Wednesday, July 29, 2009

The Speed of Trust

I've been reading Stephen M R Covey's book The Speed of Trust recently, and the one thing you need to know from it is that if you operate your business or your life without trust, you're paying a lot more than if you had trust.  Obviously, it's about 300 pages more than that, but that's the really, really small capsule.
When thinking about the astronomical costs in 2 key areas, this becomes plainly obvious.  First and worst is government.  We've heard of the expensive hammers and everything else, but if there's one area where we could really use trust, it's in the government.  Let's face it, every single regulation and law comes back to somebody not trusting somebody else.  We spend trillions of dollars in every area of government because of it, and it's only gotten worse over time.  For example, the B-29 bomber cost $7.3 million per unit in today's dollars ($600K in 1944), whereas the F-22 fighter costs $143 million per aircraft today.  I realize that there's a lot more technology that goes into the F-22 than went into the B-29, but the relative technological innovation in each is not nearly as much.  As a result, you could argue that we could be paying $100 million in trust penalty.  This takes the form of all the regulations that Lockheed had to follow on the project, combined with the constantly changing project requirements, number of aircraft ordered, and so on.  If all of that was stripped away and a) the government trusted Lockheed to deliver a product at a reasonable cost that would do everything they wanted and b) Lockheed trusted the government to not try and change the terms once they started business (and thus pad things up front to ensure they don't lose their shirts), think of what that would do in just that one area.  We're ordering 240 or so F-22s, so that's $2 billion in actual savings there.  If that went across the entire government, I'd guess that the $1 trillion deficit we're facing could be replaced with an actual balanced budget.
Another area where this is obvious is in healthcare.  The entire system is set up without trust - malpractice insurance, extra tests, denial staff, and so on.  Meanwhile, our healthcare costs are exploding and it seems like there's nothing we can do to stop it.  If we started by extending just a little trust that the doctors and medical professionals actually care about how they are doing and aren't just out to get us and our money, perhaps we could start changing the tone.  While cutting off the wrong limb is really, really a bad mistake, I tend to think that the doctor didn't try to do it - not that it makes things any better, and some compensation would be in order, but certainly not something that punishes them so severely that their malpractice insurance skyrockets and runs him out of business or causes everyone else to pay more.

3 comments:

Michael Brady said...

the logic is sound. however, we've gotten ourselves here in an equally logical way. dishonest people have given the general populace reason to be distrustful, even paranoid. if it weren't for dishonest people, we would all have a lot more trust for one another.

Sorro said...

We have gotten ourselves here that way, but it's by overestimating the costs of dishonesty. I think it's fair to say that 90% of people are basically honest. It might even be higher than that. At any rate, to stop the relatively small percentage of dishonest people, we spend more money than we would lose by just accepting that dishonesty (or perhaps just mistakes by actual honest people) by trying to prevent it. This is akin to cutting off our nose to prevent nose bleeds. Sure, it will work. At the same time, the occasional nose bleed is far less painful and damaging than actually cutting off your nose.

Michael 聖 Brady said...

well, i agree to a certain point. we certainly overshoot. but think of the dishonest acts that are mitigated by the securities in place. yes, wish it didn't have to be so. most people are sadly lazy (another problem we've mcdonaldized ourselves into), and aren't ambitious to work around the blockades. it's the dishonest hard worker that we need to watch out for, because he's usually smart, too.