I heard an interesting comment made during Davos (I wasn’t there, but was listening to Bloomberg Surveillance) about the economic situation. One Davos participant said that it’s all a matter of trust. He hit the nail right on the head. Everything that you see happening right now is about trust, because trust is the foundation of money.
Remember the lesson we discussed recently: money is essentially a medium of exchange and a store of value. I trust you to represent yourself and your value accurately, and you trust me to do the same. Money flows between us, and business is done.
This is why, by the way, trust cannot be a commodity or a currency, as Julien Smith once posited – trust is a meta-quality of currency but cannot be currency itself. Let me put it another way. (Julien and Chris Brogan will be publishing a book about the topic of trust as currency, which I look forward to debating)
Money is a tangible form of trust.
If I write on a sheet of paper that this paper note is redeemable for one iPod, is that paper worth one iPod?
It depends. If you trust me and believe that I’m acting in good faith, and that I have that iPod, then yes, that paper is worth one iPod.
If you don’t trust me, then that note is just a sheet of paper with words on it.
Trust powers currency. The only difference between my sheet of paper worth an iPod and a sheet of paper from the government of the United States (besides obvious physical differences) is that relatively few people trust me, and a whole bunch of people trust Uncle Sam. If I do business with my close friends, that sheet of paper has as much purchasing power as Uncle Sam’s sheets of paper.
Our current financial crisis ultimately comes down to a lack of trust. We don’t trust realtors to accurately represent the price of a home, so we don’t buy. We as buyers and taxpayers don’t trust appraisers to accurately assess the value of a home. The real estate market tanks. As values go down, investments based on that real estate collapse.
Banks don’t trust each other’s investments because of poor practices, and so interbank lending and lending to consumers dries up. Banks conserve cash because they don’t trust.
And here we are. No trust anywhere in our institutional financial system is what’s ultimately causing it to malfunction. This, of course, has real consequences as investments decay, the job market deteriorates, and the overall economy grinds to a halt.
What ends this crisis is whether our trust can be regained by corporate America and the government. What ends this crisis is a re-establishment of trust – and as anyone knows who has violated or had their trust violated, that takes a long time, a lot of forgiveness, and a clear record of performance, of living up to promises in an unbroken record.
This is where social media is a start – authenticity, transparency, and humanity in our communications with others. Not PR. Not corporate-speak. Relationships we can begin to trust. When you talk to Pamela O’Hara or Greg Cangialosi, you’re talking to human beings who represent their companies, but the trust you have in them is at the human level.
If companies want to restore profitability and growth, they have to fulfill that trust. There’s a reason we say that brand is a promise. Fulfill that promise, earn back trust, and you will prosper. Violate that trust and in this fragile economic environment, your company disappears.
What should YOU be doing right now, in this economy? Building trust. Building relationships. Strengthening your network. Growing your network. Why? Relationships can exist without money – barter, trade, collaboration. Money can’t exist without relationships, because without trust, money itself fails.
Who do you trust?
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