Why Look to Trust when Investing in a Post COVID-19 World
Updated: May 31
Tanya Seajay, Founder & CEO
Trust has been impacted the most during this crisis, especially when it comes to our relationships with fellow humans. In a short period of time, gestures of kindness to strangers we meet on the street have been replaced with chilling acts of separation.
The rest of the world feels so far away at times. What has given me some comfort is the belief that if trust existed before, it will return.
Now let’s look to Wall Street. Trust will be the greatest economic driver of the financial markets from this point on. And I say this without a single ounce of doubt. I’ve been studying trust for decades, a fascination of mine in both my professional and personal life.
We feel trust in so many ways. Society expresses trust in the words they use to describe a colleague, the speed in which they listen to a leader’s guidance, and in their belief that government will do what is right. Trust is what they feel when they know a company will keep them safe, no matter what.
When we emerge from our homes, trust will have a material effect on everything we do. Trust will determine where we eat, what airlines we fly, what retail store we frequent, what country we visit, and what hotels we use. It’s no longer the feel-good emotion of the past. Trust will be the Key Performance Indicator of the Post COVID-19 world.
Five reasons trust data is vital:
Trust is a deciding factor. Consumers will be drawn to brands they believe behaved well throughout the crisis, and perceived as putting humanity ahead of all else, including profits. In a special report by Edelman, 81 per cent of those surveyed said a lack of trust in a brand is a deal breaker. “I must be able to trust the brand to do what is right.” What this means is that those companies that fail to meet or surpass social expectations, will not make it. They will be left behind.
Trust is a robust signal. When we quantify trust in real time for an equity, or an index such as the S&P 500, we can compare the levels of trust in one company, an entire industry, as well as a complete index. Those constant daily signals show emerging patterns and can be used to predict a company’s revenues. If society is losing trust, a company is sure to lose revenue.
Trust scores play well with other data. Combining trust data with price data, as an example, is a simple way for financial modelers to determine if trust is moving the market, or other factors are leading the way. When lagging trust scores by a day against price data, investors can make smart predictions based on changes in human emotion. This is especially helpful when traditional factors are no longer effective, emotion is high, and the market is completely disrupted.
Trust is built and lost over time. It helps to be able to visualize subtle changes in emotional behaviour. Having a dataset on trust that travels back in time, let’s say 2015, gives modelers a unique perspective on a company’s actions, the impact various CEOs have on a company’s favorability, and so many more isolated activities that span the years.
Trust can be lost in a day. We know that every company will be hit with a crisis at some point in its lifetime. In fact, some of the best companies are the ones that have survived and learned from a crisis. How quickly it recovers from the crisis is directly related to how much it’s trusted by its employees, customers and communities. A company’s capital will likely be impacted when the crisis hits, but trust determines how quickly it recovers, and society forgives and forgets.
A final few words on how companies can use trust as a way to build their business strategies today. Hon and Grunig (1999) defined trust as one party’s level of confidence in and willingness to open oneself to the other party. The researchers identify three dimensions of trust:
Integrity: the belief that an organization is fair and just.
Dependability: the belief that an organization will do what it says it will do.
Competence: the belief that an organization has the ability to do what it says it will do.
Use these three measures of trust to build a values-based company the world needs today.