Truth IS Profitable!

04/14/2015 10:20 am ET | Updated Jun 13, 2015

It's a natural reaction. When you think someone is lying, you tend to act cautiously, skeptically analyzing their words for clues to their motivations. In business, the impediment resulting from a lack of trust is simply defined as "friction." And, friction is expensive. It creates wear on a system. This is as true for car engines as it is for business transactions. With engines, the goal of greater speed and efficiency are achieved through the elimination of friction.

Our thesis at TrueCar is that, in business, the goal of greater profit and faster growth can be achieved through establishing trust.

Opacity introduces friction because it erodes trust. Transparency is its antidote. Big data and technology are more than just a basis for better decisions and greater convenience. Computational analytics applied to comprehensive data results in each party to a business transaction understanding and agreeing on objective baseline reality in a way that we have never been able to in human history. And while transparency is the popular term of the day, it has been a central theme in human history.

"A lack of transparency results in a distrust and a deep sense of insecurity."
--Dalai Lama

At TrueCar we strongly believe that earning trust through the provision of truth which, in our case, consists of highly accurate market pricing data for vehicles, causes better economic outcomes for everyone involved. That's important as a recent study by DrivingSales, an auto dealer consultant, estimates that U.S. new vehicle sales could be as much as 24 percent larger if consumer anxiety about the sales experience were reduced through a more transparent retail experience.

In so many areas, we're seeing big data and technology remove opacity in favor of an economy where greater efficiency will allow more people to profit.

In this new ecosystem we will not see the removal of the middleperson as some fear. That middleperson will just take the form of an enabler of efficiency that will drive higher margin as a result. The old-line travel agents that sat at desks in brick and mortar locations didn't go away, they changed form. Online travel agencies, or OTA's as they are called in tech circles, account for almost $300 billion in annual travel transactions. That wasn't travel purchased directly from the provider, that was travel booked through a third party acting as an enabler of efficiency and price transparency, creating tens of thousands of jobs and hundreds of billions of dollars flowing through the economy.

Transparency is having an impact across a multiplicity of industry verticals.

Internet startup GoodRX is bringing price transparency to prescription drugs. The disparity between drug prices from pharmacy to pharmacy varies as much as 300% for the exact same brand name pharmaceutical. Contrary to the notion that transparency will disintermediate, GoodRX is actually adding one more middleperson to the equation, one whose job is to introduce transparency into the transaction. In this instance, the removal of opacity allows more businesses to feed from the same revenue stream. Over time, through the influence of companies like GoodRX, price disparity will narrow, but market size should grow as a result. Consumption of more elective drug therapies may actually increase with greater affordability and price confidence.

Removal of opacity is good for business. It engenders positive sentiment and encourages a more efficient form of consumption. The much-criticized healthcare pricing model will soon confront similar disruption and will ultimately be healthier as a result. If Obamacare is a restrictive form of pricing regulation, transparency will be its opposite, an open platform where information asymmetry will no longer have providence. Once consumers have context for what something should cost based on objective, in market data, they will begin to make more informed choices and direct their care, when possible, to more affordable options.

Automotive. Travel. Healthcare. Pharmaceutical. These are just some of the industrial engines being recalibrated for greater efficiency available by introducing transparency and big data. More are in the throes of disruption, or on the cusp of it. The ultimate step function will happen when the Millennials are the largest economic force in America. They are mandating a new relationship between business and consumer that's based on openness. This more authentic way of being will inform everything we do and result in a new era of industrialism based on the most coveted virtue in a business transaction: trust.

At the end of the day, being authentic is the most frictionless and profitable way to be. In life. And in business.