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Why We Don’t Trust Companies, Part III – Risk

Take the RiskThis is the third in a four-part series about why we don’t trust companies. The final post will offer solutions.

In the first and second posts, I said trust in companies is so low because companies don’t understand the personal nature of trust, and because they hold various beliefs that seem at odds with trust.  Call those drivers “ignorance” and “ideology.”

[Note: ignorance and ideology are not the reasons commonly cited for low corporate trust. The usual suspects include lack of regulation, conflict of interest, perverse incentives, lax enforcement, and greed].

There is one more big issue that affects our distrust of companies – the issue of risk. Risk is fundamental to both corporations and to human trust, but their views on the subject are diametrically opposed.

Trust absolutely requires risk, while corporations abhor it. The conflict between these two views explains quite a bit.

Risk and Trust

There simply is no trust without risk, almost by definition. To trust another is to willfully put oneself in harm’s way. The act of trusting lies somewhere between one extreme of cold calculation of odds, and the other extreme of blind faith.

Contrary to what Ronald Reagan was fond of saying, “trust but verify” is an oxymoron. If you have to verify, it isn’t trust; and the act of verification tends to negate trust.

Risk plays a critical role between the two parties of a trust relationship. The trustor is the one taking the risk, the one who puts himself in harm’s way. The trustee is the one who is granted the power by virtue of the trustor’s risk. How he responds is critical to the establishment of trust.

This dance of risk-taking is the essence of human relationships. I extend my hand, and you either extend yours back to me, or turn on your heel and spurn me. Romantic relationships are established by an elaborate ritual of progressive risk-taking and positive responses. So it is with trust.

Trust is a bilateral, asymmetric relationship – risk is the medium of exchange. A trusting relationship can mitigate larger risks, but it almost always begins with a small risk taken.

Risk and Companies

By contrast, corporations abhor risk. In a zero-sum, Hobbesian, sustainable-competitive-advantage world (see part II of this series), to put oneself in harm’s way of another is simply irrational, if not suicidal.

[Note: I’m not talking here about risk in financial markets – alpha and beta, hedging, risk appetite – those are design features of a product being sold.]

This negative attitude toward risk is pervasive. It’s at the root of business insurance contracts, legal reviews, communications approval processes, and a great many policies and procedures.

I recently heard of someone in the reputation management business who said they’d gotten inquiries from people and from companies alike in times of crisis. But, when they heard that his recommendations included an apology, all the corporate inquiries dropped off. Only individuals were willing to consider reputation repair that included  apologies.

The reason is clear: to apologize looks like an admission of guilt. An admission of guilt opens up a corporation to civil lawsuits. Almost all companies will view such a situation in strictly legal terms, and the “right” answer is the one that limits risks. Ergo, no apology.

This dichotomy makes sense because humans relate to apologies – to apologize is a form of risk-taking that can help restore trust. Corporations, not being human (see Part I), see apologizing in strictly legal, non-human terms. For people, apologies are about character and reputation; for corporations, they’re about threats and survival.

We as humans want truth-telling and accountability in order to trust. But companies tend to resist telling the truth or taking accountability if it puts them legally at risk.

When you have different perspectives on truth and accountability, you have a very wide divide. One more reason we don’t trust companies – they don’t usually behave by the “rules” of trust, which is (see Part I) predominantly human.

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The final part in this series will move from the negative to the positive, and offer solutions.

 

 

 

 

 

Why We Don’t Trust Companies Part I

"Trust Me" (photo by Nancy Xu)People don’t trust companies very much.

Sure, we trust some companies more than others, and sometimes we trust them more than government (sometimes not), but when you think of someone you trust, a corporation tends not to come first to mind.

There are three simple, powerful, obvious reasons for this – every one of which tends to get ignored by corporations. Who then wonder why they’re not trusted.

Reason 1: Trust is Heavily Personal

Very few companies bother to make a simple distinction – that between trusting and being trusted. It takes both to create trust.

Only people can do trusting. To trust another is an act of will, not of policy or odds-making. Corporations, notwithstanding what Mitt Romney and the US Supreme Court ruled, cannot in any intelligible manner be said to “trust” others. It’s a human thing.  So right there, half of trust can only be done by humans.

The other half, trustworthiness, also applies largely to humans. We might say, “I trust the sun will rise tomorrow,” but when it does, you don’t get much credit for your courageous risk-taking. You may trust Amazon to predict your book preferences, but that doesn’t mean you’d trust Amazon to make sales calls for you or set you up on a date.

