Photo Credit Willie Holdman Kellogg Financial Trust Index
March 22nd, 2009 by linkOur friend Matt Hutcheson, a global authority on 401k regulation who regularly testifies for congress, sent us this link today to a blog entry on Brightscope showing trust in organizations is only 12% as of December 2008. They call 2009 the year of Transparency in an articulate call for more light in financial regulation.
” . . . something important was destroyed in the last few months. It is an asset crucial to production, even if it is not made of bricks and mortar. This asset is TRUST. While trust is fundamental to all trade and investment, it is particularly important in financial markets, where people depart with their money in exchange for promises. To study how recent events have undermined Americans’ trust in the stock markets and institutions in general, we have launched the Chicago Booth/Kellogg School Financial Trust Index.”
The Kellogg Financial Trust Index called trust:
“Something important was destroyed in the last few months. It is an asset crucial to production, even if it is not made of bricks and mortar. While this asset does not enter standard national account statistics or standard economic models, it is so crucial to development that its absence — according to Nobel laureate Kenneth Arrow — is the cause of much of the economic backwardness in the world. This asset is TRUST. As stressed by Arrow: “Virtually every commercial transaction has within itself an element of trust, certainly any transaction conducted over a period of time.” Without trust, cooperation breaks down, financing breaks down and investment stops. One can bomb a country back to the Stone Age, destroy much of its human capital, and eliminate its political institution. But, if trust persists, the country may be able to right itself in just a few years, as in Germany and Japan after World War II. Conversely, you can endow a country with all the greatest natural resources but, if there is no trust, there is no progress.”
We could not agree more. We must all step up and behave in ways that inspire trust if we are to hope to turn the tide any time soon. The tide will turn and this dramatic correction will shock us into taking trust more seriously much like 9/11 sparked a national sense of patriotism. Let’s hope our paradigm shift of awareness sparks a behavior shift that is sustainable.
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