A century of trust

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Over the past 100 years, trust has played a crucial role in our economy. Whenever important systems have broken down, the resulting losses in jobs, income and quality of life damaged trust among Americans.

In some cases, new laws or regulations helped restore stability. At other times, technological innovations or new business practices renewed confidence. These changes created trust mechanisms that ultimately helped make the United States stronger and more secure for business.

But recent years have brought new breakdowns – at faster speeds and with widespread losses. With trade and technology connecting companies and communities around the world, many economic shocks have global impact. At the same time, the digital age has brought new risks to maintaining trust.

The challenge now is to ensure we have the right trust mechanisms to prevent catastrophic losses and promote growth and prosperity. That means understanding the principles of trust that hold societies together and learning from events that triggered trust mechanisms. By exploring the past century of trust, we’re empowered to build trust in new ways going forward.

What is trust?

The four principles of trust

Trust is vital to a functioning economy and resilient society. To understand trust, consider its four underlying principles.

Reciprocity. When people or groups commit to exchange with each other, they make agreements and contracts that can be enforced and create accountability.

Purpose. Trust is created when people share common interests and values and agree which values are most important. 

Transparency and information. The stakeholders in an agreement or transaction have the information and visibility they need to understand the expected value from the arrangement.

Consequence. Parties that break contracts and violate agreements face consequences that are enforced by regulators, watchdogs and others who don't have a vested interest.

The 1920s: Shared prosperity and purpose

As the post-World War I boom gave rise to the Roaring Twenties, government regulations encouraged the growth of U.S. businesses, and Americans shared a proud national identity. It was a decade of building shared prosperity.

The Railway Shopmen’s Strike and Daugherty Injunction

Pro-business actions by government

Photo: Regional History Center & University Archives

As prosperity spreads and a post-war sense of national identity takes hold, the government and trade associations place more trust in business. The Daugherty Injunction shuts down the nationwide Railway Shopmen’s Strike by roughly 400,000 railroad workers.

By banning striking, assembling, picketing and other union activities, the government protects businesses against work stoppages that can affect production and profits. The influence of labor has varied since then, but unions continue to push for fair treatment of workers.

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Revenue Act of 1924

Federal tax cuts approved

Photo: Kevin C. McMurphy, Uphill All the Way: The Fortunes of Progressivism, 1919-1929

With banker Andrew Mellon as Treasury Secretary, the federal government moves to lower tax rates, with the goal of encouraging more payments, increasing tax revenue and growing the economy. The Revenue Act of 1924 cuts rates and creates what would become the U.S. Tax Court, an independent federal court where people can dispute income taxes before paying them.

Supporters of tax cuts often trust that people and businesses will inject money they otherwise would pay to the government into the economy instead. That theory has been heavily debated, with concerns that corporations and wealthy individuals don’t share the same sense of purpose.

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Federal Arbitration Act

Business agreements gain strength

As business disputes and legal costs grow, federal officials explore how to limit frequent and lengthy court battles. The Federal Arbitration Act allows parties to agree to engage in legally binding arbitration – with an award determined by an arbitrator or arbitration panel – instead of seeking judgment in a court of law.

Arbitration helps build trust by allowing parties to quickly and privately settle a dispute instead of going through a lengthy public process. It remains a frequent alternative to lawsuits.

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1920s review: After a boom, trust erodes

Trust was on a roller coaster ride. Behind the post-WWI manufacturing boom, the brewing rural crisis meant family farms were suffering, dragging banks down with them. That accelerated the flow of people into cities and the pace of social change, creating a sense of unease that only deepened in the next decade. Some changes, like arbitration, helped businesses. But in general, government policies saw trust as an issue for contract law – a view that would become more nuanced over the next century.

The 1930s: Depression and a decline in trust

The collapse of the financial sector during the Great Depression gives birth to government institutions aimed at restoring trust in the economy. Agencies such as the Federal Deposit Insurance Corporation and the Securities and Exchange Commission establish new requirements for businesses as federal officials try to build confidence in the nation.

