Morning Mental Stroll: What’s Your Transaction Cost?

by Joy Johnson on May 23, 2012

I was having a discussion with my sister last night when she uttered these words, “Water – God only knows what’s in our water.”  I instantly realized these are the costs – this time, health costs – of trust and distrust.  As you have discussions with people, notice the high cost we pay for lack of integrity.  Steven M. Covey wrote The Speed of Trust a couple of years ago. I read it when it first came out and it made an enormous impact on me.   What costs time, costs money.  It costs real money – and lots of it.  The name for these costs are “transaction costs.”  When these transaction costs have not been paid, we distrust.  Today, it’s so ingrained in us to not trust that “God only knows” is a constant component of our thought processes.

Actually, bottled water is a great place to start a conversation about trust. I’ve enjoyed Poland Springs for years – much preferring it to even the very expensive brands of bottle water.  Like so much, however, water, and especially bottled water, isn’t what it seems and when we find out the truth, our confidence in our own ability to sense the truth is shaken.

There is something that happens to people when they find themselves in a life environment where their cats die from contaminants in cat food, they find out there really is an acceptable level of rodent feces in their food, and that deaths from exploding gas tanks apparently are acceptable.  At some point we simply become jaded about broad groups rather than individuals.  ”Big business only cares about profits,” and “All politicians are crooks” are two excellent examples.

The marketing mantra is “Know, Like, and “Trust.”  The fact is, we seldom get to that last step – and if we do get there, the tiniest thing shakes us back out.  We often do business without full trust.  We feel we’re being “taken” at least a little – lied to at least a little – but we think “this one lies less than the rest” so we choose to do business. It’s “measured trust” – not full, but  there is some trust, enough to allow business to take place.  The uneasiness is always there.  We’re watching, testing, and it affects the entire relationship from start through separation.

Raving fans, which the referral process depends upon, are getting harder and harder to come by naturally.  Now fans want to know “what’s in it for me” and that makes referrals a commodity, not a gift.  If it’s a commodity, it’s price based.  If it’s price based, bought and paid for, it’s not honest.  As a result, the government legislates what can be said and the general public is skeptical at best.  Many assume that for every testimonial there are a hundred who are dissatisfied and those shown are either paid or are from friends and relatives.

We’re so used to being lied to that unless it’s a whopper, we barely even feel violated.  We’ve built it in.  We live our lives without trust.  That’s a big part of why the trust related emotional overhead in both our business lives and our personal lives is so high and so very costly.

We still need trust or measured distrust to do business.  We still have to work to earn it.  Trust is becoming an area where great businesses really can set themselves apart.  It take work – time, and money – to be trustworthy. The transaction cost has skyrocketed.  The job is much harder.  You have to be more trustworthy and more transparent than ever before, but when you do get to the point where you have actually earned trust, you’ve arrived at a place few reach today and the powers of the universe will reward you.

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