Trust is hugely contextual, and the few contexts in which we “trust” a company tend to be very bloodless, relying largely on predictability of behavior. And it doesn’t run deep.

Trust is personal, and companies aren’t. Sorry, companies.

Reason 2: Companies Don’t Understand Trust

I noted above that companies rarely distinguish between something as basic as trusting and being trusted. Therefore, if they score low on trust surveys, they can’t tell whether the solution lies in being more trustworthy, or in being more trusting.

By default, most of them implicitly assume the issue is trustworthiness. This means they completely pass up opportunities to create trust by trusting their stakeholder constituencies, or by valuing the propensity to trust within the organization. Worse, they may even harm trustworthiness by assuming that it requires greater internal controls, thus limiting employees’ ability to be trusting.

Trust is contextual, and companies tend to be very vague about it. Sorry, companies.

Reason 3: Companies Choose Trust Tools Badly

Most companies confuse trust with reputation. They view it as a communications problem, something to be handled by PR, especially in times of crisis. Trust problems are addressed by amping up the messaging.

Most companies, if they think about increasing trust, will instantly phrase the issue in terms of measurement.  How do you measure it, what metrics can be developed to track it, and how do we manage to the metrics?

Most companies, to go along with their metrics, favor processes and policies as a way of increasing trust. We will review this 4 times, no Xs will go out without Ys, we celebrate Q and we will not tolerate Z.

But trust doesn’t work that way. Since trust is personal, it is transmitted largely through character, role-modeling, values, conversations, personal transparency, integrity, constructive confrontation, public praise and shaming, and mutual respect. How many corporate programs can you identify that use those as tools?

The one communications policy that positively affects trust is transparency; yet it is often sacrificed for message control, which predictably reduces trust. Reputation doesn’t drive trust – trust drives reputation, in any sensible time-frame past a fiscal quarter or two.

The measurement of trust is simply not as important an issue as companies make it out to be. We don’t measure love, and love seems to do fine without it; in fact we would be suspicious of people who purport to be able to measure love, much less do it quarterly, monthly and weekly. You do not need to measure trust in order to manage with it – see the list above of how it works.

Finally, policies and procedures are inherently impersonal. Other than creating greater predictability, is it any wonder they don’t affect trust? In fact, if you get enough policies and procedures, it makes everyone confuse compliance with ethics, and you end up with reduced trust.

There are many reasons we might not trust a company, or companies in general. But the biggest reasons are because we’ve defined the problem wrongly at the very outset.

When Being Trustworthy Isn’t Enough to be Trusted

In sales, you sometimes hear, “They were pursuing an aggressive strategy – aggressively waiting for the phone to ring.” In other words, sometimes you’ve got to take action.

Much the same is true of trust. If you want to be trusted, sometimes it’s not enough just to be trustworthy. Sometimes you’ve got to take action. But how?

Most of my work over the past 15 years has been on trustworthiness. In The Trusted Advisor and my other books, I’ve put a lot of emphasis on the Trust Equation – more properly, the “Trustworthiness Equation.” The implied (and often explicit) message is, “To be trusted, be trustworthy.”

But what about when that’s not enough?  How do you take action?

To understand what action to take, I need to differentiate between trust, trusting, and being trusted.

Trust, Trusting, and Being Trusted

In all the writing and research I see done in the field of trust, rarely do I see this critical but simple distinction being made. It seems quite obvious, when you think about it. One party trusts, the other party is trusted, and the result is trust. Simple.

And yet – most trust talk obscures the differences. See if you can guess which one is being talked about in these examples:

  1.      Trust in banking is down
  2.      Banks rank low on the trust scale
  3.      People don’t automatically trust their bank anymore.

I’d suggest that probably they mean the following:

1. “Trust in banking is down” – is about trust (e.g. the level of trust that exists between banks and their clients is less than it used to be)

2. “Banks rank low on the trust scale” – is about being trusted (e.g. banks are viewed as less trustworthy than football clubs or hospitals)

3. “People don’t automatically trust their bank anymore” – is about trusting (e.g. these days people are less inclined to trust everything, including, for example, their bank).

But since they all sound pretty much alike, unless you can read the mind of the writer, you can’t be sure. And here’s why that’s important.

The Reciprocal Relationship between Trusting and Being Trusted

The creation of trust between two parties depends on a reciprocating exchange. It begins when party A takes a small risk to trust party B – A is the trustor, the one doing the trusting. Party B is the trustee, the one who is trusted. And if party B agrees to the new relationship, the result is a higher level of trust.