Smoot-Hawley Tariff

Breaking global ties to protect U.S. jobs

Photo: Timothy Hughes Rare and Early Newspapers

As the post-war boom gives way to the start of the Great Depression, elected leaders look for ways to support U.S. jobs and farmers amid foreign competition. This focus on domestic business needs leads to the Smoot-Hawley Tariff, a federal act that raises tariffs on thousands of imported goods to record levels.

Despite its intentions, the act spurs retaliation by other nations and greatly reduces both imports and exports. While tariffs may inspire trust in the government among domestic businesses, there can be consequences for exporters – and the economy as a whole – if a trade war erupts.

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Telex message network

Real-time information

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With a growing demand for accurate information delivered in real time, telecommunications companies establish exchanges to connect Teletype machines and other teleprinters – previously used only to send point-to-point messages.

Long before fax, email and text, Telex provides the first means for sending messages that can be read by anyone else on the network. Being able to share information with thousands or millions of people at the same time becomes vital for the spread of information.

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New federal agencies emerge

Restoring trust in the financial system

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After the 1929 stock market crash and failure of more than one-third of U.S. banks, the Banking Act of 1933 establishes the Federal Deposit Insurance Corporation. The Securities Act of 1933 becomes first major federal legislation to regulate the offer and sale of securities, requiring that buyers receive complete and accurate information before they invest in securities.

The Securities Exchange Act of 1934 regulates the secondary trading of securities through brokers or dealers and establishes the Securities and Exchange Commission.

With the historic consequences of the crash, the government moves quickly to restore trust in the banking system and ensure enforcement of new laws. These institutions continue to be important parts of the financial system but have been tested over time, most recently during the financial crisis of the late 2000s.

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Social Security created

Help for those who can't work

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With the country still mired in depression, the Social Security Act establishes a program to provide financial assistance for retirees and others who can’t work. Funded through payroll taxes, Social Security aims to reduce hardship and provide reassurance for people during the economic crisis.

As part of the “New Deal” programs, Social Security sought to create a social contract and restore trust in the government as caretakers of its citizens. It remains in place, but with concerns about its long-term sustainability.

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Federal Trade Commission expands reach

Protection from false advertising

The rise of print media in recent decades brings an advertising boom and growing concerns about honesty in ads. The Wheeler-Lea Act declares that unfair or deceptive acts or practices in commerce are unlawful and empowers the Federal Trade Commission to protect consumers from false advertising practices.

By expanding the FTC’s powers, the government takes a closer look at the accuracy of information provided by businesses. Until this point, there weren’t serious consequences for false or deceptive ads.

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1930s review: Trust struggles during distress

The Great Depression challenged people’s hope and faith and caused more damage to trust. The federal government’s best efforts eased only the worst effects. In the background, some changes – such as information-sharing technology, consumer protection laws and new banking agencies – set the stage for future improvements. But the decade showed that stronger institutions can help restore trust.

The 1940s: World War II and global economic leadership

America’s decisive role in ending World War II and its leadership in building post-war global institutions created a strong sense of national identity as an economic superpower. A patriotic fervor gave American citizens the shared sense that its nation was the most powerful in the world, bolstered by being the first country to have atomic bomb technology and by an economy revitalized by wartime production and engineering inventions.

Investment Company Act of 1940

More regulation of Wall Street

The 1929 stock market crash put a spotlight on the need to regulate mutual funds, unit investment trusts and other investment products sold to a public that was now wary of financial services. The Investment Company Act of 1940 covers service charges, financial disclosures, accounting standards, audit requirements, governance and the fiduciary duties of fund companies.

Investment companies are still relatively new in 1940, and to give investors' confidence in these companies the act regulates conflicts of interest and requires the disclosure of material details about each investment company. It helps form the backbone of U.S. financial regulation by providing more transparency of information and protecting the public interest.

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Bretton Woods and the United Nations

The birth of multi-lateral institutions

Representatives of the U.S. and 43 other countries meet in Bretton Woods, New Hampshire, to pursue ideas for consensus and cooperation in trade and economic relations. The meeting leads to the creation of the multi-lateral World Bank and the International Monetary Fund. A year later, the United Nations is formed shortly after the end of World War II.

