Nobody trusts institutions anymore. The headline is largely right, and the cause is no longer subtle. Setting aside the DC-flavored third rail of why, monopolization and an extraction economy are doing what they were built to do. Pick any sector: healthcare, software, finance, retail; and the implicit contract between the institutions and the people who use them is getting worse on the margin every year.
Trust isn’t a soft variable. It’s the cheapest, longest-duration form of capital we have. Most of finance has forgotten this, because trust doesn’t underwrite a five-year fund cycle, can’t be marked to market, and doesn’t show up on a balance sheet until you lose it or buy it. In a low-trust environment, that makes trust shelter from extraction — both a moat for anyone who has built it and a market opportunity for the capital that can steward it.
A partner and I needed $100,000 of tooling to scale production. We did not raise it or go to a bank. We went to our supplier, who fronted the risk because we had accumulated the trust that underwrote it.
The next decade will reprice the businesses that have trust, the people who build and steward them, and the capital that knows how to find them. This piece is an argument about where that value is going, whether you are the operator who has spent twenty years quietly accumulating it, the senior employee about to deploy it on your own, or the capital trying to figure out where the next decade’s returns actually live.
How Capital Forgot Trust
For most of economic history, capital had no choice but to run on trust. The Medici lent across borders because their reputation traveled faster than their coin. American Quakers became disproportionately successful in early commerce because their refusal to bargain over price made them the preferred counterparties at a time when haggling was the universal default. Every long-distance merchant carried letters of introduction, because the alternative to trust was not moving capital at all.
The 20th century industrialized this. The Federal Reserve, the SEC, federal deposit insurance, the audit profession, public disclosure rules: institutions emerged that absorbed personal trust and reissued it at scale. A small business in Ohio could borrow from a bank in New York without the bank ever meeting the borrower, because the institutional plumbing certified the trust on both ends. This was the great trick of mid-century American finance, and it worked extraordinarily well for several decades.
Then the institutions that replaced trust slowly began to unwind.
The shift began in 1970, when Milton Friedman published his shareholder primacy essay in the New York Times Magazine, followed by Jensen and Meckling’s agency theory paper in 1976. Both reframed the firm as a contract rather than a community, with managers as agents to be disciplined rather than partners to be trusted. The institutional plumbing that had absorbed trust started engineering it out, in the name of efficiency and redundancy. Pensions were traded for 401(k)s, which moved retirement risk from institution to individual and quietly ended intergenerational trust contracts that had existed for a generation. Quarterly earnings replaced long-term strategy. Auditors got cheaper and ratings agencies got captured. The system kept the language of that replaced trust while removing the substance.
The endpoint of that trajectory is visible in where capital actually sits today. The top ten companies in the S&P 500 now account for roughly 35 to 40 percent of the index by market value, the highest level recorded since at least the early 1970s. The three largest index fund managers, Vanguard, BlackRock, and State Street, collectively own meaningful stakes in nearly every public company in the United States, with their share climbing for two decades. A working-age American with a 401(k) is, in effect, a passive minority owner of a small cluster of megacaps they have never investigated, run by managers they will never meet, with capital deployed by algorithms in which trust is not a variable.
Monopolization is the parallel story on the operating side, commoditizing the business and extracting from brand trust. EssilorLuxottica now owns most of the brand portfolio you encounter at LensCrafters, Sunglass Hut, and Pearle Vision. The customer choosing between Ray-Ban, Oakley, Persol, and Oliver Peoples is choosing between four houses owned by the same landlord. The pattern repeats in industry after industry. When trust stops being the market clearing mechanism, scale replaces it. Whoever owns the scale owns the leverage.
None of this is an accident. It is the mature form of a model that decided forty years ago that trust was a friction to be bypassed. The model worked as long as the institutions doing the removing remained themselves trustworthy. They have not, and the people whose capital is allocated this way are starting to notice that the model is losing the value that underwrote it.
So when I say trust is the cheapest form of capital we have, I mean it narratively and literally. We had it, used it to build institutions to scale it, and then engineered it out of those institutions over the last forty years. The efficiency we pursued cost us the cheaper coordinating mechanism and left us with the more expensive one*.
*A tangent I'll come back to in a future piece: money is mechanically more expensive than trust for at least three reasons. It requires intermediation, each layer of which takes a cut. It carries a liquidity premium, because it can be used to transact more universally. And it requires monitoring and enforcement, because contracts have to be enforced when trust isn't doing the work. If you've worked through this elsewhere or have a fourth reason, I'd like to hear it.
What Trust Does, Mechanically
An early-stage partner of mine and I needed $100,000 of tooling to scale production. We did not raise it or go to a bank. We went to our supplier, paid a deposit that covered their material cost, and amortized the balance over multiple quarters. Both sides deferred cash, betting on the other’s success. The financing was easy because the trust did the underwriting, and the trust had been built years earlier through the small, boring exercise of not screwing each other on small things.
