Didn’t like economics in school?
Too bad you did not have Anna Bernasek as a teacher. From her you would have discovered great connections between what you learn in class and what you encounter everyday.
At least that’s my imagination of Anna Bernasek as a teacher, based on how I understand her writing style in her wonderful book “The Economics of Integrity: From Dairy Farmers to Toyota, How Wealth Is Built on Trust and What That Means for Our Future.”
I came across the title while researching online news articles online on the aftermath of the 2008- 2009 financial crisis. A highly acclaimed economics journalist, Bernasek wrote a great book on economics that may get you to think about how integrity can be so essential to everyday dealings as well as branding, customer loyalty, profitability, and value creation.
Your business value derives from trust and trustworthiness
The book title includes the word “economics”, but Bernasek’s comments do not sink into price-demand charts (though there are supporting data charts sprinkled throughout the text). Bernasek includes an excellent mix of familiar everyday items, such as how we rely on the milk supply chain for assurance of fresh milk, to the greater complexity of the financial markets.
The Economics of Integrity examines our reliance on integrity in many businesses, with a dedicated conversation on Toyota and its commitment to integrity in the quality of its vehicles. While American automakers focused on attractive features (or “gimmicks”) meant to stir the imagination of the average car buyer:
Toyota, on the other hand, took a more straight forward approach. It said “We’ll sell you a car that does exactly what you expect it to do.” And Toyota has delivered on its promise consistently year after year.
Bernasek also explains about how Toyota’s handling of a frame recall for the Tacoma pickup – buying back vehicles 1 1/2 times their worth in Kelly Blue Book – brought amazing customer response: Some turned around and bought another Toyota truck. Bernasek sums branding best: “A brand is stored integrity.” (An aside: Anna has also talked about Toyota’s recent failings in her interviews – You can hear and see all her interviews at her website.)
A small business owner may think, “Why should I read this? I know integrity is important to my business. Duh! with a side order of #Fail.” But that kind of thinking overlooks the point of the book. The Economics of Integrity makes a solid case for the degree in which we depend on integrity naturally, so much so that even when catastrophic events are managed well integrity becomes a useful asset. Bernasek’s example of Toyota’s ability to leverage integrity is timely given its recent highly publicized recalls. And given the company’s successful first quarter earnings despite those recalls has shown, Bernasek is spot on it.
More holistic view of transparency
While transparency and authenticity is mentioned in almost every book and blog on social media, The Economics of Integrity provides a more holistic view, permitting an imaginative strategic-minded business reader to view integrity in his or her operations as a means to create value for customers and vendors.
“Understanding how critical integrity is to our economic well being is a big step. Yet the real power of integrity comes from knowing how to create more. Thinking strategically about integrity and designing integrity systems that are self-reinforcing wealth creating machines is the exciting possibility we have at our fingertips. We can transform whole areas of the economy that function poorly into integrity systems by keeping in mind the DNA of integrity — disclosure, norms, and accountability. “
Bernasek believes integrity and trust creates value. Through economic examples she delves into how systems based on disclosure, norms, and accountability can work to an advantage.
In the segment “Calculating Getting Caught,” for example, she explores statistics on vehicular safety, murder, and tax returns to show how disclosure, norms, and accountability should be to deter behavior instead of an all-encompassing punishment.
More to the point in business, Bernasek believes that a system of integrity should be “designed to work naturally to reinforce itself”, promoting trust from all parties involved. An example is the customer service policy with LL Bean where its customers can return purchase for a full refund anytime. While the policy “sets it apart from other retailers…. LL Bean has found that customers who try to take advantage of its unlimited return policy in an unfair way are by far the minority.” These kind of summations are awesome in their simplicity, and really makes you appreciate her points with respect to your own business practices and strategy.
The ending chapter of the book focuses on how the financial markets should do better. This may not be particularly applicable for the immediate needs of a small business, but the subject does make for a nice read. The reader will find historical examples with an interesting subject fit, such as the 2008 Chinese Milk Scandal or Thomas Jefferson’s quote on the mistrust of banks. With a book length of 186 pages, these asides certainly are not overwhelming nor so brief so their punch is lost in their purpose.
Use this book to build your brand the right way
You should pick up The Economic Of Integrity as a good tonic for how a business can get back to basics in establishing relationships based on trust. Readers will gain some personal perspective on brand building and customer service, because the examples raised connect individual integrity to the business community at large.
People — whether customers or investors — will stick with your firm if you follow three simple systematic behaviors of:
- producing norms, and
- having accountability.