Following the destruction of the war, rebuilding and restoring stability is a common purpose. The Bretton Woods Conference helps stabilize exchange rates and financial flows, encourages infrastructure spending and economic development, and generally promotes international economic cooperation. Lowering barriers to trade and the movement of capital represents a shift from economic nationalism to open markets.

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Levittown founded

The suburban migration begins

The founding of the Levittown community on Long Island, New York, symbolizes the start of a great migration from cities to suburbs. As the first mass-produced suburban neighborhood, Levittown provided affordable housing to returning war veterans and their families.

Although it offers an attractive alternative to crowded urban living, Levittown initially is available only to white families, creating more segregation within the broader community. While such restrictions are now gone, the overall suburban transition has limited many people’s exposure to diversity and understanding about the different experiences in urban environments.

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Diners Club

Credit cards take hold

While individual stores commonly extended credit to consumers, it isn’t until the launch of Diners Club that a credit card can be used to pay for purchases at different businesses. The concept introduces a financial services intermediary to the trust relationship of providing credit to people with the understanding that they will later pay off the debt.

The idea of a self-sufficient credit card company soon takes off, with Diners Club facing competition from American Express and Carte Blanche, and later the forerunners of Visa and MasterCard. As of mid-2016, American consumers had approached $1 trillion in revolving credit card debt, according to the Federal Reserve.

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1940s review: A stronger nation bolsters trust

Victory in war and broad economic growth boosted self-confidence and changed the nation’s direction. The expansion of consumer credit illuminated the growing trust in large businesses, continuing the shift from one-on-one relationships that dominated in previous generations. Yet policy still viewed trust as a by-product of good laws, a trend that would persist for several more decades.

The 1950s: The Cold War era and the military-industrial complex

The patriotism of the previous decade was joined by the rising fear and demonization of foreign influence. The economy grew strongly, with businesses increasing their global influence. As President Dwight Eisenhower left office, he encouraged the nation to “guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex.” His warning illustrated the growing size and political influence of military and industrial leaders in the 1950s and foreshadowed a public distrust of large enterprises.

The Uniform Commercial Code

Interstate commerce becomes easier

With commercial transactions increasingly involving multiple states, the differences in laws between states becomes a bigger issue. To simplify issues for companies that operate in more than one state, the Uniform Commercial Code is published in 1952 and recommends the harmonization of state commercial laws.

Drafted by legal scholars, the code recognizes that businesses and states have a common purpose of making interstate commerce easier. It brings consistency to commercial laws while still giving each state the flexibility to modify the code’s text to meet local circumstances.

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The Marlboro Man

The influence of advertising grows

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As standards of living and consumer spending grow, the advertising industry more than doubles from 1950 to 1960. Television becomes the primary advertising medium, and iconic advertising figures such as the Marlboro Man are born.

The surge in advertising brings new attempts to manipulate consumers through subliminal advertising. Between those actions and the decade’s quiz show scandals – in which some contests are rigged – people began to question how much they can trust what they’re watching.

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Merger of the AFL-CIO

Unions join forces

The American Federation of Labor and the Congress of Industrial Organizations had grown rapidly during the 1930s and 1940s to become two of the largest labor unions in the country. Following a bitter rivalry, the more conservative AFL and more liberal CIO agree on a friendly merger that brings more unity and eases the jurisdictional and philosophical tensions within the labor movement.

At their core, unions pursue common goals for workers, from higher pay to better working conditions. The merger of two large unions helps raise labor’s influence, but soon afterward union membership begins a steady decline, and today union workers represent a small percentage of the total labor force.

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Bank Holding Company Act

Increased oversight of banking

Riding the strong demand for credit following World War II, banks see tremendous growth. That raises fears of bank holding companies becoming too powerful and spurs Congress to pass the Bank Holding Company Act. The anti-monopoly legislation requires the Federal Reserve Board of Governors to approve the establishment of a bank holding company and prohibits bank holding companies headquartered in one state from acquiring a bank in another state.

