Trust Economics – How Smart Businesses are Using Trust to Gain an Edge over Competition
The global operating system on which all modern businesses run is built on trust. Always has been, always will be. However, the way businesses have been building (and signaling) trust has changed significantly over the years.
Trust Level 1: Good Reputation
For entire centuries, trust has been an extension of one’s reputation. And reputation has been an extension of “belonging”. To a tribe. To a good family. To a social class. To some other special group. These were the golden years of fraternities and business clubs. Country clubs and old boys’ clubs.
This made sense when people used to move (and do business) in relatively small and static circles. Information moved slowly and almost exclusively through gatekeepers. There was very little change from one generation to the next. You’d trust someone you’d know. Or whose uncle you’d know. Someone who would have a reputation to lose beyond the deal in question.
A lot of this legacy dynamic still extends into the modern day (where “belonging” = alum of a certain school, for example), but overall, as businesses went global, information moved fast the whole reputation thing had to evolve.
Trust Level 2 – Manufactured narratives
With the advent of the “new mediums” of radio, television and daily newspapers, people and businesses – still conscious of the importance of reputation – learned that manufacturing reputations on an industrial scale is now possible. This is the era of the Mad Men. Of brands and brand equity. The playbook was simple: be out there and be consistent. Tap into people’s feelings. Make them feel good about themselves. People will eventually recognize you and go “Oh, I know this brand. Worth my money”.
The insurgents of the time invested in smart, clever marketing campaigns and shot past their larger, but slower-to-adapt competitors, who were still relying on their “good reputation” for business.
The companies of the time loved this era: they could control every aspect of their presentation. Their messaging was going one way and one way only (“Above the Line” and “Below the line”), and they owned the volume button, too.
People’s feedback – collected in organized focus groups, if at all – was nothing but an input into fine-tuning this Monologue. Every so often, a letter to the editor or a journalist with a score to settle would provide a little bump to the whole thing, but that would be drowned quickly by more ad spending and simply the passing of time.
Everyone just moved with the program.
Trust Level 3 – Power to the People
Then, the Internet happened. In the early days on “the web”, trust was just simply not a thing. No-one knew or trusted the other person. Everyone used pseudonyms and the idea that you’d transact with some anonymous person was laughable. More so by companies that did well in the previous era and who build their models around trust in brands and armies of helpful sales people.
Yet, the people found a new super-power. First, random websites emerged where anonymous consumers would grumble about bad experiences with this and the other brand. Then they started making voted lists of favorite/ least favorite brands across various categories. Fans groups emerged organically. Followed by Pressure groups. And of, course, the trolls on either side.
Few in C-suites took these new trends seriously. In fact most brands wouldn’t even know or care or, proverbially, laugh it off – “kids on the internet”. Even worse, many brands made conscious decisions to dissociate themselves with these scrappy elements that seem to have no spending power and therefore be of no interest to them.
These businesses – yesterday’s successful insurgents – were so confident in the power of their advertising voodoo that they just had a laugh and, maybe, doubled down on their ad spending. Most of them failed to recognize the insurgence mounting.
The change was slow at first – it always is – until a point when everything changed, pretty much over night. Legend has it that e-bay was the first to encourage people to review their experience with each other. In any case, soon enough, ANY experience on the internet required reviews.
Eventually, reviews on the internet extended to the real world to the point that anyone in the service industry – including small local businesses – cannot survive these days without ensuring they have solid reviews from real people.
The monologue of old became a conversation. The business establishment of the previous era had to adapt. Those who didn’t, pretty much disappeared either completely or got relegated to some irrelevant niche.
Meanwhile, those who were early to realize the potential of this two-way conversation built engagement early, build communities and tribes and and ended up bypassing their larger, bigger-pocketed competitors.
Full Circle: The Insurgents became establishment and then were toppled by the next insurgency.
Level 4 – Proof or it Didn’t Happen
Soon enough brands realized that any two way conversation can actually be manipulated. They figured out how to work the system. To manufacture and control narratives and manipulate emotions at scale.
Enter the era of the Facebook Outrage and the “Fake News”.
This, in turn lead to people evolving a healthy suspicion of narratives of all sorts. A distrust of traditional media, authority institutions and big brands. This has been a particularly significant shift when it comes to sustainability narratives.
Companies used to have a little feel-good narrative ready for any occasion, and keep on with their business.
It’s a new era now. Now, brands need to prove their claims. You care about your community? Prove it. You recycle? Prove it. Is your supply chain clean? Prove it.
What does all of this mean for the present day insurgents?
Mostly, it is great news. Just like previously, the evolution of the trust economy from narrative to proof is happening pretty slowly at first (it has been ongoing), and then will accelerate very rapidly.
Rapid enough that most incumbents – arrogant and deeply confident of the power of their manufactured narrative Voodoo – will fail to adapt. As ever, many of these incumbents will lose out or disappear entirely.
This is how it happened every single time when the rules shifted, and it will be exactly the same this time around. To make things more complicated, this time the process is further complicated by a once-in a few generation global Pandemic followed by a deep economic crisis and profound social change. Everything will be accelerated and the rift will be a lot deeper.
Times like these favor the insurgent.
Smart, modern businesses understand this. They understand that baking proof and evidence into their narratives and storytelling is a big differentiator now and will soon be a minimum standard of engagement. The march of the changemaker generation into the mainstream as consumers, investors and policymakers is being accelerated.
As far as I am concerned, good riddance to the manufactured narrative, mass manipulation crowd.
I can’t wait for evidence and data to take over. If you look with the right kind of eyes, you will see that a new era of trust – backed by proof – is already here. It is just unevenly distributed.