Sunday, July 8, 2012

Trust, But Verify


Business transactions take place because the parties involved agree to act in good faith. This is an essential requirement for trade just as it is for most other human interactions. Placing faith in another is an endeavour that is fraught with perils. But that is the price of trust.

To emphasis India's approach policy toward Pakistan, Prime Minister Manmohan Singh often repeats former US President Ronald Reagan's Soviet-directed phrase - "Trust, but verify" . The phrase actually brings out the inherent vulnerability in the whole exercise of engaging 'the other'. The insurance industry actually factors this feeling of 'being taken for a ride' in calculating the Moral Hazard in a transaction.

This jeweller's ad on the back of a bus picks up on this notion of trust. It reads -
                   
                                 "Our Gold is as Pure as your Trust".

Thus placing the onus of the quality of their product on the customer's belief. The statement works just as well when the word 'Gold' is replaced by 'God'. All the religions willfully put their followers in that position of having to conduct their own self-appraisals in order to enjoy the benefits of their faith. Here, suspension of disbelief has to always occur first at the individual level.

The larger irony in the advertisement's message though is that while the benchmarking of gold itself as a metal of value to humans is an exercise in trust, still within that taken-for-granted trust - doubt persists on the details. And hence the phrase "Trust, but verify".