Society and trust

Bank runs - the age-old fear of any financial institution that has the power to cripple business, consumer confidence and product cycles. Most think of banks runs as strictly financial however they have a more insidious underbelly that runs right to the core of society, trust.

A loss of public trust in a financial institution can have a profound impact on the market, leading to a climate of insecurity and unpredictability. The resulting anxiety and unease can be contagious, causing widespread doubt and eroding confidence. As a result, customers may begin to withdraw from their purchasing habits, and when done en masse can leave us all, a little vulnerable.

Let’s remove the idea that banks only function as money lenders, for better or worse banks are a representation of value that people place on goods and services. In order for this representation to be meaningful, there must be trust that others will also recognise and honour the value of everything inside the bank.  And when a bank falls, so does sentiment. The loss of confidence in one bank can quickly spread to other financial institutions, moving the needle of the social zeitgeist from a point of trust to an area of uncertainty.

But it doesn't stop there. Market sentiment and consumer confidence are intimately connected. When investors feel optimistic about the market, they're more likely to spend money and take on debt (trust in the future). This, in turn, can boost consumer confidence and create a virtuous cycle of increased spending and economic growth.

And where there's spending, there's demand for products. Consumer confidence can drive innovation and investment decisions by companies as they strive to bring new products to market quickly and capitalise on consumer demand. Shorter product cycles and more frequent launches can be a direct result of consumer confidence in the economy.

The relationship between bank runs, consumer confidence, and product cycles is complex and multifaceted. Which triggers the other, the single block  trade that spooks the bank run or the gradual slide of trust in the market, as most things are, very slowly then all at once.

The need for hubris amongst businesses’s and founders has never been more prevalent then now.  Understanding that a users trust is earned slowly and lost quickly should be a constant north star for all companies looking to form long, meaningful relationships.

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