Business Without Trust is a Bust

The Quakers are a group of Christians that came to be in the mid 1600s in England. They weren’t happy with some of the Church of England’s teachings and, like many other groups, opted to go their own way. One area where they found some success as a result of their beliefs was in business. Several Quakers led the development of banks and insurance companies. For example, what became Barclays Bank and Lloyds Banking Group were founded by Quakers. James Dale Davidson and Lord William Rees-Mogg in The Sovereign Individual write that a reason Quakers became successful in these financial businesses was because, “They set themselves the highest possible standard of trustworthiness. They would not swear oaths, but regarded every business commitment as being as binding as an oath. ‘My word is my bond’ was for them an absolute principle.”

Trust to the Quakers was a must. It was the essential element of enterprise. Davidson and Rees-Mogg go on writing of the Quakers, “They thought that the businessman had a moral obligation to give fair value, and as merchants they developed a reputation for maintaining high quality with moderate prices. ‘Caveat emptor’—let the buyer beware—was not good enough for them. In an age when most merchants followed a high-price, high-margin theory of trade, the Quaker morality led them naturally to a low-margin, high-turnover policy. … They followed this business policy because they thought it their duty not to cheat their customer, but it turned out to be the best way to expand their businesses. The Quakers proved good people to do business with, so their customers came back; there were profits on both sides.” Their reputation as reputable business people became in itself a business asset. Simply being known as a Quaker became like a tattoo of trustworthiness.

In The Speed of Trust, Stephen Covey articulates the primacy of trust writing, “Trust impacts us 24/7, 365 days a year. It undergirds and affects the quality of every relationship, every communication, every work project, every business venture, every effort in which we are engaged. It changes the quality of every present moment and alters the trajectory and outcome of every future moment of our lives—both personally and professionally.” Trust allows society to function smoothly. Russ Roberts, an economist, has noted, “One important characteristic of civilization is trust. When you can trust the people you deal with—when you don’t have to fear that your trust will be exploited for someone else’s gain—life is lovelier and economic life is much easier. When trust breaks down in a relationship, our partner can suddenly and shockingly become our adversary, and fear grips the nervous system and takes control of the mind.” Trust is needed in order for us to interact well with each other. Moreover, where it doesn’t exist or is destroyed, our ability to maintain constructive relations tanks. Greg Ellis supports Roberts’ work writing in The Respondent, “Trust is a biological necessity. It is impossible to imagine functioning as living organisms if we live in mistrust of each other. We could not only not make a choice, but we could not act effectively. Before we can make a choice and act, some degree of surety and faith must exist. Once shattered, however, reconstructing the psychology necessary to trust is an immense challenge.” Relationships of all kinds, not just business, are built and broken on the development and destruction of trust, respectively.

Unfortunately, trust is something that seems to be not just taken for granted but outright neglected in parts of society today. Several generations ago, in the 70s and 80s, most people in North America held high levels of trust for professionals. Moreover, even the media and politicians were afforded some respect based on the trust of the citizens they served. Surveys conducted in 2018 showed how this trust had dwindled over the preceding four decades. Whereas more than two-thirds of the population considered the media mostly trustworthy in the 80s, in 2018 it had dropped to just a third. Trust in politicians fared even worse. The numbers, too, had dropped in half over several decades. In 2018, politicians were trusted by less than 20% of the population. As depressing as this was, what seems worse is that trust individuals had towards each other had also gone up in smoke. Only 30% of North Americans felt that they could trust others they encountered in 2018. As author and Senior Fellow at Stanford, Francis Fukuyama, has noted, “A nation’s well-being, as well as its ability to compete, is conditioned by a single, pervasive cultural characteristic: the level of trust inherent in society.” Steven Covey in The Speed of Trust writes, “Low trust is the greatest cost in life and in organizations, including families. Low trust creates hidden agendas, politics, interpersonal conflict, interdepartmental rivalries, win-lose thinking, defensive and protective communication—all of which reduce the speed of trust. Low trust slows everything—every decision, every communication, and every relationship.”

Sadly, it doesn’t seem that the handful of years since 2018 have helped foster trust. If anything, COVID has given us more reasons to be wary of each other and increased our skepticism of the media and government. Fukuyama observes the consequence of distrust writing, “Widespread distrust in a society…imposes a kind of tax on all forms of economic activity, a tax that high trust societies do not have to pay.” A professor at Columbia Business school, John Whitney, has offered, “Mistrust doubles the cost of doing business.” One hundred and fifty years or more ago, Ralph Waldo Emerson noted the timeless reality that “Our distrust is very expensive.”

