BCG Henderson Institute

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Francis Fukuyama once described trust as “the single most important commodity that will determine the fate of a society.” Certainly, trust is a critical commodity for business. This is even truer as new technologies change the nature of commerce and usher in the next digital era.

By far, the biggest economic impact of digital technology has been the massive erosion of transaction costs. Google, e-commerce, globally integrated supply chains, social networks—all are manifestations of what is possible when the traditional barriers to search, contracting, auditing, restitution, comparison, and connection are removed.

However, one stubborn “transaction cost” remains: trust. If anything, it is becoming even more of a barrier to digitization, exacerbated by the many reasons to distrust technology itself. In theory, digitization should facilitate small transactions among previously unrelated counterparties, but the lack of mutual trust limits that immense expansion of commerce.

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