One thing Americans can agree on these days is that the Trump Administration is unconventional. But we should not lose sight of the fact that an erosion of conventional practices could very well undermine our economy.
Here’s how: commerce depends on predictability to create products and services, while business people rely upon a complex web of market practices called “business customs.”
People engaged in a business negotiation have a sense of how a “deal is supposed to go.” The shaping of this expectation occurs through business customs.
Take for example the purchase of a car. When you walk into a dealership, you to expect salespeople to offer a price higher than they will eventually sell and highlight the wonderful ways their car is different from the competition. They know you have a price that you are willing to pay, but that you won’t divulge.
So long as the negotiation conforms with the respective parties’ expectations of behavior, the parties will build up a relationship of trust and predictability, and then, a business transaction may occur.
Business customs are everywhere in our society. It’s what allows us to “shake on a deal” with confidence that a deal will occur with terms that are consistent with our handshake. It’s what keeps people from lying when they sell an interest in their company. It’s why, when a product doesn’t work, a buyer can justifiably return it with no questions asked.
Consider now how much more difficult it would be for a consumer not to be able to rely on any of those presumptions.
If you could not believe in the honesty and consistency of the process of commerce, would you be more or less likely to make a purchase?
Businesses that can connect with their customers in a trusted way expand customer relationships and grow. Many of our most prominent national brands reflect this strong feedback loop. Conversely, as we have seen recently, when companies are perceived to not be acting fairly or in a trustworthy way, consumer backlash can be rapid and harsh.
What is true for individual companies is just as true for the economy as a whole. If we believe that transactions are rigged, that interactions are not truthful, that we don’t share common viewpoints on how a deal is supposed to happen, our trust in others and commerce as a whole will be eroded.
Our economy is productive because we have been able to predict with some certainty how others will behave and the penalties for not conforming with these expectations.
International organizations such as the Organisation for Economic Co-operation and Development and World Bank, and economists here in the United States, have told us that unpredictability in business practices is inversely related to economic growth. The harder it is to create trust and predictability, the greater the friction on commercial activity.
Whether we like it or not, our politicians set a tone as national leaders for the mood of the nation. As they consider their conduct in the coming months, I hope they remember that a continued erosion of a respect for conventional practices will set a tone for the rest of us.
Business relies upon consistency and respect to both the written and conventional practices that shape society. A failure to appreciate this reality could have immeasurably adverse results on our national prosperity.
This column originally app read in The Washington Post.