What is workplace trust in the digital age?

Garreth Hanley:
This is INTHEBLACK, a leadership, strategy and business podcast brought to you by CPA Australia.

Jacqueline Blondell:
Welcome to INTHEBLACK. I'm Jacqueline Blondel, and today we're going to be talking to Rachel Botsman. Rachel's created Oxford University's first course on trust in the digital world at the Saïd Business School. Her 2011 book, What's Mine is Yours, predicted the rise of the sharing economy and was hailed by Time Magazine as one of the 10 ideas that will change the world. Her latest book, Who Can You Trust, is an accessible and engaging exploration of the profound ways trust is shifting in our increasingly digital world. Her focus currently is trust in internal cultures, what makes a trusted leader? She'll be speaking at CPA Australia's Congress in October. Thanks for joining us, Rachel.

Rachel Botsman:
It's great to be here.

Jacqueline Blondell:
Let's look at trust in terms of sharing economy. It's a factor every time we travel in an Uber or stay at an Airbnb. Your book What's Mine is Yours predicted the rise of the sharing economy. What surprised you about the evolution of that economy since you wrote that book?

Rachel Botsman:
You're taking me back in time, Jackie. I mean, it's hard to believe that I wrote that book in 2008. I mean it came out in 2010 and I was actually looking the other day at this heat map I had of Airbnb, which was a company that I got inside of quite early on and it literally had a hundred properties over the UK. Now what prompted me to look at that was there was a big piece in the Times around how Airbnb was destroying local towns for residents and the heat map was literally like 400,000 properties. So to answer your question, I think the thing that surprised me was honestly how big it got and it raised questions for me in terms of scale. So do ideas sort of lose their original essence and intent and culture if you like, once they get beyond a certain size?

And that was very challenging because the reason why I wrote What's Mine is Yours was really because it was an optimistic book about restoring social connections and how technology could enable trust between total strangers and how we could create more efficient forms of consumerism. And I think the backlash against the sharing economy, that it really created sort of an on-demand culture where people could access services through the click of a button is a really fair critique. So you have to remember when I wrote that book, the smartphone had just come out, so it's very hard to imagine the unintended consequences of ideas at scale. So the trust piece was right, but the social impact piece was wrong.

Jacqueline Blondell:
It is hard to imagine an idea that started with someone sleeping on a blowup bed in your house has become a plethora of holiday houses for rent basically. So it's just interesting how things evolve. But let's look at trust specifically. You've written extensively on the topic, how do you actually define trust? Is it a universal definition?

Rachel Botsman:
No, there is no universal definition. I have my definition. One of the things that fascinates me about trust is it's the most debated sociological concept. So there are more definitions of trust than there are of love, if you can believe that. And social scientists have been debating this now for over 70 years. What is trust? My definition is, well, it's deceptively simple. Trust is a confident relationship with the unknown. And the unknown piece is really important because one of the misconceptions about trust is that you know what to expect. You know what the outcome's going to be and therefore you can trust something or someone, well, actually that's the opposite of trust. When you know the outcome of something and there's very little risk involved, less trust is required. It's when we are taking leaps into the unknown.

When we don't know how a system works, when we don't know when something's going to end like a pandemic, when there is a new technology, when we meet someone for the first time, when we try a new behaviour, that's when we really need to trust. And the reason why I think this is a really powerful lens to look at trust is you start to understand why trust is the conduit through which all new ideas travel. Why it's the enabler of innovation and why it's the social glue of all relationships. So it's really important to understand that trust is not knowing the outcome of something actually trust is needed when you don't know how something's going to turn out or how something works.

Jacqueline Blondell:
Would that mean that you've got to have trust in humans? I'm just thinking about the rise of AI or trust in the humans that created the AI technologies.

Rachel Botsman:
You have to have both. There's different types of trust. There's academically what we call interpersonal trust, which is trust between real people. And then what we call systems trust or digital trust, which is trust in a machine or a technology. And for something like AI that combines both of those things, you have to have trust in both. And I think AI is a really good example where often we get caught up in how does this thing work and what does this system do? Whereas what people actually really care about is the intent. So it's not just about doing things and understanding how something works, it's whether we trust that it's going to do the right thing. And that is a really important distinction when we come to trusting really complicated systems and digital technologies.

