How (27 page)

This same relationship of trust to economic advantage scales up to the macroeconomic level, too. Studies show that economic growth and prosperity within a given society require a certain minimum level of generalized trust. Without it, investment ceases and economic activity stalls. Francis Fukuyama first hypothesized this in his seminal 1995 book,
Trust
. The wealth of a nation, “as well as its ability to compete,” he wrote, “is conditioned by . . . the level of trust in the society.”
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Neuroeconomist Paul Zak extended Fukuyama’s thoughts about the relation of trust to general prosperity. “Our analysis also shows that if trust is sufficiently low,” Zak reports in the
Journal of Financial Transformation
, “then the investment rate will be so low that income will stagnate or even decline.”
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Economists call this a “poverty trap,” and once a society has slipped into one, a downward spiral of trust deficiency results. “We show that the primary reason for a poverty trap is ineffective legal structures that result in low levels of generalized trust, and therefore little investment,” says Zak. “Further, the threshold level of trust necessary for positive economic growth is increasing in per capita income; that is, the poorer a country currently is, the more trust is required to generate sufficient investment to raise living standards. This makes the low-trust poverty trap difficult to escape from.” In other words, when the societal Certainty Gap gets too large, it becomes almost impossible to fill.

Laws do many things well, and one is to create the reasonable amounts of generalized trust necessary for economic prosperity. This is one of those “floors” I spoke about. Zak’s research shows that general trust is high in Scandinavian and East Asian countries and low in South America, Africa, and the formerly communist countries. In a worldwide survey designed to measure the general ability of any two random people to trust each other in a society, only 3 percent of those surveyed in Brazil and 5 percent in Peru say their compatriots are trustworthy, while 65 percent of Norwegians and 60 percent of Swedes believe this to be so. The United States comes in at 36 percent, down from 50 percent in 1990; the United Kingdom has been holding steady at 44 percent since the mid-1990s.

Zak also found direct, quantifiable relationships between trust and prosperity. Business investment in a given society directly mirrors levels of trust. Where general trust is high, the national rate of investment—gross investment divided by gross domestic product (GDP)—is commensurately high, and vice versa. The same direct relationship also exists between trust and GDP growth. For each 15 percent increase in the proportion of people who find others trustworthy, per capita income rises 1 percent. If trust in the United States grew from 36 percent to 51 percent, for example, the average income for every man, woman, and child would grow about $400 per year from the parallel rise in investment and job creation. That adds up to about $30,000 over the course of a working life.

There is something of a paradox in this marriage of trust and prosperity. Those who have misread Adam Smith’s principles of reciprocal capitalism often clamor for truly unregulated, laissez-faire markets. They work under the illusion that, free of regulation, they could achieve anything they put their minds to. This is simply another form of rules-bound thinking: defining your ability to achieve in relation to regulatory constructs. But in fact, the certainty and predictability created by strong legal systems and regulatory apparatuses support achievement. Consider traffic signals as a metaphor. Traffic signals allow us to get around as speedily, efficiently, and safely as we can. They help to create a reasonable level of certainty that other drivers and pedestrians will behave in a predictable fashion. Like those free-market types, we all wish at one time or another while driving that the traffic laws did not apply to us. Occasionally, we even take the law into our own hands, so to speak, and choose to roll through a stop sign or exceed the speed limit in order to get where we’re going faster. But interestingly, when law breaks down—for example, if there’s a blackout and all the signals stop working—people do not suddenly go charging off at breakneck speed. Traffic, in fact, slows down. The absence of predictability makes everyone more cautious. People tend to prioritize safety over speed. In the absence of law, nobody enjoys driving because the risks suddenly start to weigh heavily against the rewards. The same holds true in the vastly less controllable sphere of human relations, and, by extension, in the marketplace. When we experience states of high uncertainty, everyone slows down, as does economic activity. Our circle of trust shrinks, as does our tendency to take risks, even, interestingly, if they may lead to greater rewards.

Dr. Peter Kollock, associate professor and vice chair of the department of sociology at the University of California at Los Angeles, conducted a study in the mid-1990s that demonstrated this. He set up a trading game where people traded goods in two different environments. In one environment (low uncertainty), participants knew the value of what they were trading, and in the other (high uncertainty), they did not. Kollock’s study achieved two fascinating results: (1) people have a greater tendency to form interpersonal commitments in a high uncertainty environment, and (2) they tend to forgo potentially more profitable exchanges with untested partners in favor of trades with partners who have demonstrated their trustworthiness in previous transactions. In short, economic activity in times of high uncertainty slows down and traders become risk-averse .
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HOW HIGH IS THE CEILING?

If the Certainty Gap is the space between our ideal state of security, certainty, and predictability and the state that exists in the world, and the confluence of destabilizing factors in the world today has lowered the floor of certainty, what defines the ceiling of the Gap? What defines an ideal state of certainty?

Actually, it is a trick question, because I believe there is no ceiling. When we create sufficient trust to take risks, innovate, and progress within current global or market conditions, why stop there? Why not keep going? Security and certainty are not heights to be dreamed or attained, but rather something that spreads out around you horizontally. Picture an archery target sitting on a table, with you standing in the bull’s-eye. Around you are circles and circles stretching out to the horizon. Each represents a trust gap to be filled—red, blue, green, white, and so on. The more rings of trust you can fill around you, the more secure you can be. The horizon is limited only by your imagination. Now take that same mental picture and instead of a target, imagine a football stadium with you standing in the center. All around you are the people you work with, play with, live with, and love. Instead of rings, imagine circles of connection, interpersonal synapses filled with trust, stretching out to the very lip of the stadium. The more powerfully connected you can be to this expansive mass of people, the more secure you can be, and, more importantly for your ability to thrive, the more Waves you can create throughout the stadium.

