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Numerous management books and articles have extolled the virtues of trust. Trust is declared to be some near-magical economic elixir, facilitating productivity, creativity, and humanity at work. Many HR professionals struggle to build trust throughout an organization because they ^nd that trust is squishy, subjective, and probably impossible to measure. If we could solve these issues, many managers tell me their organizations would jump on the trust train.
Fortunately, discoveries in neuroscience- many from my laboratory-have provided new, rigorous, and actionable insights into what trust is, how it can be measured, and most importantly, how organizations can raise trust and reap its rewards.
What Is Trust?
The first comprehensive mathematical derivation of trust came from a 2001 biologically-based general equilibrium model by Steve Knack and me.1 It showed that trust reduces the transactions costs associated with investment decisions by increasing confidence in what the other party would do. This model predicted that by lowering (implicit) costs, investment would increase. We tested the model in a sample of 41 countries and found that trust was among the strongest predictors economists had ever found for investment and per capita income growth. The model showed, and the empirics confirmed, that trust would increase with the level of income, with "similarity" (in income, ethnicity, language, and genes), with fairness, and with the strength of formal and informal contract enforcement. Trust is an economic lubricant, reducing the frictions that often occur during economic activity.
Trust Is Chemical
The next step I took was to test why in a given environment one would tangibly and intentionally trust a stranger. I wanted to know whether there was a "switch" in the brain that could be engaged to "turn on" trust. Based on studies of social rodents, I hypothesized that the neurochemical oxytocin (OT) might be such a switch. My team ran a series of experiments where an individual could invest earned money with a stranger to obtain a return. But this required that the individual trust the investment agent to return the investment and not keep some or all of the money. The standard view in economics was that money is always valued and thus anyone who controlled money would keep it. But, when given a chance to return some of the...