Take something as simple as a handshake at a networking event. Party A goes over to party B and says, “Hi Mark, I’m Charlie – I think your work on the boson participles was great, and I just wanted to meet you (extends hand).”

If party B reciprocates (e.g. “Hi Charlie, delighted to meet you, I’ve heard about you as well, how are things? (shakes hand),” then the result is trust.

If party B does not reciprocate (e.g. B looks at A’s hand, does not extend his own, gives a tight-lipped smile and turns away), then trust is not created.

The key to trust creation is reciprocity – the trustor takes a risk, and if the trustee reciprocates, trust is created. If not, trust is not created.

Therefore: the absence of trust can be caused by:

a. too little trustworthiness on the part of the trustee, or

b. too much risk aversion on the part of the trustor.

Now here’s the key: if you want to be trusted, you have two strategies you can pursue.

  1. Increase your level of perceived trustworthiness (think trust equation), or
  2. Kick-start the reciprocity relationship by first playing the role of trustor. 

You’ve heard the second strategy before. Henry Stimson often gets credit for first saying, “The best way to make a man trustworthy is to trust him.” The same is true of making yourself more trusted – demonstrate vulnerability by offering to trust first.  The natural human reciprocal response is to return the gesture – tit for tat, good for good, bad for bad.

How often have we heard: You get out what you put in, the love you take is equal to the love you make, one good turn deserves another, whether you expect good or ill, that’s what you’ll get. They’re simple statements, but not simplistic – they’re profound.

In game theory, the simple “tit for tat” strategy is shown to beat all others. (You’ll love the link – Richard Dawkins in video with circa 1990 computers).

Using Reciprocity – Rightly 

Reciprocity is deeply wired into our psyches. You can trust it. You can use it. You can depend on it working – if, that is, you don’t abuse it.

Want your customers to trust you? Find some ways to trust them.

Want your colleagues to trust you? Find some ways to trust them.

Want your direct reports, and your report-to’s to trust you? Find some ways to trust them.

Trusting + Trusted = Trust

Trust it. It’ll work for you too.

Boston Trust

Last week, trust was destroyed. Then it was rebuilt.

At least, that’s the party line in all the media and the social buzz channels. But it’s not the whole story. The whole story is, unfortunately, not so good.

Particularized Trust and Generalized Trust

Dr. Eric Uslaner, arguably the world’s leading academic on the subject of trust, makes a key distinction between two types of trust – particularized and general. Particularized trust is experience-based trust in specific things – particular people, or institutions.

Particularized trust is what happens when we experience people to be similar to us. When a runner stopped to aid a race spectator, for example, or when the citizens of Watertown recognized that the police were on their side. This kind of trust is what we hear talked about most in the press. It’s what we mean when we say “trust takes time.” (Which it doesn’t, by the way; but that’s another story).

The other kind of trust – what Uslaner calls generalized trust, or moralistic trust – is the really powerful kind. Uslaner explains:

[Moralistic] trust doesn’t depend upon evidence or experience. It is the belief that we can trust people whom we don’t know and who may be different from ourselves. This is the sort of trust that helps societies solve key problems. It is more based upon our belief that we ought to trust people—the Golden Rule—than our experiences with people we know well and who may look and think like ourselves.

This kind of trust changes only glacially from experience. It is not “destroyed in an instant,” as particularized trust can be destroyed by an instance of betrayal. Generalized trust is gotten from our parents, even our grandparents; it’s handed down with mother’s milk.

When someone says, “You’re way too trusting, you know,” that’s the kind of generalized trust you’re not likely to change just because you get burned once.

The Powers of Trust

For all the print space given particularized trust (e.g. trust in banking is down, trust in government is down, Bostonians are wicked trustworthy), high levels of particularized trust are by no means all positive. The worse experiences people have, the more they are tempted to withdraw into tribal groups, where they experience particularized trust – trust in those who are like them, in shared opposition to those who are not. “We” are not going to let “them” stop us.  Boston Strong is a tribal cry in this sense.

But it is generalized trust that makes for powerful societies, efficient economies, flourishing nations – not the tribal bonds of particularized trust. Uslaner:

…particularized trust as a substitute for generalized trust is a negative for a group.  If a group limits its trust, it results in closed minds, cultures, and economies.

And now we can see the sad trade-off in Boston. The story wasn’t Trust Lost and then Trust Regained. It was a slight, but real, loss in moralistic, generalized trust – with a swap-out for particularized trust. Net net, it’s a loss for society.

