An Exploration of the Role & Importance of Trust – and the Cost of losing it amid current Trust Issues at Uber, The Weinstein Company, Cambridge Analytica, and Facebook
The world is changing, and so is one of the most important elements of human relationships: TRUST. We are living in an era of trust erosion where specifically digital trust is becoming a more and more scarce commodity and trust in general is declining on all fronts. Especially in Western countries, governments, public institutions, but also private organisations, and especially businesses, are being perceived as less and less trustworthy. And in turn this obviously affects how people interact and engage with these organisations. In business, this is not different. Trust is, more than any other quality, determining success as a basic requirement that is essential for engaging in any commercial transaction. For brands specifically it is said that trust “acts as a building block for other positive attributes, including the creation of perceived standout and brand preference”.
Trust and its relevance for brands is also represented in their role as being satisficing, which combines the two ideas of being satisfying and sufficient. This concept, first described by Herbert Simon’s 1956 publication “Rational Choice and The Structure of the Environment”, states that people make most purchasing decisions to minimise risk rather than to optimise choice. That means when making a decision, most people choose an option that satisfies their basic requirements rather than aiming for an actually “optimal” solution. To exemplify this, just think of one of the most well-known brands in the world, McDonald’s: The fast food chain is certainly not known for offering the most refined food you could think of. But on the other hand, it is also unlikely that you will contract food poisoning or immediately die of food at McDonalds – something you can be unconsciously reassured of by the fact that so many others are frequenting this franchise on a daily basis without falling ill or dropping dead. This supports the idea that the actual value of most brands is not about being the best, but instead about being trustworthy enough to not deliver an absolutely negative experience. Or in other words: they can be trusted as risk-minimisers. But trust is relevant not just for brands. Let’s have a look at the impact of trust in other business contexts.
1) Systemic Dishonesty is Driving Systematic Distrust
As trust is becoming rarer across many domains, its relative relevance is also increasing, specifically in trust-poor contexts. Based on the context-dependant scarcity, (dis)trust is impacting human behaviour – opening the view to a dynamic systems-perspective of trust. A nice example for this effect is online dating. In the beginning of online dating, users were excited and had high hopes regarding this new way of match-making. Many platforms advertised having elaborate scientific matching algorithms that were supposed to allow a user to find their “ideal partner”.
However, in reality users quickly found out that online – where truthful signals of information are hard to generate and easy to fake – people are lying systematically about information that is crucial for choosing a partner, such as height, income and age, rendering valid matching processes rather futile. But what is less obvious and even more astonishing is that, within the online dating context, people also show systematic counter strategies on how to deal with dishonesty, underscoring the importance of trusted information. In a data-set of users of the platform OKCupid we can for example see a strong correlation between contact frequency and stated income, most likely driving a general inflation of stated income among especially male OKCupid users.
Messaging frequency on OK Cupid. Credits: OK Cupid
In the chart above we can see that OKCupid users indicating higher income, specifically an annual income of $100,000 upwards, are systematically receiving a greater number of messages on the platform, as indicated by a green colour code representing being in a higher percentile of messages received. However if we look more closely at the youngest age bracket – especially the demographic being between 18 and 22 year old – we see this phenomenon partly reversed. It seems that, stating that you will make more than $50k might even significantly reduce your chance of getting a lot of messages, potentially indicating the limited credibility of such information. This appears to be true even for the age range of 23 and 25 years old, where not the ones stating to be making $100k or more are receiving the most messages, but actually the ones (pretending to be) earning between $40k and $80k.
This means that what you say you earn actually does not impact online dating success as much as what people believe that you say you earn, underscoring the increased importance of trust in this generally more dishonest and therefore rather untrusted context.
2) Outdated And Inefficient Media Formats Still Work – Because They Imply Trust
Even though traditional ad formats – such as tv, radio and print – are often considered to be technically outdated, the level of trust the public places into these media formats is still higher than in comparison to newer media platforms. A survey showed that, in the United States, 80% of internet users trust TV ads when making a purchase decision, compared to only 25-60% trusting in digital ads with search ads representing the highest ranking online format trusted by 60% of American internet users.
Especially in a “post-truth world”, people are looking for reliable signals which is where the trust-advantage of otherwise rather outdated and inefficient media formats like TV is coming from. Differently than more efficient forms of online marketing, TV offers a way of addressing a collective live audience which is by nature a more trustworthy way of communicating brand messages not despite but actually because it is still one of the most expensive forms of advertising. That is why it is possible to observe in some print and online ads the message “as seen on TV”, but never to see the message on TV “as seen on social media”, as Rory Sutherland brilliantly observes. TV ads are allowing brands to make a claim in front of an extremely large audience with a certain minimal guarantee of trustworthiness as it is believed that it is “hard to fool all the people all the time”. However, when looking closer we can see that the “trustworthiness” actually stems rather from the way in which advertising messages are communicated on TV. TV ads tend to tap into our propensity to believe in bigger brands with bigger brand awareness and stronger emotional associations, rather than explaining factual reasons for buying a product or brand. This exploits consumers’ social heuristic for decision making that guides them to “follow the herd” and, consequently, buy what most others are buying – again a strategy for risk minimisation rather than for actual factual trust. As a result of this, advertising is specifically using messaging such as “UK’s number 1 cleaning brand” or “UK’s most bought motor oil”. Because different to general belief, consumers today are neither savvier nor more engaged than consumers in the past. Research showed that 56% of all knowledge about a brand is held by just 20% of its buyers, while 80% of a brand’s buyers know little about the brand, which is exactly why consumers are employing “follow-the-herd” heuristics in their attempt to minimise risk. Against this insight marketing claims of any “most trusted brand” actually have to be read as “least mistrusted” brand – reflecting consumers’ risk minimisation strategy in a generally distrusted consumption environment.