While the law mandates the separation of banking and commercial enterprises and restricts the expansion of large banking groups, not all restrictions would last. The repeal of the interstate restrictions and the ban on owning other financial institutions have since been repealed, allowing banks to grow significantly in the 1990s and 2000s.

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1950s review: With more trust, safeguards suffer

Trust climbed again thanks to a strong economy, increased trade, and better banking laws. But the seeds for future concerns were being planted. Abuses by television networks and advertising helped breed cynicism. And institutions such as banks and government, which both embodied and needed trust to operate well, soon would face new threats during economic changes.

The 1960s: The Civil Rights era and the Vietnam War

Trust was tested often during a decade of civil rights demonstrations, public protests and a war on the other side of the world that generated strong emotions in America. Many people lost confidence in leaders, with activists saying “Don’t trust anybody over 30.”

Consumer Bill of Rights

Basic protections for consumers

After promising during his campaign to support consumers, President John F. Kennedy gives a speech to Congress in early 1962 on what would become the Consumer Bill of Rights. The four basic rights – to safety, to be informed, to choose and to be heard – are intended to address the limited means consumers previously had to defend themselves against faulty or defective products or against deceptive advertising.

The Consumer Bill of Rights becomes the foundation for other regulation and consumer protection organizations, such as the Fair Packaging and Labeling Act and the Consumer Product Safety Commission. In addition, the United Nations later endorses and expands the concept to eight rights, including consumer education and a healthy environment.

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Silent Spring

Claims of industry disinformation

Silent Spring, a book by Rachel Carson, documents the harmful effects of pesticides on the environment, notably birds. The book accuses the chemical industry of spreading disinformation and public officials of accepting the industry’s assurances without questions.

Although chemical companies deny Carson’s claims, Silent Spring spurs a change in national pesticide policy, leading to a ban on DDT. With its focus on the significant impact humans have on the natural world, the book increases attention to conservation and helps inspire an environmental movement that contributes to the creation of the U.S. Environmental Protection Agency in 1970.

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Civil Rights Act of 1964

Landmark legislation outlaws discrimination

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A milestone in ensuring equality, the Civil Rights Act of 1964 outlaws discrimination based on race, color, religion, sex or national origin, and also ends unequal application of voter registration requirements and racial segregation in schools, at work and in public accommodations. The new law comes after heavy public protests and civil unrest that reveal a lack of trust among many Americans.

While the act is a landmark in labor legislation, the power to enforce the law initially is weak. Within a few years, however, the Equal Employment Opportunity Commission becomes authorized to enforce the law in addition to investigating claims of discrimination – a role it continues today.

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LBJ and The Great Society

Major government spending on social issues

Photo: LBJ Presidential Library

Pledging to build “a Great Society … where no child will go unfed, and no youngster will go unschooled,” President Lyndon B. Johnson launches a series of domestic spending programs that address education, medical care, urban problems, rural poverty and transportation.

The Economic Opportunity Act anchors the War on Poverty, while the Voting Rights Act builds on the Civil Rights Act. Other key programs include the Elementary and Secondary Education Act and the Social Security Act of 1965, which creates Medicare and Medicaid.

Similar in scope to the New Deal of the 1930s, the Great Society benefited from a Democratic president and Congress working together to approve several programs. Some measures wouldn’t last under subsequent administrations, and debate over how much government should invest in social programs remains fierce.

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The My Lai Massacre

The Vietnam War divides the nation

The steady decline of popular support for America’s presence in the Vietnam War results in a divided nation where passions rage. Protests on college campuses and in cities are common, culminating in the riots at the 1968 Democratic National Convention in Chicago. The mass killing of hundreds of unarmed people at My Lai, Vietnam, prompts even more outrage and solidifies the anti-war movement.

The massacre doesn’t become public until late 1969, more than 18 months afterward. The increased attention to U.S. military abuses further erodes Americans’ trust in the war effort. The rise of television news means that Vietnam is the first war in people’s living rooms every night, and that greater visibility makes transparency a bigger issue in future wars.