Jacqueline Blondell:
You've charted in your book the three ages of trust. Can you run through how trust is evolving and shifting?

Rachel Botsman:
Yeah, so the evolution of trust, if you like, really sort of emerged from the work on the sharing economy where this was a time of Brexit, this was a time of Trump, a lot of chaos in the world, which still exists today. And the general rhetoric was that trust was in a state of decline that we just didn't trust anyone or anything anymore. And that didn't bring true what I was seeing in my research. So I zoomed out and I said, "Okay, if you took a really macro view of trust, what has happened over the course of history? A fairly big question. And what I realised was actually trust has existed in three chapters, if you like. The first chapter is what we call local trust. And this was a very long period of time where we lived in small villages and communities and everyone for the most part knew someone who lived close by and trust was largely based on reputation and this form of trust was highly effective. But then when we wanted to internationally trade, when we started to migrate and build cities in urbanisation, this form of trust didn't work.

So we invented what we call institutional trust. And this was a remarkable invention if you think about it because it said like, "Oh, trust no longer has to flow between two people. That person can trust an intermedial and institution." And in this chapter of history, there was all these phenomenal trust innovations. Everything from things like insurance and contracts and agents and all kinds of brands and middlemen that enabled trust to scale, if you like. And these two forms of trust, I should say they still exist at local and institutional. And actually we're seeing a resurgence of local trust, which is really interesting. But what technology wants to do, digital technologies, is it wants to take that trust that for a long time has been top down and hierarchical and centralised and fairly linear, and it wants to distribute it through networks and marketplaces and platforms. And that's what I call distributed trust.

Now if you look at the root cause of disruption in many different areas of our lives and industries, you'll see distributed trust at play. So social media being a classic example. All right, we used to have the town crier, local trust, then we had media and news institutions, institutional trust. And now we take our news from friends and platforms in soundbites all throughout the day. That's distributed trust. You can look at it in banks. So bartering to money, to cryptocurrencies. There you have the evolution, you can see it in transportation, you can see it in travel. I could go on and on and on. It's really fascinating. You may not say, "Oh, that's distributed trust changing my life." But it is the root cause of disruption in many different places.

Jacqueline Blondell:
So would you say you think when you're writing this book, there was a great social unrest going on in terms of trusting institutions. Did you find that zooming out helped clarify that we're not in a dangerous age where we don't trust governments, we don't trust the media, we don't trust science? Or is it still an unsure environment for trust in institutions?

Rachel Botsman:
Oh, it's a very precarious age for trust. This shift is not, I'm not naive, it's not necessarily a good thing for sure. And it's not just that the social fabric of institutions has been disrupted and that we no longer look up to experts or we no longer, I mean this is a generalisation, trust scientists. It's that these distributed mechanisms don't always have social safety nets to protect people. So I didn't go into this book with the sharing economy, which is like, "Everything's going to work." But I think it's really important because I was saying to the entrepreneurs, you can say, "Oh, this distributed model is going to work far better."

Yeah, but what happens when things go wrong? Who is responsible? Who is accountable? So for the public to say they don't trust institutions, I totally understand. Healthcare, banking, education, government, many of these systems are broken and need reinventing, but if you remove them, what replaces that systems trust that often creates the roots in the stability of society. And that's the disruption and the phase that we're in, which is why we feel a lot of chaos, a mess and constant change in our lives.

Jacqueline Blondell:
Now, can we just use the example from your book, which I found quite fascinating, the case of Jack Ma and Alibaba and how trust leaps work in this example. How did he overturn the Guanxi concept in the Chinese market to get people to go online and trade as opposed to having to know the person personally go out for a large banquet and then trade?

Rachel Botsman:
It's really phenomenal when you think of the Jack Ma story and what he did with Alibaba, because just to give a definition of a trust leap. A trust leap is whenever we take a risk to do something new or to do something differently. So a trust leap can be the first time you put your credit card details in the website or that you use cryptocurrency to pay for something. So the idea of an online marketplace where you could trust total strangers and it sort of matched a buyer and a seller through these reputation mechanisms was revolutionary. I mean, we saw it with eBay, we saw it with Etsy, but to do it in China was a whole different cultural story.

