BIZ VOICE: Economy suffers loss of trust

It’s been a scary few months to be an entrepreneur. The basic principles of business are bleeding, major brands are being bailed out by the government and everyone is salivating for a handout.

In the midst of the madness, the pillar of capitalism has crumbled: Trust has disappeared from the system, from real estate to Wall Street to Detroit’s Big Three.

The “credit crisis” has turned into an “econolypse” because at the very heart of it, a problem with credit is a problem with basic trust. And trust, not just credit, is what powers everything from business loans to elections to everyday consumer decisions. Trust, too, is Marketing 101.

There is now an inherent distrust of the “system,” from the White House to local car dealerships. Trust has been broken in all facets of American business because for far too long, top brands have been making decisions in an environment where they stand to gain without personally taking on risk or responsibility. This atmosphere breeds recklessness, as it’s easier to play dangerous games with money that’s not your own and you aren’t responsible for.

Not since the Great Depression has the global outlook been so bleak. My solution as an entrepreneur and a marketer is to stress the importance of brands earning trust —- good old-fashioned entrepreneurial trust —- by working hard and taking responsibility, long term and short term. And no one knows how to earn basic trust more than the entrepreneur, an individual who takes significant responsibility for the inherent risk and outcome of his or her enterprise.

We’re now transitioning from a period when trust was taken for granted to one in which trust must be earned. Wealth will be redistributed based on who can make the best case for this “new trust.” What does this trust look like? It is relationship-based, person-to-person, peer-to-peer and unrelated to big-brand institutions that sail by on a name. (These brands are heading for a tremendous setback in the 2009 economy, with consumer backlash against big players in many sectors, I believe, seen as the purveyors of disaster.)

Entrepreneurs, those who work hard, make payroll and don’t expect a bailout, will lead the pack in establishing these new paradigms of trust. Main Street business people, who are in touch with their customers, can be reached at 9 p.m. and will do anything to properly service their businesses, are the ones who will come out of this crisis not just intact but even successful. The entrepreneurship of personalized service, boutique brands and hands-on results will grow, and one-on-one relationships will thrive.

The “cash and carry” mentality of the American dream will once again earn trust and re-emerge today.

While loans from banks may be scarce, the collapse of institutions creates opportunities for success. General market rules dictate that with chaos comes opportunity. Those who take chances and stand arm to arm with consumers will earn trust and prevail. A financial paradigm shift is under way, and the chances are there for those who seek them.

This week, a foreign entrepreneur, self-made and worth hundreds of millions of dollars, approached me and spoke of needing $10 million in cash within a week, providing a personal guarantee and tremendous returns within six months. Only a few days before, I received a call from an NYC real estate developer in a similar situation. Entrepreneur after entrepreneur I speak with says the same thing —- in the next few months there will be a major reallocation of assets. It’s an environment where millions will be made and lost in just a short time. It’s also a time of fear, when relationships based on trust will go a long way.

While $250 jeans, mink coats and cars won’t be purchased by consumers en masse this year, there is still tremendous opportunity in the long term. The economic times are simply more amazing than people today realize or understand. As Warren Buffet says: “Be greedy when people are fearful and fearful when people are greedy.” Brands that today establish good old-fashioned entrepreneurial trust by way of responsibility, hard work and commitment will thrive. Those brands can now afford to be greedy because so many others, who have not an ounce of trust left to their names, will be destroyed. (Hint: No private airplanes when asking for bailouts.)

> Ronn Torossian is CEO of 5W Public Relations, based in New York, one of the 20 largest independent PR agencies in the United States, named to the INC 500 list of fastest growing privately held companies.