"People have a desire for companies they can trust"

An interview with Jerry Michalski, a technology analyst, speaker and thinker who believes in trust as the true foundation of business.

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May 26, 2020
New York

Jerry Michalski is probably the only person whose brain you can find online. It obviously doesn’t mean his brain is uploaded into the cloud to live there forever. But rather that you can go online, and see whatever he has been thinking about for the last two decades. "One of the start-ups I worked with in the nineties was a small mind-mapping company called TheBrain”, explains Michalski. “And since meeting them I have been curating a forever growing mind-map on the web. It's called Jerry's Brain. I'm actually the lead user of the software, with about 418.000 listings."

Even beyond his online brain, Michalski isn’t your regular Silicon Valley tech-thinker. He started out as a technology analyst in 1987 and quickly understood that something would need to change. So he started focusing on what he calls the Relationship Economy, which led him to study why trust is so important in business, yet often so overlooked. According to him, all of this represents a major trend for companies, one they cannot afford to miss.

Consumed by fire

"As a tech analyst I worked with large corporations and smaller start-ups on how to deal with technology", Michalski told us. But at some point, he decided he wasn’t happy with the way we approach business. "I didn’t like the word consumer. I looked into what it stood for, as a metaphor, as a business model, as a lifestyle and what it means for society. I saw how we shifted from treating people as citizens, to treating them as mere consumers. The American government for example sees itself more as a tool to protect consumers, than as a body that represents citizens. In terms of the antitrust law it for example means that as a business you can be monopolistic and predatory, as long as it results in low prices. Consumer, before it meant customer, used to mean something entirely different. It used to mean “to destroy”, as in: a fire consumed the house. And in many ways consumerism is destroying us as well."

Which ties into his point about trust. "As we ‘consumerized,’ everything, businesses broke trust. We broke it systematically in a range of industries, and we consumerized everything from retail to our education system and even healthcare. And recent negative trends, like the Surveillance Economy companies like Google or Facebook, are byproducts of this lack of trust. Companies don’t see trust as the essence of their business anymore.”

From this failure Michalski defined his alternative: the Relationship Economy. "We're starting to see how mass consumer capitalism is bad for us and the earth. And at the same time, we're coming together in these alternative groups and communities, pretty much like we used to do a long time ago: but this time around it’s buyer's collectives, cooperatives, open-source communities and alternative currencies. People are coming together in many different ways, and they do this by designing organizations from trust. Wikipedia is an excellent example of this: anyone can change a page, without a penalty. If a user vandalizes the page someone else will come along and change it back."

Trust through vulnerability

Jerry firmly believes that trust is a business opportunity for companies. A great case of a company that seized this opportunity is the clothing brand Patagonia. "They for example have something on their website called the Footprint Chronicles”, explains Michalski. “For any product Patagonia sells, they will tell you how they sourced all the components. They even include trade-offs. They will mention that a certain blue dye is still toxic in the production process, but that they currently don't have a better alternative. It's a form of vulnerability through transparency that is fantastic. It creates a bond of trust with their customers."

Which in turn is distinct from regular corporate social responsibility according to Michalski. "Philanthropy is not a karmic cleanser,” he says. “A lot of companies have massive philanthropic budgets with which they try to clean up their reputations. That doesn't work anymore. People want companies to clean up how they work, not just donate their money to charity.”

In that transition, leadership is key. "We need leaders to step up and do the right thing”, says Michalski. “So much of this is about them having the courage to do something that is different from the conventional wisdom. It’s often the leaders who decide upon a company’s norms - the culture, the vision, the mission but also their operational rules - and they also change them when the time is right. And today they are facing very complicated, interconnected problems. Supply chains are connected to climate change, which are connected to revenue models, which is now even connected to the corona virus. Leaders need to find the profitable and ethical thing to do, yet sadly the ethical part is too often left out."

Is change possible?

So how does this reflect on the “techlash”, or increased criticism, which technology companies have been facing over the last few years? "Technology is a double-edged sword”, says Michalski. “Historically it was generally seen as something good, but it also has a nastier edge. Everyone for example now has a piece of “unobtanium” in their pockets capable of rendering 3D-worlds and recording high definition video, while also serving as a mailbox and a typewriter. Smartphones have changed our lives completely. The cost of coordinating action and spreading ideas has dropped to zero, which is a tremendous benefit for humanity. The problem is that we were a little naive about this technology, and people and companies took advantage and violated our trust."

But don’t a lot of the problems around digital technology stem from us being too trusting, and leaving opportunities for abuse? "Trust doesn't mean naive trust,” reacts Michalski. “There are clearly bad actors out there. It's just that the best way to keep them out is transparency. We need to be honest about the negative side of technology, which allows you to talk about those issues and collectively come up with solutions."

It goes without saying that big companies will face some pretty steep challenges if they want to engage with a relationship economy. "Large organizations have antibodies, they have defense mechanisms to keep innovation at bay. Often a company's success might be based on an unfair advantage, like a regulation in their favor or a monopoly they own. Those companies will be hesitant to change. Yet it's not impossible, look at IBM for example. There was a moment in its history where it looked like it was about to die, yet they managed to turn it around by adopting open-source software and donating some of their work into open-source. This saved the company, and allowed them to make billions of dollars on top of these technologies. So it is possible."

In the meantime the stakes have never been higher according to Michalski. "Companies are becoming ever more unstable and easily disrupted. Yet we also know that trusted companies survive much longer. So this isn’t just about doing the right thing, it’s also about innovation, leadership and handling risk.”

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May 26, 2020
New York