So many of these entrepreneurs, if you actually ask them and get inside their companies, the ones that really succeeded, they didn't think of these things like marketplaces, just sort of efficient commerce platforms that was very easy to replicate. They understood how trust worked in the online world. They understood the importance of reputation mechanisms that how you behave would impact your future propensity to be able to transact in that marketplace. And if you think about it today, a huge platform here, it's called a Vinted. It's finally sort of cracked the secondhand clothing and trading market, which has been really difficult to scale at mass. And it's all about the reputation of the buyer and the seller. And Jack Ma in many ways was just a visionary and way ahead of his time in terms of how he understood to create that online culture.

Jacqueline Blondell:
We hope you're enjoying INTHEBLACK. If you are interested in the latest news, analysis, policy updates and business insights, you should check out CPS Australia's with Interest podcast. Join us as we dive into the news and delve into the business issues of the day. Each week we talk to thought leaders from across the accounting, finance, strategy, economic and business spectrum. And you get their expert opinions. Now back to INTHEBLACK.

Jacqueline Blondell:
Now there're things that we can take from trust in the online world, and we can learn from that in the so-called real world.

Rachel Botsman:
It's an interesting question because your instinct goes yes, you can replicate online trust mechanisms in terms of how they work face-to-face. But some are actually pretty unique to the online world. So this idea of reputation, having a currency and being visible to a network, that's actually quite hard to replicate face-to-face. This idea of social proof, which is when you go online and you can see your friends have recommended that product or service or they've liked that thing. That kind of influence might make you buy that product or try it for the same time.

That's the challenge, traditional advertising, it doesn't necessarily have that kind of component. So there are some pretty unique mechanisms to the way trust works in the online world. The behavioural principles though are remarkably similar because the way humans trust one another, it is not simple, but it actually replicates in the online world. So we are always making assessments of what we call trustworthiness, which is made up of people's capability and their character. And that is true whether we are looking at someone online or whether we're making that decision face-to-face. So the science, if you like, of trustworthiness, what makes us trust someone and the signals that we read, that is the same whether that's a digital representation of that person or whether we're meeting them face-to-face.

Jacqueline Blondell:
Let's talk about trust in internal cultures. What factor does trust play in the culture of an organisation and how important is it?

Rachel Botsman:
It's a big question. I am going to say high trust cultures are absolutely critical. But before I say that, I'm going to say a caveat that there are some cultures that are purely based on efficiency. They are purely transactional. So I like to say that money is the currency of transactions and trust is the currency of interactions. So if you have a business and it's purely focused on profit and making money and it is just transactional efficiency, efficiency, efficiency, you could say really a trusting culture, it's not that important. But if you are in any kind of culture where people have to interact, and that can be internally with each other, most organisations I hope and or externally with customers or other shareholders, the media regulators, you have to have trust. And what we see in the research is there is a high correlation between high trust cultures and innovative cultures because what trust enables is for people to take those risks, to have that confident relationship with the unknown.

Trust in many ways enables the discomfort and friction and tension that you actually need in healthy cultures. So sometimes I've seen organisations and I really worry when they say, "Oh, our goal is to create a comfortable culture, a culture where everyone feels comfortable." And I'm like, "No, you want a culture where everyone feels safe, but a comfortable culture isn't a good thing because then who's doubting things, who's voicing dissent? Where is that friction? That's where things often go horribly wrong." So trust enables that tension, that energy for people to have differences and to still feel safe at the end of the day. So trust, it is the social glue in healthy cultures, but it's also this enabler of risk-taking, innovation, which is sometimes the piece that gets missing when we think about trusting culture.

Jacqueline Blondell:
So what does it mean to be a trusted leader? Does that mean your staff trusting you as a leader or you trusting your staff or the perfect synergy of both?

Rachel Botsman:
It's a very astute question because many leaders don't see trust as a two-way thing. So I always talk about you have to think of how to trust and be trusted. And the starting place actually for leaders is how to trust. So how do you give your trust to other people? How do you let go and not try to control things, which is really difficult. And it can be very confronting for leaders that they suddenly recognise that their control is a form of lack of trust. So learning how to let go, how to trust people is often the first stage of trusted leadership. And then the second stage, and these things should ideally go hand in hand is how you earn the trust of other people.

