The Impact of Trust in a Knowledge Economy

By Ron Rivers,

The nature of work is changing rapidly here in the United States and across the world.  A growing pool of technological resources, best practices, and a highly skilled and innovative workforce is shaping the way humanity can work into a new and exciting potential that will forever change our lives.  The transformation is already occurring and demonstrates that high-trust environments producing flourishing environments. Here we explore the impact of trust on businesses in the past and present economic models and how we can utilize government as a tool to ensure that the new high-trust work methodologies benefit all business sectors. In doing so we build a stronger foundation for cooperation and collaboration in every day life.

Welcome to your first day of training… (Photo Cred)

Trust and Competition

All exchange in the world is based on trust.  Market economies are essentially a form of institutionalized cooperation between strangers.  If we consider the present market arrangements, we can conclude that in an environment completely devoid of trust exchange as we know it would not be possible.  In other words, if our fear that the person we are going to exchange with outweighs our trust for them we would never choose to complete exchanges. You would avoid buying things online entirely, and merchants would be hesitant to accept transactions from unfamiliar people.

The mass production economic model that historically defines the United States generates a relatively low trust model of exchange.  In many respects the way the laws enabling these operations encourage behaviors that do not put much faith in employees or outside parties.  An internal example would be an assembly line worker who is given exact direction on how to act and does not have the autonomy to break from routine to experiment with new processes that might better create results and efficiencies.  Externally we observe low trust through the existing patent system which in many cases imprisons some of our most advanced practices and technologies in the hands of single companies, denying others the ability to take those advancements in new directions. These two examples are practices that help to create low-trust organizational structures.

Drawing from personal experience, this low-trust structuring of work can hinder the development of strategic advances for businesses of all sizes.   Before selling my previous small business, I spent time developing strategies to organize purchasing cooperatives among competitive firms within our geographic radius.  The benefits on paper supported the collaborative efforts and would have generated net profitability benefits for all involved parties. Unfortunately, a few members were unwilling to participate because they did not want to share the quantities and products they were purchasing with the other members of the cooperative.  By closing the door on a more cooperative form of competition they lost the ability to add 3-6% to their bottom line revenues.   

Alternatively, in an environment with high trust, our present market arrangements become unnecessary.   This is the future that is at our doorstep presently, it’s not a question of if but when this model of exchange assumes dominance within the world.  We can imagine a system of exchange where people can choose cooperative teamwork or independent ventures and have access to the most advanced technologies and practices independent of their preferred work style.  Using advanced techniques such as 3-D Printing and deeply networked communication, the experimental nature of development, labor, and exchange becomes instantaneous.

High trust contributes significantly to the success model of Silicon Valley companies.  Cooperation is deeply embedded in its productive ecosystem. A software developer expresses their talents through sets of programming languages that allow them to express their creativity differently depending on needs.  Their abilities make them highly skilled labor, but their ability to work anywhere makes them highly transferable. If you know how to code in a specific language, you can apply those skills to any organization that needs them in any direction they desire.  Each time an individual leaves one team for another, they bring a wealth of knowledge in both practice and procedure to the new organization. By creating a web of talent that moves fairly freely between organizations, Silicon Valley as a whole has harnessed humanity’s potential like no other productive sector ever has.  The beauty of this high trust model of labor is that the more it spreads, the better it gets, perpetually expanding its capabilities alongside its participants.

Building the Foundation for High-Trust Economies

High trust is not the natural default for every laborer in present society.  On the surface, high trust for others seems more natural for generations who have grown up with the internet.  For many Millennials, myself included, personal connections were made and maintained without ever meeting people in person.  For many people, these interactions build understanding and trust with others outside of their immediate circle. Compare the future scenario where the majority of people of different ages, races, religions, and economic classes are interacting with each other around shared interests for decades before entering the workforce.  We could imagine that if given the opportunity to do so, work will transform into a more inclusive and high trust process that better reflects the openness of evolving communication. A predisposition to high trust combined with exponentially increasing innovation sets the stage for a radical transformation of how trust and labor intertwine in society.  

In many respects, we are on the cusp of a moral evolution fueled by our institutions.  The direction of that evolution is uncertain, but not entirely out of our control. With enough social and political willpower, we could work to expand a high trust collaborative competition model throughout numerous economic verticals.  While this may seem like a radical utopian ideal, the reality is that opportunities exist now to create structural innovations to increase the frequency of high trust transactions within society.

Let us examine a relevant moral and economic issue in the increasing of the minimum wage to $15 per hour and how Knowledge Economy practices might impact our possible solutions.  The argument for a minimum wage increase is supported both by the historical data and the moral obligation to help support our brothers and sisters throughout the nation.  Discussions against the minimum wage increase typically center around rising costs for small businesses, the potential for inflation, and the old fashioned “pull yourself up by your bootstraps”  mentality. This presents us with the false narrative that increasing the minimum wage is a battle between small businesses owners and the poor. The truth that fails to our current leadership fails to represent is that the evolving nature of work requires innovative thinking outside existing structural arrangements to avoid a crisis.

Understanding the value small businesses provide to our communities requires us to recognize that with the changing nature of work small companies may need assistance to rethink their strategies on how to prosper.    Here the state could be used to facilitate high-trust frameworks through deeper government cooperation with small business owners to help with this transition.

For example, government administrations could work with small businesses owners in the state to implement a more collaborative form of competition.  We could facilitate regional purchasing cooperatives for similar businesses. The state could provide the tools in the way of information resources, logistical resources, and a digital platform to help coordinate orders for small business owners in specific regions.  This allows individuals to organize on their own without direct state intervention beyond the initial foundation building.

If we use a Pizza shop as an example, collaborative purchasing would drive down resource costs such as flour, sauce, cheese, etc. for the shop and increase their profitability per slice. This way small businesses can better focus on the things they do best, offering real and personal value in the experience.  The revenue gains recognized from this type of structural innovation would likely exceed the costs associated with an increased minimum wage.

Beyond revenue initiatives, participating businesses could cooperate to facilitate research into best practices that could be shared to all participants, network employees together to create shared labor pools, and develop cooperative marketing strategies.  There is no limit to the latent cooperative potential existing both inside and outside our existing market arrangements. By facilitating cooperation and high trust among small business owners, we empower industry participants to work towards redefining the markets they operate within, continuously pushing the envelope of what is possible.  When necessary their combined forces could influence the creation of laws surrounding property and contract within their specific niche.

While it is difficult to quantify the intangible benefits gained arranging higher trust into our economic arrangements, it is worth mentioning.  As humans, we’re context driven beings. Much of our experience and feelings dictate our perception of the world and the others that inhabit it. While the argument that a higher level of trust and cooperation within society would be a good thing is relatively self-evident, the scale of this impact is still yet to be determined.  The Knowledge Economy presents us with an opportunity to radically transform the nature of our most frequent interactions and doing so creates a significant chance to build higher trust and stronger social bonds into our everyday interactions.

  Category: Blog
  Comments: Comments Off on The Impact of Trust in a Knowledge Economy