Strategy + Business

Cybertrust: An Economic Imperative


Trust may be the most underestimated asset in commerce. Almost all transactions involve some potential for misrepresentation, noncompliance, or fraud. To deal with those risks, parties to commercial transactions rely upon elaborate contracts, arrange to monitor performance, or turn to litigation. These methods all work, but they are all costly. Mutual trust, when it exists, is a far better and more efficient alternative; it substantially lowers transaction costs, and it can offer a big competitive advantage. One World Bank study, using a regression analysis covering the 1980s, suggests that a 10 percent difference in the degree of generic trust among the citizens of a nation is reflected in a 0.8 percent variance in that country�s rate of economic growth. With average annual growth worldwide in the range of 1 to 3 percent during the same period, it is easy to see the payback in building trust.