A Matter of Trust

A MATTER OF TRUST by Michael S. Malone

I’m writing this column from table #3 at Peet’s Coffee in Cupertino, California.

Why am I here, instead of working from my own home office two miles away? Therein lies a story.

Simply put, my Comcast cable service crashed yesterday afternoon at 4 p.m. That not only means my Internet access is down on all five of our family computers, but my cable television is down as well. In fact, the only service still working in our house in the landline phone – and that’s only because, when Comcast offered that service as well, my wife replied, “I don’t trust you people not to screw that up as well. I need something in this house I can depend on to work right.”

And, in fact, she used that phone to call Comcast to report the outage. And I took off for Peet’s to file this column.

How annoyed am I at this loss of service – a service I depend upon to make my living? A little bit less than load-the-Winchester angry, but a whole lot more than kids-having-a-drunken-party-next-door pissed off. The cable TV I can live without – though it makes the kids a little more bored and truculent than usual – but that’s because I spend more time these days on the Internet than television.

But the loss of my wireless router – and thus my Internet connection – has got me wandering about in a Lear-like confused rage. This is my livelihood, my entertainment, my connection to the bigger world. I can’t get my emails, I can’t research my story, I can’t find out what’s going on out there.

Okay, but I’m actually angrier than the loss of those things would predict. After all, I can go into any Starbucks, Peet’s, or even Mickey D’s these days and find a wireless hot spot. And Comcast promises to come out tomorrow – hey, thanks! – to find out what’s wrong.

No, I think the real source of my anger is what can best be described as a betrayal of trust. There is no greater source of anger in this world than just that sort of violation. Open the newspaper or turn on the news (as if I could right now) on any given day and probably half of the stories involve just such a betrayal: adultery, breaches of contract, anger at politicians, blown drug deals, embezzlement, child molestations, angry consumers, etc., etc. Seen from this perspective, it sometimes seems that almost every form of human friction devolves into some kind of betrayal of perceived trust.

What is surprising about this is that, despite the fact that we live in a largely scientific, empirical world – one in which natural scientists, sociologists and economists have come up with yardsticks and equations to measure and quantify almost every type of human behavior – we really have no common and accepted measure for trust. And, it follows, because we lack that measure, we have no precise way of knowing when that trust changes, when it fails, or what the consequences will be of that failure.

Not that there haven’t been attempts. A few years back I wrote a book with the Swedish economist, Leif Edvinsson, entitled “Intellectual Capital.” The impetus for the book was the growing realization in the business and financial communities that we really had no idea what anything was worth anymore. That is to say, we had all of the traditional accounting measures: inventories, capital equipment, etc. But the gap between that sum and what the stock market seemed to believe the company was actually worth was growing by the day. For example, how could Intel, which at the time had about $20 billion in revenues, be worth more than the entire U.S. automobile industry?

In fact, the only accounting entry that seemed to be stretching to encompass these changes was that little item called “goodwill”, traditionally a kind of mulligan to cover the difference between the book value and sale price of traditional companies. But nowadays, such goodwill might be three times the book value of the firm – meaning, if we were willing to admit it, that we really don’t know the value of anything anymore. [That’s even more true now than it was then – which helps explain the increasing volatility of the world economy.]

Edvinsson and I (along with a number of other folks working with the same idea at the same time) set out to find real measures and real numbers for these other, “intangible” assets – a company’s hidden “intellectual” capital.

In the end, we came up with a whole bunch of different measures, from executive turnover to number of patent filings to customer satisfaction ratings. Other folks came up with other measurement schemes. Some worked pretty well, others less so. A few of the measures have been unofficially adopted by companies and industry analysts, though none yet officially so. Someday, I suspect that intangible asset measures will be an accepted part of all balance sheets; but it won’t happen anytime soon.

Looking back, if there is one part of our research I would have emphasized a whole lot more, and would have tried harder to quantify, it is the matter of Trust. Writing at about the same time, in his book of that name, political scientist Francis Fukuyama got it right: Trust is the single most valuable currency of the modern global economy, the maker and breaker of nations.

Everywhere you look, the question of trust is defining winners and losers in the Internet age. Why are newspapers dying? Not just because technology passed them by, but because they violated readers’ trust that they would deliver timely, accurate and unbiased news. Why is Apple Computer so successful? Because it has upheld its customers trust that Steve Jobs will continue to give them interesting, innovative and ‘cool’ products. Why have a handful of bloggers earned huge audiences, while millions of others have not? Because we trust those few to either consistently entertain us, or we trust their judgment in selecting interesting items for us to read, or we trust that their world view is just like our own and their ability to enunciate those views even better. Why is the xBox 360, a superior game player, falling behind Nintendo and Sega? Because gamers don’t trust Microsoft to continue delivering the best games.

But it is even more complicated than that – because Trust is not just a static characteristic, it also changes. A company that delivers a highly trusted product or service can suddenly find that it is losing that trust because the underlying technology has moved on and left it behind. If your customers expect you to be state-of-the-art in performance, quality or price, anything less is a betrayal of their trust.

Success too can lead to a betrayal of Trust. So can an evolution in customers. In the tech world, the most famous example is that of the scandal that nearly killed Intel Corp.: the software bug in the Pentium microprocessor chip. There had always been bugs in processors, but since most of the people using the early microprocessors were scientists and engineers, they expected them, worked around them, and waited for Intel or Motorola to send them fixes.

But with Pentium, and the transformative marketing campaign that surrounded it – “Intel Inside” – Intel now found itself with a gigantic customer base of everyday consumers . . .people for whom such a bug was a catastrophe, a betrayal of trust by the company, and a source of real fear by unsophisticated users. Intel initially dismissed the growing controversy – and then, in a move that may have saved the company, reversed itself and agreed to replace all of the faulty chips.

As the world grows more complex, the marketplace expands to encompass billions, and the stakes go ever higher – so does the importance of Trust. And nowhere is the burden of trust greater than when we enter into a relationship that requires us to abandon all alternatives. Because Trust can never be perfect, it always helps to know that if that Trust begins to falter we have someplace else to go, an escape hatch.

This human need, I suspect, is what underlies the angry response right now to the Obama Administration’s health care plan. Progressives and other social engineers always make the same mistake: they find what they believe is the One Best Way, the empirically most efficient, reasonable and fair process, and then seek to impose it on the entire population as the Right Thing To Do. What they inevitably fail to appreciate (because they are Utopians) is that they are demanding from the populace almost infinite Trust in matters of life and death – something most sensible adults will, wisely, never give — while at the same time stripping away every other alternative. This is guaranteed to create fear, a sense of helplessness . . . and ultimately, anger.

In a smaller way, that same impulse helps to explain my anger at Comcast right now. We have had problems with Comcast before, though happily we finally found a repair guy there, Sean, who knows what he’s doing. So now, we specifically ask for Sean and hope and pray that he has an opening in his schedule. Ultimately, we trust Sean more than we do Comcast. Unfortunately, Sean wasn’t available today.

I entered into the agreement trusting that the cable company would provide me with reliable service – also knowing that in doing so it would be difficult for me to switch to some other vendor. Comcast, unfortunately, sees itself still as a service provider, by which measure it is doing a good job – and not as a monopoly pseudo-utility, by which measure it is a failure. And as long as it continues to misperceive itself, and thus fails to understand the new level of Trust required of it, it will have a lot of angry customers like me.

In the meantime, as long as I’m trapped and helpless, I think I’ll have a latte.