For all the tribal celebrations and tales of individual courage and grace, the impact of a dent on generalized trust is negative. It will most likely result in pressure against immigration, not in favor of it. It will most likely result in closed borders, not open; more surveillance, not less; more suspicion, not less; and more enmity of “us” against “them.”

Building Generalized Trust

In Uslaner’s latest book – Segregation and Mistrust – he enlists massive amounts of data to show that diversity doesn’t help or hurt generalized trust – it is integration that helps it, and segregation that hurts it. And our society is becoming more, not less, segregated – in housing, in race, in income, in social groups.

The two largest drivers for greater generalized trust, he notes, are high levels of education and low levels of income inequality. It’s not looking good for either these days. Instead, we’re seeing higher levels of the wrong kind of trust – the tribal bonding of like people, trusting each other in a joint mission to make sure that the “others” don’t win.

Uslaner points out that high-generalized trusting people broadly believe two things: that the world is generally getting better, and that they have control over their own lives.

By contrast, low-generalized trusting people believe the world is going to hell in a handbasket, and it’s “those others” who are conspiring to keep “us” down. It’s a society dominated by that kind of thinking that, in extremis, produces nihilistic, desperate bombers.

Talk of “Winning” against “Others” is not a good omen for the important kind of trust. The legacy of the Boston bombings will be more negative than positive.

 

Trust, Scale, and the Corporation

Erecting Trust in a BusinessI always have trouble answering a question I’m often asked: What company does a great job on trust?  Because the answer is some combination of, “it depends on the definition of trust,” and “hardly any.” Let me unpack that.

Trustworthiness and the Corporation

Mitt Romney’s metaphysics notwithstanding, corporations are not people, apart from a few legal rights. Corporations don’t smile, feel guilty, bleed, or feel emotions. That means: it makes some sense to say “company X is trustworthy,” but it makes little sense to say “company X trusts.”

Trustworthiness attributes that a company can exhibit include reliability and transparency. But to say that a company trusts is simply to make statements about company policies put in place by people. So from one perspective, the connection between corporations and trust is largely a subset of trustworthiness.

Of course, from another perspective it’s meaningful nonetheless to talk about corporations in terms of trust.  That perspective is best articulated by Trust Across America, which uses the acronym FACTS to identify five metrics associated with trustworthiness. Those are: Financial stability and strength , Accounting conservatism, Corporate integrity, Transparency, and Sustainability. Most people would generally agree that those attributes are associated with what we call trust, and I think TAA have done a sensible job of defining and weighting those components.

And yet, that still leaves all that human-y stuff – the bleeding, feeling, risk-taking, emotional parts of trust. The parts that corporations can’t do.

Personal Trust in the Corporation

Corporations cannot trust, but they have enormous effects on whether or not its people trust, and are trustworthy. The biggest influence on trustworthiness and the propensity to trust is not metrics, or compensation systems, or even policies. It is values and culture.  Do the values and culture celebrate honesty, integrity, long-term perspectives, and other-orientation? Or do they stress short-term performance, micro-metrics, “being tough,” and meeting the numbers?

The question of values and culture brings me back to that opening question: What company does a great job on trust?

When I answer “hardly any,” what I’m saying is I don’t see any large corporations that are driven by trust-related values, or support trust-friendly cultures.  I have seen some good examples of smaller-scale organizations that are highly trust-based – a unit at MicrosoftBangor Savings Bank, and Pediatric Services of America, for example But these are relatively small organizations. Where are the Citibanks, General Motors and Oracles in the pantheon of trust-friendly organizations?  Is the problem that trust can’t scale?

Can Trust Scale?

Trust very much can scale. In fact, values-driven organizations scale very well, especially in fast-moving and complex industries, where standardized processes are too complex to keep up with reality.  The issue is not being values-driven – the issue is which values will drive. Goldman Sachs is a values-driven organization; so is Apple. It’s just that the values being valued don’t include trust in the top list.

Now here I’ll get speculative. I think this is because the dominant values in Western business in the last 50 years have been largely anti-trust. The values we have espoused have included competition, the Darwinian-revised version of Adam Smith’s Invisible Hand, caveat emptor, management-by-metrics, management-by-process, and the reduction of all issues to an NPV calculation.

These are serious values, and they are all either anti-trust or trust-neutral (even though, as Trust Across America is demonstrating, trust is associated with higher profitability). And they are extremely dominant values. You don’t get to be a Big Corporation without drinking deeply of these belief systems, taught as they are in MBA programs and the popular business press.

