Trust as Capital
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We have defined above trust as an outcome of social interaction. The importance of trust is in that it is a form of capital as well as financial (money) capital, human (knowledge) capital and social (values, norms, principles, etc.) capital. The assertion that trust is also a form of capital may at first sound unusual, but understandable through the recognition of significant similarities between the functions of trust and traditional forms of capital.
In conditions of satisfactory decision-making, asymmetric information and dynamics of sense-making, the significance of trust as capital will be emphasized. Organized and unintentional elements in human interaction underline managerial capacity to nurture trust capital in keeping promises, keeping committed and honoring contracts for people, groups and organizations.
Financial capital is usually defined as a factor of production without which production is not possible (Friedman, 1986, p. 333). Trust as capital empowers and facilitates production by keeping people together, motivating them and rewarding them. It engenders cooperation and collaboration, promotes openness and transparency, makes decision-making and conflict resolution easy, and strengthens communication and responsibility. Financial capital is expensive and time-consuming to acquire (Friedman, 1986, p. 333). Trust as capital does not come from the air simply by snapping the fingers — it takes time to earn. Of course, there are also some significant differences between capital and trust, but they do not change our assumption of trust as a comparable factor to financial, human and social capital (Friedman, 1986, pp. 334–335).
Use of Financial Capital without Trust
In order to demonstrate that trust should be understood as capital, we must elaborate first what would probably happen if financial capital (money) were used by its owners — people, groups and organizations — without paying any attention to trust. We hypothesize that earning and losing trust each have their own unique direct and indirect consequences for every individual, group and organization.
The first possible consequence of the use of financial capital without trust could be that people may begin to feel that they can succeed in going on alone and that they really do not need anyone around to help them. This behavior leads to a sense of superiority, selfishness and indifference and it is called an egomaniac personality (Lilley, 2002, pp. 50–51). Egoists, show-offs, the self-centered, the know-it-alls and the insecure, alienate people who may have known each other for a long time. When the social distance between people widens, their willingness to share information and experience and collaborate will weaken, causing financial losses to an organization.
The second possible outcome from the use of financial capital without trust is that it strengthens the notion that money is the solution to every organizational problem. Financial realities will always be crucial, but capital, obviously, cannot solve the more subtle, complex problems of the contemporary organization and politics (Halal, 1986, p. 211). Emphasis on financial capital discourages productive collaboration, fosters exploitation of scarce resources and exacerbates social costs instead of, say, searching for common ground and combining the values and virtues of running organizations (Halal, 1986, pp. 211–212). Money will become an end in itself instead of the transfer of value, as it is traditionally understood in mainstream economics. If the process continues unimpeded, wise money might slowly turn into careless money serving mainly short-term purposes instead of investing in finding benefits in the longer-term. This is called shortsightedness or the narrow view, which is commonly held to be one of the most drastic managerial diseases in business and political life.
The third tendency from the use of money not based on trust is that it provokes opportunistic behavior among those who own money. Opportunism can be defined as a behavior independent of consistently followed principles. People are clever at flattering each other in order to promote their own interests without any real intention of giving something in return (Marion, 1997, p. 41). This behavior tends to deprive people of sincere advice, positive criticism, encouragement and support, thus increasing the probability of errors and failures.
Finally, the use of money without trust will change the nature of human interaction from mutual benefit to a zero-sum game. Trust is needed to build the mutually beneficial relationship and make it profitable for each participant. Without trust people are bound to take everything they can as fast as they can. Trust facilitates conflict resolution; distrust creates conflicts. Table 1 summarizes our findings.
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The Use of Human Capital without Trust
There are also obvious problems in the use of human capital (knowledge) without trust. People who think that they know more than others may forget that there is an essential difference between the personality of the person and the amount of knowledge he has. It is the former that counts, not the latter. Knowledge is not independent of the personality; it is inextricably linked to it. If the personality radiates distrust, people will avoid that individual, provided that they have access to other sources of knowledge. And if they find it necessary to work with such a person, they will be inclined to assume extra costs to prepare for possible setbacks and betrayals.
The second outcome of the use of human capital without trust is a fear of manipulation. People who know more than others may find it useful to engage in manipulation in order to achieve their goals (Stone, 1997, pp. 84–85). Manipulation is called passive aggressive means, instead of direct aggressive means, by which people vie for power and control over others (Stone, 1997, p. 85). In manipulation, knowledge is not honestly and openly shared. People who cannot compensate their relative ignorance with more or new knowledge will be especially wary of manipulation when interacting with others.