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1960s review: Trust, it is a-changing

From the Vietnam War to social movements that rejected the status quo and claims that industry was lying to the public, everything – including trust – seemed at risk. The Civil Rights movement, Great Society programs and consumer protection laws offered new ways to boost trust, but they did little to ease the anxiety of a changing economy and society. And people were starting to ask questions about what trust meant, for society and individuals.

The 1970s: Faith in public institutions declines

The Watergate scandal sets the tone for diminished trust in government and institutions. Stagflation and energy crises challenge the public’s faith in the government’s ability to steer the economy. The end of the post-World War II boom leaves many disillusioned about their economic prospects.

Federal Election Campaign Act Amendments of 1974

Campaign finance laws limit donors' influence

After Congress passed the Federal Election Campaign Act in 1971 to require the disclosure of federal campaign contributions, the law is amended three years later to place limits on the campaign contributions and expenditures. The amendment comes after reports of serious financial abuses in the 1972 presidential campaign and also creates the Federal Election Commission to enforce campaign finance laws.

The acts and its amendments form the basis of current federal campaign finance law, which aims to provide transparency in campaign contributions. Who gives how much to which candidate continues to be a big focus in elections at all levels of government.

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Magnuson-Moss Warranty Act of 1975

Giving more teeth to warranties

By the 1970s, the widespread misuse by merchants of express warranties and disclaimers catches the attention of legislators. The Magnuson-Moss Warranty Act requires sellers of consumer products to make warranties on consumer products easy to understand and enforceable, and it gives the Federal Trade Commission means to better protect consumers.

With the act, consumers now have access to reasonable remedies in the event of a breach of warranty. Consequences include informal dispute-settlement procedures and potential actions by the government and private parties against sellers.

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Foreign Corrupt Practices Act

Restoring trust across borders

U.S. influence in the Cold War is being undermined by corrupt business practices, as investigations by the Securities and Exchange Commission find hundreds of instances of U.S. companies making questionable or illegal payments to foreign officials. Congress passes the Foreign Corrupt Practices Act to prohibit the bribery of foreign individuals and governments.

The act helps restore public trust in the integrity of the American business system following the revelation of several high-profile cases of abuse by major U.S. companies. It introduces new standards for financial transactions with foreign officials, although critics worry they could discourage U.S. investment in foreign markets.

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Marquette vs. First of Omaha

Court ruling leads to credit card boom

In Marquette National Bank of Minneapolis v. First of Omaha Service Corp., the Supreme Court finds that a state’s laws governing interest rates can’t be enforced against nationally chartered banks based in other states. The ruling frees national banks to offer credit cards anywhere in the U.S. while abiding by the usury laws of their home state.

With banks now able to “export” interest rates to other states, the case prompts a wave of state deregulation, resulting in the elimination of usury interest rate ceilings in several states. The surge in competition and increased use of credit cards by consumers would become the subject of intense debate, with critics concerned about high interest rates and supporters citing the greater availability of credit.

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1970s review: Trust takes a back seat

Economic stress fueled despair, and that hurt faith in government, business and other institutions. Social changes put pressure on trust, but people also benefited from stronger consumer warranties and the growth of credit. These needed trust to work, and their development drew notice to the gulf between commercial and societal trust. That began to drive new ways of looking at the issue of trust overall.

The 1980s: The Reagan Revolution

The election of President Ronald Reagan ushers in a period of reduced government spending and regulation, marking a shift away from the principles of the Great Society. The decade ends with the fall of the Berlin Wall, symbolizing the end of the Cold War.

Depository Institutions acts of the early 1980s

Financial sector deregulation begins

The Depository Institutions Deregulation and Monetary Control Act of 1980, signed by President Jimmy Carter, allows banks to set their own interest rates for deposit accounts and loans, allows credit unions and savings and loan associations to issue checks, and raises the deposit insurance of banks and credit unions. It is one of the most significant banking laws since the Great Depression.