It is easy to draw and imagine pictures, but much more difficult for many of us to implement what they represent in daily life. Those who have had long and satisfying experiences with trusting environments can envision a very high level of certainty, while others, who have perhaps suffered in environments of betrayal and self-interested action, can imagine only distrust. But everyone has the ability to expand their vision of a trust-filled world. Like all journeys of knowledge, we can’t just leap from the Hill of B to the Hill of A; we must build our ability to imagine trust circles incrementally, one relationship at a time, one group at a time. Sometimes we will struggle in the Valley of C, where we have trusted the wrong people and been betrayed. But we can push out from where we are, no matter what our previous experience with trust has been, to reach the furthest limits of possibility. Perhaps you can accomplish one ring of your target, perhaps three. But when you get to the edge of one ring, and only when you get there, will you suddenly see the next ring to fill. Like climbing a mountain, you must crest one peak before you can see the next. Trust isn’t a switch you can turn on and off at will, but the power to envision it is strength you can build over time.

GOING ON A TRIP

So, what do we know about trust? We know that it fills the brain with powerful chemicals that strengthen interpersonal bonds by reducing fear. We know it fills the Certainty Gap, thereby defeating the arresting forces of insecurity and timidity that make us go slower when—to really thrive—we need to go faster. We know that trust begets trust between individuals and between corporations and that it builds more trust over time and repetition. We know it stimulates an upward spiral of cooperation and value. We know that trust fuels Waves that bring people and organizations closer together. It gives back as much energy as it takes to create, if not more, and enables risk-taking behavior. In short, we know that trust is active and propulsive; it is nothing short of inspirational.

It takes a journey to envision and learn about trust, but trust also propels its own trip. No book like this would be complete without an inspirational acronym and, not to be pedestrian, I’d like to offer just one that I have found encapsulates a lot of these ideas about trust:

TRIP

Trust

Risk

Innovation

Progress

Trust

The “T” in TRIP stands for trust. If we have just met, and I choose to extend you my trust, who is virtuous: Is it me for trusting you or you for being trustworthy? Aristotle said that the one who extends trust is virtuous. When I trust you (even though I’ve just met you), I’m giving you the power to let me down or do right by me. I’m the one who’s vulnerable, who takes the risk. Trusting, in a sense, means giving something away and ceding power to others, an essential step in achieving the outward focus needed in a hyperconnected world. Trust empowers others but, because it is a virtue, it also empowers one’s self. Trust at its very essence involves risk and provides the engine that powers this TRIP.

Risk

“R” stands for risk. We know that in business and in life, risk is directly proportional to return. “No risk, no reward,” says the cliché. The more rational risk you can take, the more you can accomplish. In environments of high uncertainty, forming trust circles becomes very difficult. Peter Kollack’s study demonstrated this clearly. We look closer to home for partners and limit our exposure to those with whom we’ve done business in the past, those to whom we are related, or those with whom we can reinforce trust ties with through personal and direct means like reputation and recommendations. Without trust, the Certainty Gap looks like the Grand Canyon. We drive slower, act more cautiously, shrink our circle of friends and associates, and generally default to more conservative impulses. When there is trust in the room, however, all of these tendencies are reversed. We are secure and so can act boldly. We feel free to invent a new process, for example, without being scared our boss will be angry with us for messing with the status quo. We experiment more, confident that even if we fail we will have learned something valuable and improved. If the very nature of trust involves risk, then the more trust there is, the more risks we can take. Studies have shown that if teams have a lot of trust, they outperform teams that don’t have trust.
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If you trust people’s vision for making a Wave, you’ll stand up with them. If you don’t trust it, you’re going to keep eating your hot dog. To take risks, then, the Certainty Gap must be filled with trust.

Trust enables risk. If I were to stand you on a sandy beach and ask you to jump as high as you could, try as you might you would not get very high. If I put you on a hard surface, like a basketball court, you could jump higher. It’s difficult to jump off of sand. That’s why we respect beach volleyball players; we know intuitively that their jumps are more difficult. In building construction, the more solid the foundation, the more stories that can be added to a skyscraper. The same holds true for leaps forward in business: The firmer the ground is, the more innovation can spring forth. The dynamic relationships between living things—like colleagues, partners, or companies—are like the shifting sand on a beach. But trust creates solidity. It stabilizes relationships and creates the hard floor from which you can walk or leap. This soft thing called trust is actually the hardest thing of all. When it’s there, it allows you to take a risk, to leap higher.

Innovation

In a hypertransparent, hyperconnected world, we are more exposed and discoverable. Opening up and letting information flow inherently involves more risk, less control, and increased vulnerability, so current conditions require us to be more comfortable in high-risk environments. A horizontal world, where teams collaborate across space and specialty, is unbounded and much more diverse. To function well—to take risks and reap rewards—you must have enough trust circles around you to allow you to work laterally in many directions at once. You’ve got to get good at heterogeneity, at developing the kinds of strong synapses that allow you to cover a much larger geography of interrelationships.

In a trusting environment, everyone feels emboldened to take more risks. They challenge the system more, they solve problems, and they don’t stay in small boxes afraid to venture into new territory for fear of criticism (by bosses or colleagues). Innovation flows from this creative spirit. Business is all about constantly pushing the edge. It asks us daily to go to uncharted territory; to take more chances; to leap higher or run faster; to create innovative new strategies, products, and systems; and ultimately to think more deeply than our competitors. To reap these sorts of rewards, we must take risks and create the environment in which others can do so as well. Some bright marketing people, comfortable in their high-risk environment, conceived of viral marketing. What could be more risky or counterintuitive than to expose a brand to the manipulations of consumers? Leaps of consciousness like this happen only in environments of trust.