A significant part of building trust in business is going to come not by revising policies and governance, and not by better regulation, but by re-orienting a corporation around core trust values. I see no reason to believe that trust values can’t scale as well as the other values; we’re just awaiting leaders with the vision and courage to lead the way.

Trust on the Rocks

You know those exercises where you fall back into a partner’s arms and trust that he or she will catch you?  What if that person is a family member, like a 16 year old daughter, or 18 year old son?

Do you trust them?  What if your relationship is on the rocks?  Literally!

Our family spent Thanksgiving rock climbing, outdoors, at a local quarry.   I like to think of it as complex cliff climbing; though for experts like my kids, the 50-75 foot climbs were mere child’s play.

There’s a lot to learn about trust when rock climbing.  For example, see this three part series in July, 2012 “Three Things You Need to Know about Trust” by Charlie Green.  Three distinct topics emerged:

Trust Fall? Try this!

  1. Trust is a Two-player Game
  2. Trust Requires Risk
  3. Trust is Reciprocal

As Charlie notes:  one party must do the trusting, and the other party must be trusted.  That is true in business and personal life, as well as in climbing.  And it’s risky.  All involved must trust each other in order to do well, be safe and have fun. 

Securing the Ropes 

In rock climbing, if the rope isn’t secure at the top of the cliff – well, I don’t want to go there.   So the climber must trust the one who secures the rope.  That person must be credible, one of the elements of the Trust Equation.

Climbers might be comfortable climbing on the ropes they set themselves.  I, for one, am not yet experienced enough to know what a secure top rope should even look like.  However, I do know my kids who secured the ropes.  They are careful, and take calculated risks.  They learn before they do, and they learn from people who know what they are doing.  So I simply trust that it will be done right.  And I don’t worry about it.  How often do we do that in business?  In life?

On Belay – Belay On; Climbing – Climb On

Top rope rock climbing is about more than trusting that the foundation is secure.  It’s trusting that the partner belaying (anchoring and holding the rope at the bottom) you will not let you fall.  And it’s reciprocal.  When there are only two of you, you have to belay the person who belays you.

Belay me downRemember the trust fall exercise?  Try this: imagine you are 50+ feet high on a rock wall with a 90 degree slope, and the only thing between you and a hospital bed is your 16 year-old daughter.

As I leaned back, I worried needlessly about whether the fact that I weighed a lot more than her would send her flying off the ground if I fell.  After all, she wasn’t secured to the ground.  At one point while I was descending, she wasn’t even watching – just feeling the tension on the rope and releasing it at just the right speed so I could safely descend the cliff until I reached the bottom.

I belayed for her climb next.  She didn’t worry about anything.  She tried something.  It did not work.  She fell and trusted that I would catch her.  And I did.  Several times.  Once when she dropped a little further than she would have liked, I got the “how did that happen?” look from her.  But she trusted it wouldn’t happen again.  And it did not.

By trusting her, and her trusting me, we strengthened our bond.  We knew we wouldn’t let the other get hurt, and we got to prove it a few times.  It kind of made us reliable.  This was repeated with each of my other kids as well.  Among all of us, I was the least trusting – and they knew it.

Trust Yourself Too

I had difficulty with one of the climbs – all right, all of the climbs.  But on one of them, my kids gave me sage advice.  “Just trust that you can do it.”  “It will be ok.”  “Take a risk.”  “Try it – we don’t know what will work either until we do it.”  “Commit.”  “The worst that will happen is you will fall and I will catch you.“

They had me on the last one.  And each of them was very reliable.  After all, I got home safely and could write this.

Next time, I will practice trusting even more.  Because the more I can let go of fear and just trust that it will work out, the better I will do, the more I will be able to do, and the more I will enjoy it.  And with rock climbing, with my kids, the more I trust them, the more we connect, bond, and appreciate each other.

Funny thing.  Doesn’t that apply to most everything in life and in business?

 

 

Trust Metrics: Breaking It Down

How can you measure trust?

Consider a simple equation:

Trusting  x  Trusted  =  Trust

In other words: if someone is trusting enough to take a risk (the trustor), and if someone else is trustworthy enough to be worth that risk (the trustee), then when the two parties are a “match” – and you get “trust.”

Suppose you could quantify each.  Note that there is more than one way to get the same result for “trust.”  For example:

  • a “trusting” rating of 8/10 and a “trustworthiness” rating of 3/10 might give a “trust” score of 24 out of 100 – 8×3;  and
  • a “trusting” rating of 4/10 and a “trustworthiness” rating of 6/10 would give the same “trust” result – 4×5, or 24.
But what does this mean?

