Smart Trust

1. Trust is the new currency of the global economy

Trust is what makes our markets work. It "makes the world go round." At its core, capitalism is based on three things: capital, liquidity, and trust.

Trust affects speed and cost. When trust goes down in a relationship, on a team, in an organization, or in a country, speed decreases and cost increases. This is due to the many steps needed to compensate for lack of trust, creating a low-trust tax. Conversely, when trust goes up, speed increases and cost goes down.

Trust impacts economic outcomes. Research shows:

• High-trust organizations outperform low-trust organizations in total shareholder return by 286%
• Countries with higher levels of trust experience greater economic growth and investment
• 77% of informed respondents refuse to buy products or services from companies they distrust
• 55% are willing to pay a premium for products from trusted companies

Trust is essential in the digital age. In today's networked world, trust has become critical for:

• Enabling markets to function
• Facilitating collaboration and innovation
• Attracting and retaining talent
• Enhancing reputation and brand value

2. The crisis of trust coexists with a renaissance of trust

We're never so vulnerable than when we trust someone—but paradoxically, if we cannot trust, neither can we find . . . joy.

The paradox of trust. While there is a global crisis of trust, evidenced by low trust in institutions and widespread corruption, there is simultaneously a renaissance of trust led by individuals and organizations who understand its power.

Examples of the trust crisis:

• Only 46% of informed respondents in the U.S. trust business to do what is right
• Only 40% of informed respondents in the U.S. trust government to do what is right
• 53% of U.S. employees don't think their boss is honest

Examples of the trust renaissance:

• Muhammad Yunus's Grameen Bank, built on trust, achieved a 98% loan repayment rate
• eBay facilitates millions of transactions daily between strangers based on trust
• Companies like Zappos and Netflix build successful business models on trusting customers

3. Smart Trust combines propensity to trust with analysis

Smart Trust is judgment. It's a competency and a process that enables us to operate with high trust in a low-trust world. It minimizes risk and maximizes possibilities.

Smart Trust balances heart and head. It combines:

1. Propensity to trust: The inclination or desire to trust people
2. Analysis: The ability to assess opportunity, risk, and credibility

The Smart Trust Matrix:

• High propensity to trust + Low analysis = Blind trust (Zone 1)
• High propensity to trust + High analysis = Smart Trust (Zone 2)
• Low propensity to trust + Low analysis = No trust (Zone 3)
• Low propensity to trust + High analysis = Distrust (Zone 4)

Smart Trust in action. Examples:

• eBay's trust-based system with built-in safeguards
• Netflix's DVD rental model that trusts customers but monitors for abuse
• L.L.Bean's 100% satisfaction guarantee balanced with occasional account closures

4. Credibility is built on character and competence

A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well.

Credibility components:

1. Character: Integrity (honesty and congruence) and Intent (motive and agenda)
2. Competence: Capabilities (talents, skills, expertise) and Results (track record and performance)

Building credibility:

• Demonstrate consistent trustworthy behavior over time
• Align words with actions
• Develop relevant skills and expertise
• Deliver consistent results

Examples of credible leaders and organizations:

• Warren Buffett: Known for integrity and investment acumen
• Apple: Consistently delivers innovative, high-quality products
• Mayo Clinic: Combines medical expertise with patient-centered care

5. Declaring intent and assuming positive intent builds trust

Whatever you can do, or dream you can, begin it. Boldness has genius, power, and magic in it.

Declaring intent:

• Communicate both what you intend to do and why
• Creates context and inspires hope
• Reduces suspicion and misunderstanding

Assuming positive intent:

• Start with the belief that others have good motives
• Opens up possibilities and enhances collaboration
• Inspires reciprocity

Examples:

• PepsiCo's "Performance with Purpose" declaration
• Google's "20% time" policy, trusting engineers to innovate
• Indra Nooyi's practice of assuming positive intent in all interactions

6. Doing what you say you'll do is crucial for trust

Make a dent in the universe.

The power of follow-through:

• Builds credibility and reputation
• Inspires others to trust you
• Creates a virtuous cycle of trust

Strategies for consistent delivery:

• Make realistic commitments
• Communicate clearly about expectations
• Prioritize keeping promises, even when difficult

Examples:

• FedEx's reputation built on reliable overnight delivery
• Zappos' customer service exceeding expectations
• Warren Buffett's track record of honoring commitments

7. Leading out in extending trust creates a virtuous cycle

Trust men and they will be true to you; treat them greatly, and they will show themselves great.

Benefits of extending trust:

• Inspires reciprocity
• Brings out the best in people
• Creates a culture of trust

Smart Trust extension:

• Balance trust with appropriate safeguards
• Consider the situation, risk, and credibility involved
• Lead by example in trusting others

Examples:

• Best Buy's Results-Only Work Environment (ROWE)
• Whole Foods' empowerment of team members
• Ricardo Semler's radical trust-based management at Semco

8. Trust changes prosperity, energy, and joy

If history is a trustworthy guide, state-of-the-art technology won't ever replace state-of-the-heart technology.

Trust impacts three key outcomes:

1. Prosperity: Increased revenues, profits, and economic growth
2. Energy: Enhanced engagement, innovation, and creativity
3. Joy: Greater happiness, satisfaction, and well-being

Research findings:

• High-trust societies produce more economic output
• Trust is the number one factor linked to happiness
• A 10% increase in trust has the same effect on employee satisfaction as a 36% increase in pay

Examples:

• Denmark: Highest-trust nation with high prosperity and happiness
• Google: High-trust culture leading to innovation and employee satisfaction
• Zappos: Trust-based approach resulting in customer loyalty and employee engagement

9. Creating a Smart Trust culture multiplies performance

Culture eats strategy for breakfast.

Characteristics of a Smart Trust culture:

• Clear expectations and accountability
• Empowerment and autonomy
• Transparency and open communication

Benefits of a Smart Trust culture:

• Increased speed and efficiency
• Enhanced innovation and creativity
• Higher employee engagement and retention

Examples:

• Berkshire Hathaway's "seamless web of deserved trust"
• W.L. Gore's lattice organization structure
• Zappos' culture of empowerment and customer trust

10. One person can make a difference in restoring trust

Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.

The power of individual action:

• Small acts of trust can create ripple effects
• Leadership in trust can inspire others to follow
• Consistent trustworthy behavior can change cultures

Strategies for individual impact:

• Start with self: Build personal credibility
• Extend Smart Trust in your sphere of influence
• Be a role model for trustworthy behavior

Examples:

• Pedro Medina's "Yo Creo en Colombia" movement
• Oscar Morales' Facebook campaign against FARC
• Muhammad Yunus' microcredit revolution

Last updated: October 18, 2024