What that arrangement substituted for, in dollar terms, was a $100,000 line of credit at whatever the prevailing rate was, plus a year of relationship-building with a lender, plus the legal and structuring cost of putting the facility together. Conservatively, $15,000 of friction, $10,000 of interest, and a quarter’s worth of operating attention. Trust did the work of $25,000 of friction and three months of management bandwidth. None of it appeared on either company’s books as an asset.
Multiply that by the dozens of small accommodations a healthy supply chain runs on. Net-30 terms that quietly extend to net-60 in a hard month. A partial shipment that goes out before the PO is signed because both sides know the PO is coming. A price that holds through a cost spike because the supplier is playing a longer game. None of these are favors. They are stored productive capacity, accumulated through years of conduct, deployed when needed.
This is what people mean when they call relationships important in business, and the phrase has been thoroughly defanged. It gets used in MBA case studies as a soft variable, when it deserves a line on the balance sheet. The balance sheet has no record of it, even though a balance sheet without it looks much different.
What Underwriting Trust Looks Like
I spent the early years of my career at a Community Development Financial Institution, sourcing deals to deploy capital into small businesses. CDFIs underwrite loans that commercial banks decline. The reason they can do this is not magic. It’s an underwriting model that includes the things commercial banks are structured to ignore: local knowledge, character, the operator’s fifteen-year track record of paying suppliers on the third of every month, and the specific shape of the business in the specific community it serves.
Capital that requires three years of audited financials, liquid collateral worth more than the loan, and a personal guarantee tied to home equity (rebranded on recent bank earnings calls as "a sophisticated AI underwriting model") selects for a narrow band of borrowers. Everyone outside that band either compounds slowly on retained earnings, sells to someone with access to that capital, or does not exist as a business at all. Trust-aware lending widens the universe of opportunity significantly, if you can bear the slower underwriting it requires.
Conventional capital does not just narrow the band of borrowers it will lend to. It also actively strip-mines trust when it acquires businesses that have it. The leveraged buyout pattern is documented enough that I do not need to name companies. The buyer pays a multiple, services the debt by stripping cost, and "monetizes" the trust in the process. The brand thins, suppliers feel the pain as terms tighten, and the senior people leave, the kind of people who made customers say "if Janet retires, we're done." The business survives or it doesn't, but in either case the asset that was actually purchased, twenty years of accumulated trust between a founder and the people around them, is half-gone before the new owners have figured out where the bathrooms are.
I am not making the moralized version of this argument. Private Equity is the right capital for many businesses: highly cyclical companies with too much fixed cost, roll-ups in fragmented industries where consolidation creates real efficiency, underperforming carve-outs that need new ownership to function. The point is narrower. PE is the wrong capital for businesses whose primary asset is trust, because the math of a five-year fund cycle requires you to monetize the trust faster than the trust can be rebuilt.
Both CDFI lending and the LBO strip are capital decisions. One uses trust to underwrite. The other strips trust to amortize debt. The first continues to compound while the other runs out the clock.
Why the Math Just Tilted
Commodity markets have always run on trust. When the product itself is fungible, the only thing differentiating one seller from another is whether the buyer believes the spec, the timeline, and the next delivery. Cargill and Glencore are not in the corn business or the copper business. They are in the counterparty business, and they have been for a century.
White-collar output is now arriving in the same condition. AI is compressing the cost of producing the things that used to be priced as skilled labor: copy, code, decks, analysis, tier-one support. “Jobs Are Dead” argued that a niche product is now reachable for a single operator with $25,000 and a thesis. The corollary, which I want to draw out here, is that as production gets cheaper, the margin migrates from making the thing to whatever isn’t being commoditized. In every market that has been through this transition, what isn’t commoditized is the relationship.
The mechanical version of this is straightforward. When the cost of production falls toward zero, the price of the output falls toward its marginal cost. The supplier’s margin on the work itself disappears. The only remaining margin is on the things AI cannot do: knowing what to build, for whom, on what terms, with what guarantee. The buyer’s question shifts from “can you produce this” to “do I trust you to deliver it on the terms you said.” That second question is where the margin lives. Trust is the only thing that answers it.
Allocators have not priced this in yet. The investable asset in a $5 million specialty manufacturer was never just the equipment. It is the operator’s twenty-year relationship with three distributors who will not switch suppliers, the brand recognition inside a thousand-person enthusiast community, and the quiet fact that the company can ship a custom run in two weeks because the floor staff have done it together for fifteen years. Strip any of those out and the equipment is worth what the auction will pay for it. Keep them and the equipment is the smallest part of the value.
Why the Repricing Goes Deeper
The commoditization of output is the visible part of the repricing. Trust in most major institutions has been declining for two decades, by every credible measure of it. The extractive turn is real. Healthcare bills arrive months after the service, bear no relation to anything the patient experienced, and require a phone tree to dispute. Software subscriptions raise prices annually while shipping product worse than what they replaced. The implicit contract between large institutions and the people who use them has been getting worse on the margin, year after year.