Most of the Data Doesn’t Support Decisions

Most of the trust data out there (think Edelman Trust Barometer, or Pew Research) isn’t about either “trusting” or about “trustworthiness.” It’s simply about the end result, trust. And that’s not very enlightening.

Suppose we get a series of data points about trust, and that they show a decline over time, from 26, to 24, to 20. Does that mean that the trustors got more gun-shy and less willing to trust?  Or does it mean that the trustees became more shady, and less trustworthy?

Measuring only the result – trust – is like saying the results of the Yankees vs.Tigers game was 3-2 – without telling you the winner. It’s like saying that the average household income of a small town is $500,000 – without mentioning that one of the residents is a billionaire. It’s like saying that unemployment is down – without mentioning how you count those who are not looking.

If you were to pass laws about regulation – you might want to know the driver of decreased trust. If you were building a marketing campaign – you might want to know which factor shifted. And if you were observing a pattern between two firms,  you might want to know why trust declined – was it because of less trusting, or because of less trustworthiness?

There’s a lot more to be said about this rarely observed but simple distinction: let me just point out that there are in fact some sources of data that are actionable and help us get at causal drivers, rather than just identifying results.

The Trust Matrix

The matrix below shows some of these relationships.

1. In the upper left box – Individual Trusting – academics are well aware of the General Social Survey, a fifty-year database with an impeccable pedigree, which permits some fascinating conclusions about our propensity to trust others. Hint: it’s gone down. We’re becoming more and more suspicious in principle.

2. In the box Trustworthy Individuals, the pre-emininent database may be my own company’s Trust Quotient. With over 25,000 data points, a time-proven insight called the Trust Equation, we can now state categorically which gender is more trustworthy, which of the four trust factors are harder drivers of trustworthiness, and the relationship of trustworthiness to industry.

3. What about the critical question of organizational trustworthiness? This is a question  we keep trying to answer by reference to trust surveys, which are unable to yield the answer.  The best source I know of is Trust Across America’s database of publicly traded US companies (they’re working on expanding it). They have a composite definition well-grounded in commonsense and objective databases, and some compelling data about the correlation between corporate trustworthiness and economic performance.

4. The bottom left box – an organization’s propensity to trust – is something for which I’m not aware of any data.  Would someone please correct me if I’m in error?  My working hypothesis is that this box has declined considerably.

JP Morgan himself may have lent on the basis of character, but the industry he left behind lends only on secured assets. Except, of course, when they lay off risk through ever-increasingly complex transactions.

Companies routinely won’t even trust small subcontractors, insisting that they self-insure against things like falling on sidewalks. It seems to me that corporations consider a propensity to trust to be roughly tantamount to stupidity. It’s hard to be a trusted organization if you systemically and systematically distrust your stakeholders.

5. Finally, the last column – measurements of trust itself – needs conceptual clarification.  When we look at data that says “trust is down,” there are four meanings.  We might be referring to trust between individuals, trust between organizations, or trust between organization and individual (with two variations depending on which is trustor and which is trustee).

To Mean What You Say, Say What You Mean

Any of us – not just researchers or academics or survey-takers – can contribute significantly to the discussion of trust simply by being clear about what we mean. If you want to say that bankers have become banksters, then point to data about the decline of trustworthiness on the part of banks – not to composite data that blurs the trustor-trustee distinction.

If you want to say that trust is up in the sharing economy, then use data that talks about the propensity to trust, not just the end result of trustor-trustee interactions.

I have a feeling that some significant chunk of the debate about trust could be improved by simply using clearer language to reflect clearer thinking.

Trust is Down? Wait – What Does That Even Mean?

We hear it all the time. Trust in banking is down. Trust in Congress is down. Trust in the educational system is down. We hear these statements, we say, ‘tut-tut what’s the world coming to,’ and we go on about our business – in large part, because we don’t know what to do about them.

Well, no wonder.  These seemingly obvious statements mask a fundamental confusion about the nature of trust – a confusion that prevents us coming up with basic solutions.

The problem is this. When trust in banking is down, does that mean:

a. that banks are less trustworthy than they used to be?  Or,

b. that people are less inclined to trust than they used to be?

Those are very different problems. Typical solutions to the problem of trustworthiness have to do with ensuring the behavior of the trustee.  Think regulations, penalties, enforcement, behavioral incentives and the like.