The third possible tendency regarding the use of human capital without trust is that it could create an atmosphere in the organization in which those people who know more than others begin to think themselves invincible and irreplaceable. Once that happens, they consider others to be interchangeable parts about whose treatment and fate they need not bother to respect. This situation erects psychological and hierarchical barriers between people. People who do not have enough knowledge could begin to feel vulnerable and weak. Vulnerable and weak people do not invest in new learning or collaboration; they invest in increasing their security against those whose knowledge they do not like to trust for reasons known only to themselves. When people do not trust someone, they resist that person's influence (Kouzes & Posner, 1995, p. 165).
The fourth repercussion of the use of human capital without trust is losing motivation to acquire new knowledge that could replace old knowledge. It could be difficult for some people to resist the temptation to stick to what they already know. When managers stop learning, they give their employees an example to follow (Kouzes & Posner, 1995, pp. 329–332). They close their eyes to the fact that new discoveries and ideas tend to replace the knowledge in use. They may not remember that future successes depend more on learning new things than on cultivating time-tested knowledge.
The final repercussion of the use of human capital without trust is that it may turn fruitful fantasy into destructive fantasy. The essential difference between these two is that people will usually take inspiration and strength from the former, whilst the latter is bound to aggravate them into destructive fantasies (Stone, 1997, p. 126). This is one of the hazards of visionary leaders who emphasize the vision based on their knowledge more than submitting it to the careful scrutiny of colleagues, customers and friends. Disproportionate reliance on one's own knowledge helps people look at the world from their own points of view, instead of letting it provide them with new possibilities (see especially Thomke & von Hippel, 2000). These findings are summarized in Table 2.
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The Use of Social Capital without Trust
James Coleman (1988), Robert Putnam (1993), and Francis Fukuyama (1995) have spoken for social capital as a necessary prerequisite for economic prosperity, social tranquility and empowering politics. They emphasize social capital as commonly held and shared values, norms and principles which facilitate people's chances of achieving their own, different and even conflicting aspirations, needs and goals simultaneously and peacefully. People, groups, and organizations sharing the same social capital — resources — are willing to cooperate and collaborate to make their common and individual plans possible.
However, there will also be inevitable deleterious outcomes if trust is withdrawn from the use of social capital. Probably the first sign of this is that people who have good productive ideas, but who are not trusted, will be deprived of the cooperation and collaboration that they need to realize their objectives. This is what makes communities and societies low-trust and high-trust, as Fukuyama has tried to show. In the former, people will only collaborate with those they know intimately and whose behavior they can directly manipulate and control. In the latter, people are more willing to share their ideas, resources and positions of vulnerability even with totally strange people with no persuasive guarantees against possible betrayal or fraud.
Distrust in social capital will undermine the power of commonly held and obeyed norms, principles, and values in social interaction. If people begin to break these without replacing them constructively with new ones, social capital will suffer losses. In this situation norms, principles and value are losing their collective authority over the minds of people because they cannot function as the map and compass for people by which they navigate the complexities of social interaction and make use of its possibilities for learning and collaboration. This is a loss because norms, principles and values contain a great amount of accumulated knowledge that is difficult and sometimes even impossible to articulate and explicate. When people cannot solve their mutual problems spontaneously, they will turn to politics and government, which are bound to centralize social powers to themselves.
The third inevitable outcome of mistrust in social capital is a phenomenon that could be characterized as the compartmentalization of people's mindset. This means people will stick to behavioral norms and principles of their own groups through which they evaluate other people and groups. Compartmentalizing minds will make people intolerant and hostile towards other groups. In the process, politics will cease to serve society and become a vehicle of different groups whose interests it is compelled to promote. These findings are summarized in Table 3.
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Summary
Thus far, we have stated first that trust as capital is at least as crucial or even more fundamental than financial, human and social capital. We asserted that trust can take advantage of a smaller amount of money and knowledge than distrust can take of a greater amount of money and knowledge. If people, groups, and organizations do not trust each other, no amount of money and knowledge will make them cooperate and collaborate if any alternative is open to them.
We also argued that social capital grows out of trust, which, in turn, is an outcome of social interaction. Social capital is a generalized order. All three forms of capital will prove empty or powerless without trust. Trust is the fourth form of capital and as such it could be more crucial than the other three.
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EAN: 2147483647
Pages: 143