Deregulation gains momentum under President Ronald Reagan with the 1982 Garn-St. Germain Depository Institutions Act, which deregulates savings and loans and allows banks to provide adjustable-rate mortgages. Savings and loans can offer more savings products and expand their lending authority, but they now have less government oversight.

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Immigration Reform and Control Act

Immigration reform comes to the private sector

Concerns over border security and a large number of undocumented workers during the 1970s and 1980s lead to a push for immigration reform. The Immigration Reform and Control Act requires businesses to confirm their employees’ immigration status and makes it illegal to knowingly hire illegal immigrants.

One idea behind the act is that undocumented immigrants will have fewer job prospects and be discouraged from entering the U.S. As a result of the law, some employers turn to subcontractors for workers, making them not liable for the workers’ immigration status.

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Financial Institutions Reform, Recovery and Enforcement Act

Savings and loan crisis prompts drastic action

The savings and loan crisis, which ultimately involved the closure or resolution of more than 1,000 thrifts, leads Congress to approve several new regulatory measures. The Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) abolishes the Federal Home Loan Bank Board and now-insolvent Federal Savings and Loan Insurance Corp., with the latter’s assets, liabilities and responsibilities now managed by the Federal Deposit Insurance Corp.

The act also creates the Office of Thrift Supervision to regulate savings institutions, the Resolution Trust Corp. to dispose of failed thrift institutions and the Federal Housing Finance Board to oversee the 12 Federal Home Loan Banks.

The loss of confidence in savings and loans and government response are a departure from the deregulation earlier in the decade. The government later would use FIRREA to prosecute banks that issued housing market loans before the subprime mortgage crisis of the late 2000s.

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1980s review: Optimism encourages trust

An economy that found its footing and the hopefulness of the Ronald Reagan administration helped rebuild national confidence. There were low moments, both politically and economically, but the overall mood was positive. By the end of the decade, the decline of the Soviet Union and the Eastern Bloc helped fuel a sense of being on the right side of history.

The 1990s: The internet era begins

A new information age was born, with the World Wide Web becoming a global phenomenon and leading to innovation in business models. The internet created new ways to communicate, make transactions and build business relationships. It also opened up unprecedented access to information and new possibilities for understanding customers.

Netscape becomes a public company

The internet goes mainstream

While the World Wide Web protocol was first published in 1989, its use is limited until graphical web browsers emerge. Netscape is the first browser to be widely adopted, becoming the dominant face for the growing internet. Less than a year after its browser launch, Netscape has a successful IPO in August 1995.

The origins of the internet date to the 1960s, and academics used it widely in the 1980s. But it’s not until the 1990s that the World Wide Web links personal computers with commercial networks and enterprises and starts the transition to the modern internet, eventually allowing billions of people unprecedented access to information – not all of it trustworthy.

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AuctionWeb becomes eBay

Internet-based businesses build peer-to-peer trust

Image: CNN Tech, Old websites today, 2015

The rise of eBay as an e-commerce giant begins with its pioneering approach to online purchases. Founded in 1995 as AuctionWeb, the company holds online auctions among consumers, connecting strangers through the transactions. In September 1997, the company – after hosting millions of auctions – changes its name to eBay and secures several million dollars in venture capital funding.

Thanks to search engines, sorting capabilities, automated bids and ratings systems, eBay not only allows people to buy and sell items online but it also helps build trust among anonymous parties. Its model is adopted by other companies, and within a few years, online auctions are projected to account for more than one-fourth of all online e-commerce.

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Gramm-Leach-Bliley Act of 1999

Banking restrictions eased

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For several years the banking industry had sought the repeal of the Glass-Steagall Act, which separated commercial and investment banking activities and was passed after the stock market crash of 1929. The Gramm-Leach-Bliley Act removes the restriction against financial institutions operating as any combination of a commercial bank, investment bank and insurance company. This opens the door for financial services providers to offer a much broader range of services under one roof.

The act allows people to have savings and investment accounts at the same financial institution instead of moving money between accounts at different institutions depending on the health of the economy. But the act doesn’t give the Securities and Exchange Commission or any other agency the authority to regulate large investment bank holding companies, and it raises concerns about financial institutions becoming too big and intertwined to fail.

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1990s review: In tech we trust

With its promise of instant communication and connection, the internet re-energized people’s search for someone like them. But this watershed development posed new challenges to trust. New types of companies tackled the issue – reminding us that from door locks to digital encryption, technology can be a positive force. Trust also became the focus of academics and policymakers who developed a more nuanced view that saw trust as important for both commerce and the public good.

The 2000s: Bursting bubbles and the Great Recession

The bursting of the dot-com investment bubble, in which many internet-based companies failed following the 1990s boom, temporarily slowed the digital economy. Much greater damage came later in the decade, when the financial crisis saw major institutions collapse, stock markets plummet and the Great Recession affect businesses and households around the world.

The dot-com bubble bursts

Confidence in tech investments vanishes

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After five years of increasingly speculative investments in technology companies – some never earning a cent – the market sells off. The tech-heavy Nasdaq Composite stock index drops 78 percent from its peak during the dot-com bubble, with many internet-based companies failing completely while others eventually stabilize and recover.

Heavy investment in dot-com companies signaled the optimism many had for the new frontier of e-commerce, and some innovative business models developed during the period remain. But the combination of new technology and available venture capital led many investors to overlook traditional metrics and place too much trust in the potential of new companies.

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Sarbanes-Oxley Act

Corporate scandals prompt tougher governance

Photo credit: UMKC Law School, Douglas O. Linder, 2014

After corporate and accounting scandals at large firms cost investors billions of dollars, the U.S. Congress increases requirements for public companies. The Sarbanes-Oxley Act focuses on accounting malpractice and board oversight, adding criminal penalties for certain misconduct and requiring the Securities and Exchange Commission to regulate public corporations’ compliance with the law.

The scandals at Enron, WorldCom, Tyco and other corporations shake shareholders’ confidence that executives and boards are protecting their interests. In signing the law, President George W. Bush says, “The era of low standards and false profits is over; no boardroom in America is above or beyond the law.”

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Twitter rules SXSW

Social media starts dominating conversation

As social networks become more popular, Twitter takes the trend to a new level. Launched in 2006, Twitter sees exponential growth in users the following year as a result of promotion at the influential South by Southwest conference in Texas.

Twitter’s combination of immediacy and brevity – 140-character messages that can be read by anyone online – provides a dynamic platform with huge implications for business. Consumer brands now face a populist channel where they must engage in conversation instead of broadcasting advertisements, increasing the demand for authenticity and transparency.

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The Great Recession and Occupy Wall Street

Trust in institutions collapses

The combination of high-risk financial products, risky mortgage originations, inadequate regulatory controls and failures by credit-rating agencies brings the worse financial crisis since the Great Depression. Across the nation, Americans lose their jobs and homes, businesses close, and the economy goes into a dramatic tailspin.

The personal impact of the downturn turns public sentiment dramatically against the financial industry and government. As faith in institutions sinks, demonstrations grow – most notably the “Occupy Wall Street” movement that starts in New York and spreads to other communities.

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2000s review: Trust needs a reboot

Trust dominated the conversation amid the backdrop of a divisive war, scandals at large firms and fading transparency. New laws sought to enforce more openness in business, but the decade closed with the housing bust, a recession and fears about government surveillance. Populist ire rose, aided by social media that helped rally both critics and supporters. But online trust emerged as a serious concern, while companies had to learn how to connect with a public that wanted more authenticity.

The 2010s: The digital revolution in trust

Ongoing innovations in technology and new business models help create the “sharing economy,” providing new opportunities for trust. Greater access and connectivity also increase the need for trust mechanisms that help protect consumers. As businesses strive to learn more about their customers, concerns about privacy grow. Companies try to balance expanding digital operations with the growing threat of data breaches and other cybersecurity issues.

Dodd-Frank Wall Street Reform and Consumer Protection Act

Sweeping regulatory reform for financial services

In response to the Great Recession, the U.S. Congress passes the most significant changes to financial regulation since the Great Depression. The Dodd-Frank Act makes changes to almost every part of the financial services industry, including limiting proprietary trading and creating the Consumer Financial Protection Bureau.

Among the legislation’s aims are “to promote the financial stability of the United States by improving accountability and transparency in the financial system” and “to protect consumers from abusive financial services practices.” Given its complexity, however, the act has been slow to implement, and debate continues on whether the law places too much of a burden on banks or doesn’t do enough to prevent another financial crisis and subsequent federal bailouts.

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Data privacy goes public

Data theft already is a growing concern when WikiLeaks, an international non-profit organization, releases cables taken from U.S. State Department servers. The group goes on to release more secret, confidential and classified information, providing insight into the decisions and inner workings of governments and businesses.

WikiLeaks becomes a flashpoint for the debate over transparency vs. security. The organization collaborates with traditional media on projects and is praised for challenging institutions and supporting freedom of the press. But the practice of “document dumps” without careful analysis raises concerns about national security and global diplomacy, and that WikiLeaks can be used for political purposes.

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The Uber app launches

The sharing economy starts to grow

Although strangers have been doing business online for several years, peer-to-peer transactions take on another dimension with the launch of Uber. The ride-sharing network allows people to use their smartphones to hire nearby drivers, who use their personal vehicles while the Uber app calculates fares and transfers payments to the drivers.

The business model connecting individual service providers to unknown customers helps define the new “sharing economy.” Along with Uber, companies such as Airbnb, TaskRabbit and others take advantage of consumers’ willingness to trust services provided by a private citizen just as much as – if not more than – those from an established business.

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Distributed ledger technology enters mainstream

While the most well-known use of blockchain, bitcoin, began in 2009, it takes a few more years for the potential of blockchain to emerge. By 2015, more than 100,000 merchants are accepting bitcoin for products and services, and The Economist magazine dubs blockchain “The Trust Machine.”

By storing data across its network, blockchain reduces the risks associated with data being held centrally. The distributed ledger technology allows people who don’t know or trust each other to build a dependable network that’s harder for hackers to exploit. Given this potential, the financial and legal industries are investing in blockchain technology, exploring how to move and manage not only money but contracts, copyrights and intellectual property.

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The Paris Climate Agreement

International accord on climate change

With escalating concerns about the adverse effects of climate change, 195 nations from around the world adopt the world’s first comprehensive climate agreement during the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change. With the Paris Agreement, the countries pledge to reduce emissions as a way to reduce greenhouse gases and limit global warming.

Nearly every nation signs the treaty, and it becomes international law in late 2016 after being ratified by countries that produce a majority of the world's greenhouse gases. While praised as an example of global accord and shared purpose, the agreement’s lack of firm commitments and binding enforcement has raised concerns about its effectiveness.

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Information Sharing and Analysis Organizations

Standards for cybersecurity collaboration

Following a 2015 presidential order, guidelines for establishing information sharing and analysis organizations (ISAOs) are released. Developed through a public process by an independent working group, the ISAO guidelines are intended to help businesses share and analyze information related to cybersecurity risks, incidents and best practices.

The federal government has encouraged the private sector to develop ISAOs as a way to share cyber-threat data and disrupt malicious activity. Although ISAOs are voluntary, the guidelines represent the collaboration of experts from industry, government and academia. As the standards grow and evolve, they could help create an array of hubs serving businesses with a common purpose but also with solutions that meet the needs of individual members.

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What’s next for trust?

We know trust is important and that it flourishes in certain conditions and suffers in others. The question is how we create an environment where trust can thrive.

Technology will remain intimately involved in the trust discussion. Data breaches and online hacking show how technology can be a threat. But breakthroughs such as blockchain can provide a new foundation for digital trust – both between individuals and in business.

Strong institutions can be positive if they support openness and consistency, but trust will be damaged if they abuse their control of information. For trust to grow, we need to balance the competing demands of the institution and individual, and of business and the public good.

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Todd Bialick

Todd Bialick

Deputy Risk Assurance Leader, PwC US

Scott Greenfield

Scott Greenfield

Digital Risk Solutions Leader, PwC US

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