We too often neglect the other side of the equation – the propensity to trust. The problem is simple enough to state: you may be the most trustworthy partner in the world, but if the other party is unwilling to trust you, nothing will happen.

The propensity to trust is critical. It amounts to risk taking. Despite Ronald Reagan’s famous quote to the contrary, there is no trust without risk. The dictum to “trust but verify” in fact destroys trust by sanctioning acting on suspicion.

The Hitchhiking Problem

In the 60s, hitch-hiking flourished. By the late 1980s, it was dead.  Partly, hitchhikers were afraid to hitch; but mainly, drivers were afraid of hitchhikers. And it wasn’t due to an epidemic of violence; it was due to a fear of violence.  We lost a great deal when we lost hitchhiking – economically and culturally.  (The move to collaborative consumption, interestingly, is a contemporary resurrection of that idea).

Why is hitchhiking relevant to trust in banking?  Because one common response to low trustworthiness – perceived or otherwise – is a reduced propensity to trust. Which will kill trust just as surely as will low trustworthiness.

There is a huge cost to low propensity to trust; look at The Cost of Fearing Strangers by the Freakonomics folks. We are great at articulating the risk of doing something; we are awful at noticing the cost of doing nothing.

Want a really Big Example? Next time you’re in an airport, look at the social cost of us not being able to trust grandmothers from Dubuque on their flight to Grand Rapids.

The Laws of Trust

To people schooled in free-market economics ways of thinking, trust is hard to make sense of. If the propensity to trust declines, you’d think the market would respond by creating more trustworthy offerings. In fact, just the opposite happens. Suspicious people tend to attract con artists; skeptics get sucked in by fakes.

The reason is simple: trust is not a market transaction, it’s a human transaction. People don’t work by supply and demand, they work by karmic reciprocity. In markets, if I trust you, I’m a sucker and you take advantage of me. In relationships, if I trust you, you trust me, and we get along. We live up or down to others expectations of us.

We have been teaching and practicing business according to the wrong Laws of Trust. The solution for low trustworthiness is not necessarily to trust less, but to trust more, and more intelligently. Maybe you’ve heard, “The best way to make someone trustworthy is to trust them.”

We’re Teaching the Wrong Laws

Our public education and culture is loaded with the free-market versions of trust. We teach, “If you’re not careful they will screw you.” We passcode-protect everything. We are taught to suspect the worst of everyone, be wary of every open bottle of soda, watch out for ingredients on any bottle.

Then in business school, we are taught that if customers don’t trust you, you need to convince them you are trustworthy – partly by insisting on our trustworthiness.  You can’t protest enough for that to work: in fact, guess the Two Most Trust-Destroying Words You Can Say.

By teaching distrust and confusing trust recovery with messaging, we are teaching entire generations to be suspicious of anyone and everything. By teaching suspicion and distrust, you can make book on it: what we’ll get is a reduction in trustworthiness. Read the Tale of the Thieving Convenience Store Managers.

This doesn’t mean we shouldn’t teach trustworthiness; much of my career has been built heavily around that. But by itself it’s not enough.

We need also to be teaching risk-taking, relationships, and the values of being connected to other human beings –not just than calibrating the dangers of hitchhiking.

Don’t tell me there’s no data.  The General Social Survey has been collecting data on the propensity to trust since 1972. One interesting finding: the propensity to trust is strongly correlated with educational attainment.  What does that say about the social and economic costs of cutting educational investment in the name of lowering taxes?

And don’t tell me I’m naive. I was in Denmark a few months ago. I left my wallet in a taxi. By the time I discovered it, my client had left me a message to say the taxi driver had returned it to their offices, and they’d paid him to bring it to my hotel. Which he did.

I expressed amazement at how well it had all worked out. My client said, “Nothing to be surprised at. Anything less would have been surprising.”

I bet the Danes hitch, too.

Three Things You Need to Know About Trust: 1 of 3

There really are only three things you need to know about trust. You can pretty much deduce the rest.

I’m going to write about each of them in a separate blogpost, but here’s the one-liner version of each:

  1. Trust is a Two-player Game
  2. Trust Requires Risk
  3. Trust is Reciprocal

If you understand those three points, you can figure out things like trust recovery, rapid trust creation, and trust-enhancing cultures.

Trust is a Two-Player Game

For trust to exist, one party must do the trusting, and the other party must be trusted. That sounds dirt-simple, until you pick up the paper and realize how much talk about trust simply doesn’t mention it.

How many articles and surveys have you read that talk about “trust” as if it were some simple, unitary phenomenon?  Answer: most.

