—and not so true outside that place.

Context is critical.

Most trust-talk these days is about institutional trust—the SEC, the institution of business, trust in the media.  Interestingly, it doesn’t take long for attitudes about institutions to change—a charismatic leader (a Pope, a President) can rather dramatically affect trust levels.  (By contrast, it takes much longer to change cultural attitudes toward trusting “others,” or toward strangers.)

All of which means getting the context right is critical.

Trust is Personal.  Former House Speaker Tip O’Neill famously said, “all politics is local.”  So is trust, in the sense that if is unlinked from people, it loses its breadth of meaning. We don’t say we “trust” that the sun will rise in the East, or that the law of gravity will work every time.  We may depend on or predict based on laws of nature; we “trust” people. 

We cannot afford a society based on 18th century models of a competitive state of nature.  We cannot even rely on "the rule of law"–society is too complex.  We cannot afford social constructs based on the suspected evil of others–we need models based on values and standards to which we demand people aspire.

This is a fundamental truth about trust.  In all the debates about institutional trust and the need for regulation, we ignore this truth at our peril. 

At the risk of using the same quote twice in a week: Samuel diPiazza, CEO of PricewaterhouseCoopers, and Robert G. Eccles, a former HBS professor, wrote, in Building Public Trust:

…even transparency and accountability are not enough to establish public trust. In the end, both depend on people of integrity. Rules, regulations, laws, concepts, structures, processes, best practices, and the most progressive use of technology cannot ensure transparency and accountability. This can only come about when individuals of integrity are trying to “do the right thing,” not what is expedient or even necessarily what is permissible. What matters in the end are the actions of people, not simply their words…without personal integrity as the foundation for reported information, there can be no public trust.” 

If there is any common message about trust, this should be it.  The "trust issue" is not fundamentally about disclosure, or process regulations, or even transparency: at root it is, as it always has been, about the personal integrity and trustworthiness of human beings in relationship to each other.


2 replies
  1. Charlie (Green)
    Charlie (Green) says:

    An addendum to this blogpost: if you’re interested in intelligent thinking about the US system of financial regulation, you must read the text of Harry Markopolis’ testimony of today, Feb. 4, before the House of Representatives’ Committee on Financial Services about the Madoff affair. You can find it at

    Part I describes his frustrating history as a whistleblower.  The lesson that so obviously emerges from his tale is the financial illiteracy of the SEC, and the baked-in habits of a bureaucracy.  As he put it, as presently constituted this organization couldn’t find first base in Fenway Park from the Red Sox dugout given an afternoon. 

    To my surprise, Part II was even more interesting.  He purports to tell the new SEC Commissioner how to do her job–and by gosh, I hope she’s reading, because he’s got a lot of good to say.

    This is not some boob businessman howling about how the government ought to run by private sector principles.  This man knows exactly how the government works, and how auditors work, and how fraudsters work, and how investments work.

    He has got simple, intellingent suggestions for how the SEC can become more effective.  Use standard auditing techniques.  Instead of sitting in the conference room reading (possibly fake) reports submitted by staff, go out on the floor and ask people if they’ve seen any fraud.   Hire people who know assets from liabilities.  Put professional certifications on staff business cards.  Get more than one Bloomberg machine per regional office.  Subscribe to Barrons.  Institute best practices from the IRS and the DOJ, including centralized contacts and tracking of whistleblowers.  Make effective reward funds for turning in malfeasance.  And above all, get rid of the mindless mindset of checking boxes and calling it "compliance," replacing it with a mission to secure our capital markets.

    Markopolis obviously has passion, and he’s far more right than wrong.  He’s given to the occasional hyperbole (see Fenway comment above), but hey, this man is the real deal. 

    Remember Sharon Watkins of Enron fame?  Same deal.  This is must reading.





  2. J. Mark Walker
    J. Mark Walker says:

    Your conclusion, "at root it is, as it always has been, about the personal integrity and trustworthiness of human beings in relationship to each other," captures the essence of the challenge in a more fundamental context — with sales people. 

    In our sales process trust is part of "validation."  You must validate that people trust you, your organization and your product or service, in that order.  So often people on the front lines of selling and serving do not appreciate the vital significance of their own abilities to connect in a trusting manner with the customer or prospect.

    Recently I wrote a presentation with PowerPoint on "A Trusting Workplace."  The responses from the executive groups who see this is overwhelming.  There is a hunger among leaders to find ways to build trust within and without.  Unfortunately, or otherwise, trust between people has to start at the top.  The leader must be trustworthy, and must show integrity in insuring her/his trust focus is part of the foundation of the organizational culture.

    Thanks for putting this in context of the current political and economic crisis from which I can extrapolate to my daily life.




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