3) More Trusted Brands Stand Out and Generate Greater Value
As various reports suggest, brands that score higher on trust tend to stand out and be more preferred by consumers. At the same time, the emergence of trust is closely correlated to usage – which explains why specifically day-to-day, e.g. food and drinks, brands engender high levels of trust. Especially in a general environment of corporate mistrust, trustworthiness has become a strong brand differentiator. Moreover, according to Forbes, the 10 most trusted brands in the UK in 2016 were able to accumulate a market capitalisation of over 39 Billion GBP, representing over 2% of UK’s total GDP in 2016.
4) Destroying Trust Means Not Only Destroying Business – It Means Destroying The Social Foundations Of Our Existence: The Cases of Uber, The Weinstein Company, Cambridge Analytica and Facebook
Trust has to be earned and building up a reputation can take decades. Whilst companies like The Weinstein Company might have build up a reputation for creating value in the entertainment industry over more than a decade with not more than 2 years ago the company potentially being valued at 800 Million US Dollars, the now publicly known misconduct of its co-founder Harvey Weinstein has literally destroyed almost all of that value as the company is filing for bankruptcy.
In the same vein, Uber, at the end of last year still valued at $69 billion has lost over 20% of its valuation, not least due to an originally undisclosed data hack, targeting 57 million users in 2016. And even more worrying is the case of Cambridge Analytica, a company based on unethically obtained Facebook data which then has been used to influence voting behaviours and manipulate democratic processes at the decision making level. Millions of users entrusted and continue to entrust their data to Facebook on a daily level – and hundreds of thousands also trusted a personality testing app on Facebook that has been used to harvest the data for Cambridge Analytica without disclosing the real objectives of the underlying data harvesting activities. Because Facebook did not originally disclose or address this data breach, the company valuation just dropped 7%, shaving off $36 billion of the company’s value and destroying $6BN of its owners Mark Zuckerberg’s stock value.
Because we are by design social animals, we not just tend to but have to trust someone – unless we are actively opting out of human society at large. But every global demographic trend seems to indicate the opposite, that human societies are living in more and more closely integrated structures, even living more and more closely and densely together in general. Global population data is showing that since 2007 more than half of the global population is living in ever more densely populated cities where our lives rely on each other rather than on our individual skills to survive in nature.
And although we general belief in progress, recently increasing numbers of data breaches have shown that technology does not necessarily make trust easier, but is instead raising new questions about our ability to entrust our data to others and whether or how digital trust is even possible at all.
In a more complex, from a trust perspective certainly more challenging environment, old rules and behavioural guidelines who to trust become increasingly obsolete. Given our social nature as human beings it is certainly not helpful nor feasible to stop trusting in business or society altogether. But the general questions who, and more importantly, how to trust in a post-trust era remains.
Cambridge Analytica whistleblower, asked who he would trust (11:48); credits: The Guardian
It might be a good advice to “go through life with a healthy dose of scepticism”, but it yet remains to be seen how this should be broken down and applied in our day to day behaviour, specifically in an ever more complex digital and data-laden environment. You may try to follow all the rules about how to protect yourself in the digital world, maybe by auditing your Facebook apps and privacy settings, reading all privacy guidelines and installing ad and tracker blockers as well as cleaning your browsing data every hour. But the only way to be 100% safe from all digital threats, is to stop using digital technology altogether.
Ultimately, trust is an inherent feature of our social nature and comes as the natural “risk of doing business” or better, as the “risk of being human”. You cannot not trust, but you can be discerning who and how you trust. Whilst personally I would still advocate to err on the side of being too trusting, Error Management Theory would suggest that the best way to apply your trust is to err on the side with the least costly error.
The most intriguing aspect of trust appears to be its social ambivalence: as would we all be better off being cautious and mistrusting, we all also need others to trust us to be socially effective and commercially successful – without trust, there is no business. And the same technology that is bringing us digitally more closer to each other as ever, allowing everyone at any point to communicate, publish and disseminate their thoughts into the world, is also the same technology that is making it harder to identify the “truthful signal” within the generally untrusted noise.
Whilst it seems ironical to quote someone who has just received a major blow to his company valuation due to data-breach related trust issues, he still deserves credit for having understood on what side of the trust question to generally err in face of the long term technological journey into the unknown we are on: