Trust

There is a glass, half full of water and half empty. Which half do you see? If your answer is the empty half, you will generally be categorized as a pessimist, who always look at the dark side of things. But please don't be discouraged by such an unfair assessment. i see the empty half too. And i see the opportunity to fill in even more water into the glass, while, for those who see the full half, there is nothing more they can do. Who are the optimists?

A basic economic problem is how to deal with limited resources and unlimited wants. But the problem seems no longer to be a serious one in the developed countries, given the abundant supply of production capacity and the improved production efficiency. Although oil prices have shot through the roof, i suspect the tight oil supply is temporary, by which i mean in the count of years. Electric cars are already on the road. Chemists are inventing substitutes for petrochemicals.

It seems that we purchase more products and services than necessary, and replace them sooner than later, as i can recall the first article of this column dated February 2. In my article last week, i followed up the topic, citing Richard Layard, an economist at London School of Economics, as saying, in his book "Happiness -- Lessons from a new science", that higher income and higher consumption do not necessarily make us happier.

The Economist, in the April 2 issue, said the Internet enables consumers to gain a king's power, as we can obtain product information and users' reviews, and avoid being fooled by advertising. We do the window-shopping online, and then buy the products and services either through the Internet or in the street.

i remember a scene in "Matrix", a wonderful movie about the future. Neo (Keanu Reeves) wants guns, and immediately hundred of guns packed in shelves appear to him. He also has enormous memory capacity, which enables him to learn kung fu and piloting as soon as the data are input.

In that fictional world, where materials and information are plentiful, however, one thing is as limited as in the ancient times -- trust. People in Zeon trust Morpheus as their leader, and Morpheus trusts Neo as the one destined to save them. There are betrayals by others, as well.

Everyday, 400-700 new brands are added to the 2.1 million brands tracked by market research unit TNS Media Intelligence. It is easy to register a brand, but it is very hard to stand out from the crowd. The Economist quoted the company's chief executive as saying: "Consumers' attention is becoming a scarce economic resource." Unilever, Europe's largest consumer product supplier, has cut its portfolio of brands from 1,600 to 400. Customers' trust is even scarcer, urging Unilever to re-label most its product lines under the more successful brands.

Yes, trust is of limited supply, whether it be on people or brands.

People like living in a world in which people trust each other. But fewer of them do these days. In the U.S. and Britain the percentage of adults who think that most people "can be trusted" is half that of the 1950's, Layard said.

For products, i wonder if you can name only one or two brands that they trust for each kind of products, electronics, shoes, watches and instant noodles. i trust Sony, Timberland, Tag Hauer and Demae Ramen because i don't have to worry about the reliability and quality. (Some are Japanese. Well, whether we boycott Japanese products is another matter.)

i sometimes fancy living in a small village in one of the outlying islands of Hong Kong where i can leave the door open to the outside all the day, like my neighbors there do.

Is the world becoming so insecure that it drives us mad?

i believe trust is a social good that leads to cooperation. We definitely need more of it to build a better society. However, just because of its exclusiveness, it is precious and valuable. Even though i can have hundreds, or thousands, of choices of product brands, i cannot simultaneously trust all the brands. Even if i can make many friends through the Internet, i cannot, and should not, trust all of them.

Companies with strong brands will differentiate from the others. If you want to pick companies for a ten-year investment horizon, think of those with branding potentials. Think of the successful stories about Techtronic #669 and Esprit #330, in which they combine branding with low costs. IDT #167 is a potential candidate, with its Oregon Scientific brand. The current turmoil in its share price represents a nice buying opportunity.

Other established brands, HSBC #5, Cathy Pacific #293 and Sun Hung Kai Properties #16 will see their brands appreciate over time. (Disclosure of interest: i hold shares of HSBC and Swire B #87, which holds a stake in Cathay.) Supply of loans, aircraft and apartments can be abundant, but names that people trust are jewels. Of course, it is important to keep track of the strength of these brands. Trust can go overnight, even though it takes years to build it.

Apr 25, 2005
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