I have to say the number one question I'm asked all around the world regardless of organisations is how do I build more trust? And I think that question in itself is incredibly revealing because if you say build more trust, you think you are in control. So if as the leader you want people to trust you, they're going to trust you more. And actually the trust, the power lies in the hands of the giver, right? They will decide whether they can trust you. So leaders, it sounds nitpicky, but rather than building trust, they have to think about continuously earning trust. And the only way to do that is through behaviours. It is not through marketing and communications and these grand gestures, it's really through these micro moments of how people experience you and your leadership.

Jacqueline Blondell:
So let's take some micro moments. I know that every company in the organisation is different and the people in them are different, but maybe we can look at it through the way of saying, how can trust be eroded in a microbe moment? So that's a lesson on how you should do it correctly.

Rachel Botsman:
Yeah, it's a good question. Actually going back to this idea of trustworthiness and capability and character, there's a really useful framework where you can identify the micro moment that is actually helping you earn trust or erode trust. So on the capability side, you have what we call competence and reliability. And this really creates a feeling, "Oh, I can depend on that person." And then on the character side, we have empathy and integrity and this creates a feeling that, "Oh, this person caress and they're on my side." So there's this feeling of alignment. And trust is either earned in a micro moment where someone feels like you are competent, reliable, or you have integrity or empathy or it's eroded where one of those things starts to wobble. Now the interesting thing that we see is that in most cultures, the wobble is on the character side.

And yet most organisations tend to interview people and coach people and bonus people largely on the capability side, which I find really fascinating. And you can even scale this up. So if you think about major trust crises, if you look at Boeing or Volkswagen or Facebook, Meta the systemic cause, like the leader might say, "Oh, it was a capability problem, it was a flaw in the product." But actually it was a character problem. Somewhere someone made a decision that didn't have integrity. Somewhere someone didn't really care about the employee or the customer. Somewhere along the line, the company's interest did not align with the best interest of the customer or the public. So I think this is absolutely fascinating is that organisations, it is shifting, but still the emphasis tends to be on capability and less so on character. But that's where systemic breakdown of trust usually happens.

Jacqueline Blondell:
So trust is heavily aligned with ethics in that case?

Rachel Botsman:
100% because it's often about not the things you do, but the things that you choose not to do. So when you ask me about trusted leadership, it's actually when you look at leaders that are highly trusted, it's because they make the tough calls. It's because they say no to things or a simple, "No, we can't work with that client. Yes, it might be highly profitable, but actually if you look into the ethics of the company, our values aren't aligned." So that is a huge component of trusted leadership is saying, no.

Jacqueline Blondell:
I know we can't do an A to Z on how to be trustworthy or seen as trustworthy, but what's the most effective way, say for finance professionals who have always scored reasonably well on the trust indices to instill trust in their colleagues, their clients, customers, and of course regulators. Does this approach to trust building depend on these different audiences, or is it universal?

Rachel Botsman:
It is another great question because trust is highly contextual. So what makes someone trustworthy or what makes you trust someone in one context is not necessarily true of another context. So we have to be careful with generalisations, and I think this is really important to remember because blanket trust isn't a good thing. No one wants to be trusted for everything, that's where things go wrong. So this idea that trust is contextual, it's really important to think about and what trait is the most important for that particular situation and that particular audience, if you like. But if I had to generalise, I've worked a lot with the financial industry, and if you look at finance professionals where they're trying to earn trust from clients or regulators or their own internal employees, I would say the deepest trust forms around the trait of integrity. And the reason why is it's actually what's made us distrustful of financial systems, is that we don't believe that the financial industry as a whole is built to serve the best interest of the customers. The financial crisis sort of amplified this in that if you think about the way customers view banks, they'll say, "Well, the products and services, they're fundamentally designed to make the banks a lot of profit, versus really to protect people." So any financial provider that can differentiate itself and say, "No, I am truly on the side of the customer. I truly am aligned in my interests with the regulators in terms of protecting the public." That's where deep, deep trust is going to form.

Jacqueline Blondell:
I think that's all we've got time for today. Rachel, thank you so much for joining us. And don't forget to go to our show notes so you can check out where to see Rachel at this year's Congress.

Garreth Hanley:
If you've enjoyed this episode, help others discover INTHEBLACK by leaving us a review and sharing this episode with colleagues, clients, or anyone else interested in leadership strategy in business. To find out more about our other podcasts, check out the show notes for this episode, and we hope you can join us again next time for another episode of INTHEBLACK.