How do you feel about companies that make purchasing easy but customer service difficult to access? Do you enjoy learning that the free trial you were able to easily sign up for has now become an auto-renewable annual commitment that is cumbersome to cancel? If you want to cancel it, you can’t do it the same way that you signed up, with one easy click. The onus is now on you to dig around for hours to find a customer service number to call and be put on hold then shuffled from customer “service” rep to rep all seeking to impose barriers and burdens on you to make cancelling a challenge. Do these types of practices help you feel trust toward the business? If they would have treated you this way prior to “signing up,” would you have signed up at all? Do we hire referees to officiate our interactions because we trust each other or because we distrust each other. How many people getting married have their marriage counsellors doing the officiating? It would seem that the erosion of trust is real as are its consequences as burdens to both businesses and consumers. Trust, certainly in commercial contexts, impacts two key factors: speed and cost. Decreased trust leads to decreased speed and increased costs. When distrust deepens, due diligence efforts grow. More outside parties are required to “help.” The information passed between parties isn’t accepted but must be scrutinized, audited, and evaluated by independent reviewers. All of this takes time and costs money grinding down the gears of commerce. If we aren’t arming ourselves with attorneys we’re pleading our case at the steps of legislatures. We’re lobbying for laws to help us navigate our distrust with each other. Consumer protection legislation, environmental protection legislation, and any number of other rules and regulations are rolled in to become the arbiters of our arrangements each adding another layer of complexity through which all parties have to navigate. This takes time and effort to do.

What are some symptoms that reflect an absence of trust in our commercial transactions? Barriers between organizations and their customers reflect compromised trust. Erecting physical barriers through plastic screens, markings on the floor, and masks all separate. So, too, would be barriers created between customer and business through paper and contracts. Yes, the US has the largest economy in the world. However, it also has the largest number of lawyers of any country in the world as well. As large as the US economy is, it represents less than a quarter of the world’s economy. Yet, the number of lawyers in the US is higher per dollar of GDP than that of most other countries. In 2022, there are more than 1.3 million lawyers practicing in the US. Consider that there are between three and four lawyers for every plumber in the US. What does a high number of lawyers in an economy say about the society? Does it reflect high trust or an absence of trust? There are more lawyers per capita today than a generation or two ago. Consider the gloomy survey results noted by Stephen Covey in The Speed of Trust where Covey notes that almost two thirds of law students admit to having cheated in order to get into their law programs and 75% of business students admit having cheated in order to help them get into graduate school. Are these the kinds of people that will populate a profession with honesty and integrity?

Do the growing proportion of lawyers, increased numbers of management consultants, and investment bankers reduce the cost of a transaction between two parties or increase it? With more lawyers, longer terms and conditions seem to be the trend. Of the terms and conditions you’ve encountered in recent years are they growing in size or shrinking? In what way are our interactions facilitated by these impositions? Are these suggestive of progress? Do these reflect the presence or absence of trust between parties? Worse yet, many lawyers don’t even hide the fact that their objective is to create obstructions. Some are content to refer to their efforts as lawfare. Lawfare offers legal services as a tool for organizations to combat other parties. It’s used by environmentalists to stop resource developments and businesses to stifle the efforts of competitors. Lawyers create problems for other parties to prevent them from doing things. It is an active attempt to gum things up.

It used to be that a concept coupled with chutzpah could convert action into traction. It seemed we celebrated the creators, developers, and innovators a bit more in the past. Now, we’ve traded the red carpet for red tape. More legislation, regulation, and interventions have burgeoned the bureaucracy hindering development in many domains. In an interview about his book, Where is My Flying Car, author J. Storrs Hall points out that “You don’t need one good idea nowadays, you need a good idea, two schemes to involve the activists on your side, three favorable environmental-impact statements, four sympathetic judges, and 500 lawyers.” It’s tougher to get things done.

As a former Chairman of Johnson & Johnson, Jim Burke, has noted, “You can’t have success without trust. The word trust embodies almost everything you can strive for that will help you to succeed. You tell me any human relationship that works without trust, whether it is a marriage or a friendship or a social interaction; in the long run, the same thing is true about business, especially businesses that deal with the public.” Take a moment to think about a past or current relationship you have or may have had with someone where trust was lacking. How did it feel? Were you able to get things accomplished together? What was the communication like? Did you feel confident sharing intimate details of yourself or your project with the person you didn’t trust? Was it a grudging back and forth grind or a seamless and smooth success?

An absence of trust implies doubt. If the distrust is really strong, it shows as suspicion. Where we trust, we take things on faith. We are more comfortable taking action and moving forward without seeing a perfectly clear path. Progress is assisted and the path proceeds downhill. Where trust isn’t present, the path forward is dark, murky, cluttered with debris, and moves up a steep and winding trail. A path without trust is much harder and slower to navigate than one paved with trust. It doesn’t have to be this way. Other countries seem to be better at developing trust amongst its citizenry and institutions. In fact, countries like Holland and the Scandinavian countries are seeing their respective societal trust grow. In surveys similar to those that show North American trust tanking, these other countries are showing trust levels at 70% or higher. These positive examples serve to illustrate that our decreasing trust trends aren’t set in stone. We can take actions to increase trust. In a subsequent article we’ll offer some suggestions for how we can work to develop trust in our own organizations.