In a low-trust environment, trust-rich enclaves become more valuable, not less. The most visible version is the influencer economy: a single person with a relationship to a hundred-thousand-person audience can monetize that relationship more efficiently than any incumbent media brand, because audiences trust actual people more than they trust institutions. Anyone who has done a home renovation knows the mechanism scales down. The plumber who shows up when he says receives price-insensitive demand in a market full of plumbers who don’t. The lender who has not changed terms on a borrower in a downturn gets first call when the borrower’s friend needs financing. The operator known not to screw his suppliers gets deal flow that competitors paying twice as much will never see.
Trust is shelter from extraction, at every scale. As the broader economy grows more extractive, that shelter gets more valuable to own and more expensive to build. This is not a one-time repricing. It compounds with every year that institutional trust keeps eroding.
Twenty Years of Quiet Trust
The people best positioned for the next decade are the ones who have spent years quietly accumulating trust in some specific corner of the world, and who now have tooling that lets them deploy that trust into a real business without raising venture money to do it.
Owner-operators of $2 to $20 million businesses tend to be these people. Many of them are running companies their parents started, with relationships that go back two generations and customer lists that read like a family tree. The next ten years will either entrench those advantages further or hand them to whoever shows up with a check and a slide deck about synergies. The difference between those two outcomes is whether the right kind of capital reaches them first.
Senior employees who were told their loyalty was their job security are in the same camp. The product person eleven years into the same company, who knows every workflow gap the company will not fix. The operations director with twenty years of vendor relationships that their employer takes for granted. Six years ago they couldn’t justify quitting because the build cost was prohibitive. They have been sitting on an asset that became investable while they weren’t looking.
Some of them will not even need to leave. I know one operator who started as an intern at a manufacturer, stayed twenty-nine years, and bought the founder out for north of $20 million without raising outside capital. The seller financed it almost completely because he had spent three decades watching this person not screw anyone, including him. This is the trust-as-cheap-money thesis in its purest form: a buyer with a limited balance sheet acquiring a company with no formal lender involved, because the relationship was the underwriting.
Allocators with patient horizons are also a beneficiary. Family offices, some endowments, and a small number of credit funds with twenty-year holds are structured for this. Anyone whose capital does not have to clear a five-year IRR hurdle has a structural advantage right now they did not have five years ago, because the assets that compound slowly and steadily are the ones the rest of the market is least equipped to price.
A society grows great when old men plant trees they will not sit under. That line gets quoted at commencement speeches and almost never at investment committees, which is part of the problem I am trying to address. On a five-year horizon, trust looks like a soft variable. On a twenty-year horizon, trust is the variable. Patient capital is not a slogan. It is a math problem, and the math gets clearer the longer the horizon.
Four Signs Your Books Understate Your Business
If you run a business and you are not sure whether this thesis applies to you, here are four tests.
You can defer cash. Suppliers extend terms others do not get. Customers pay before they are required to. You have raised working capital from your supply chain or your customer base instead of from a bank, at least once, because both sides preferred it that way.
You retain talent below market. Senior people stay through years when they could earn fifteen or twenty percent more elsewhere, because the alternative looks worse on dimensions that don’t appear on a paystub. The accumulated cost savings of not paying market for your best people, compounded across a decade, can run to seven figures. None of it shows up as an asset.
You command price above the spec. Customers pay more for the same physical product because they trust you to deliver on time, to honor the warranty, to fix what breaks without arguing about whether it should be covered. The brand is not a logo. It is a contract that does not need to be litigated.
Opportunities arrive without being pursued. Sellers bring you businesses before they list. Customers refer their peers without being asked. Suppliers route their best terms to you first. Your pipeline includes a quiet line item that does not appear on any CRM.
If two of these are true, your books understate your business by some meaningful multiple. If all four are true, you are sitting on the kind of asset that wrong-fit capital can destroy in eighteen months and right-fit capital can compound for thirty years. The work, then, is to figure out which kind is reaching you first. If you are working through a problem the four signs framework maps onto, write me at duncan@saorsapartners.com.
Where I’m Placing My Chips
I work with owner-operators because they are running the businesses I think the next twenty years will reprice. The thesis is not an abstract platitude for me. I think most of the value in owner-operated businesses is mispriced, that the mispricing is about to correct, and that the operators sitting on it have between five and ten years before either the right kind of capital reaches them or the wrong kind does. The work I am doing now is mostly with the operators on the inside of that window. The consulting practice is the strategy executing now. A decade or so from now, I might raise a fund to execute on the strategy at scale, however for now I write here because the thinking sharpens when readers tell me where I am wrong.
Trust has been mispriced for forty years. It is starting to reprice. Value will flow to trust-rich businesses faster than it has in a generation. It will also flow to the capital that knows how to find and steward them. I am building toward the second, on the same principles I am asking you to recognize in the first.
An Ask
If you forwarded “Jobs Are Dead,” thank you. Our thesis reached more than 15,000 readers because you sent it.
If you are new here, hit reply and tell me what you are: owner-operator, allocator, builder, writer, something else. I want to know who is in the room before I write what comes next. If the four signs lit up something, write me at duncan@saorsapartners.com. If you know someone living this thesis, forward them the piece. The community gets sharper when it gets more specific.
When did trust last do the work of capital in your life, or capital try to do the work of trust and fail? I read every reply.