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The importance of trust

In all our dealings with other people and organizations we unconsciously rate them according to their trustworthiness, in business dealings we talk about a person's "reputation", what we mean is that that person can be trusted. An old motto is "my word is my bond", we have noted elsewhere that the diamond trade, still relies on verbal agreements, but the trader who fails to honor an agreement faces exclusion from the market. It is probably relevant that the diamond traders normally share a common background and religious values. For a businessperson a "good" reputation is their most important asset. The recent example of Enron has virtually destroyed Andersons because trustworthiness is ultimately the most important asset of a firm of accountants, not cleverness, not size, not connections; we trust them to audit the books properly, we rely on the audited accounts when buying stock in companies, without trust the rest counts for nothing. Trust is the glue that holds the economy together. Companies that build successful brands understand this. Branded goods came on to the market in the US and the UK in the 19th century to counter the rubbish that was often sold to consumers (in an age before food regulation or consumer protection legislation), the basis of these early brands was the development of trust. You knew that Heinz and Campbells products were of good quality. Many of these brands have lasted for generations, but if there is a problem with the quality of the product sales drop away. Perrier mineral water suffered for years after a contamination case, in the case of automobiles Lancia lost many of its UK sales after engines dropped out of its cars because of rust, and after decades the brand is still affected in that market. Trust is closely related to honesty, a fact that often escapes salesmen.

Trust and Social Cultures

Francis Fukuyama in Trust: The Social Virtues and the Creation of Prosperity [1995] says that, "If the institutions of democracy and capitalism are to work properly, they must coexist with certain premodern cultural habits that ensure their proper functioning. Law, contract, and economic rationality provide a necessary but not sufficient basis for both the stability and prosperity of post-industrial societies; they must as well be leavened with reciprocity, moral obligation, duty toward community, and trust, which are based in habit rather than rational calculation. The latter are not anachronisms in a modern society but rather the sine qua non of the latter's success" [page 11].

In The Mountain People Colin Turnbull advocated the separation and relocation of the Ik, a tribe located in Northern Uganda. The Ik, forced from a hunter-gatherer society to a sedentary existence in a drought-stricken, region not suited for agriculture, deteriorated as a society into a collection of individuals whose main goal has become a quest for survival on a day-to-day basis. Family obligations broke down and it was every man [and woman] for themselves, a society without any functioning rules of behavior. The underclass of American cities also reflects a loss of trust and a working set of social values. Turnbull shows that societies don't have to have a working culture, but that the absence of such a culture makes life brutish and short.

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