Those articles that say “trust is down,” “trust in banks has declined,” “people I know are more trusted–” all suffer one great defect: they don’t tell you why the trust is up or down.

It’s simple, if you ask the question correctly. If surveys show that trust in banking is down, is that because banks have become less trustworthy? Or because people have become less inclined to trust? One is a problem of ethics and trustworthiness; the other is a problem of risk-taking, education and fear.

You can’t design policies or laws or actions if you don’t know which problem you’re trying to solve.

If you can’t directly address trusting and trustworthiness, then measures of “trust” alone can’t be trusted – they could be influenced by exogenous factors like GDP growth.  And they are.

Trusting and Being Trusted

Trusting is about intelligent risk-taking.  Being trusted is about trustworthiness.

When someone says trust is really an issue of character or integrity, they’re talking about being trusted, not about trusting.

And when someone says, “trust but verify,” they’re talking about trusting, not about being trusted. (Though notice: if you have to verify – it’s not really trusting).

When you talk about trust in your organization, or with your clients or customers, you would probably prefer that others get better at trusting – to save you the trouble of getting more trustworthy!

We don’t have a lot of control over others’ propensity to trust, though we can certainly influence it.  But we have a lot of control over being trusted. And by far the best way to be trusted is to simply be trustworthy. One way to think about that is through the Trust Equation.

Trust is a Relationship

Trust is a relationship? Well, that’s what being a “2-player game” means. Before you think this is another “Doh” moment, note what it implies. It means the absence of trust is the absence of a relationship. It means when we think about business outside the framework of relationship, we are not thinking about trust.

What do market share, competitive advantage, markets, cost reduction, and value chains have to do with relationships? Not much. And therefore they have little to do with trust.

One driver of the level of trust is, simply, how we view business. Our view of business for the last several decades has been about competition, not about collaboration; about opposition, not about relationship.

A big reason those articles show that “trust is down” is because we have stopped thinking about relationships, and focused instead on competitive marketplaces.

Wanna know why trust is down? Start with the absence of relationships.

————–

Next post: Trust Requires Risk

Good Things Happen When you Swing the Bat

At a talk last week, new friend Petter Østberg told me an old story with a new twist. It takes a great sports metaphor for achievement – and steps it up a notch to leadership.

First, the metaphor at Level One.

If You Don’t Do A, You Can’t Get B

You’ve heard this one before as, “If you leave the putt short, you are 100% guaranteed to miss the putt; never leave it short of the hole.”

Or maybe you know The Great One, Wayne Gretzky: “You miss 100% of the shots you never take.”  It’s not just about scoring percentage, in other words, it’s also – very much – about shots on goal.

You also know, “No pain, no gain.” “You’ve got to pay to play.” One of my favorites is the thundering voice from heaven that comes down to the whining loser who is kvetching about never winning the lottery: “Do me a favor – first, buy a ticket.”

All these metaphors remind us of the need to take risks. In our misguided efforts to avoid the risk of doing the wrong thing (call that Type 1 error), we end up not doing the right thing (call that Type 2 error). And in life, as in nearly every sport, it is that Type 2 error that ends up being the Big Bomb.

To not take a risk is the biggest risk of all.

Petter’s story started out this way. A deceased dear friend of his helped run the Little League programs in their town. One of the lessons he taught kids was, “Good things happen when you swing the bat.” If all you do is “take” the pitch, you’re likely to end up striking out.

(Apologies to the non-baseball countries out there, but you get the idea).

Good, good. The youngsters are being taught this Big Truth as well, all’s joy in Mudville.

Getting People to Take Risks

But as David Maister points out powerfully in Strategy and the Fat Smoker, the trick is not cognitive. Just realizing you’re fat and shouldn’t smoke doesn’t mean you’re going to stop gorging and emulating a chimney. Would that it were that simple.

The failure of most corporate training programs (not to mention the people who take them) is to believe that cognition implies action. Entire classes of professions (lawyers come to mind) believe that if they can simply understand something, they have acquired the only thing they need to act upon it.

When it comes to algebra, fair enough.  Maybe even learning a foreign language.

But when it comes to altering substantive human behavior, that belief is So – Not – True.

So it is with golf, hockey, baseball, and I’m sure with cricket and futbol. Armchair athletes from the business world nod sagely as they receive this wisdom from Tiger, the Great One, His Airness, you name it.

“Yup,” they say, “that’s just how it is in my world; you gotta take that risk.”

But they don’t. They really, really don’t.

So: how do you get people to take risks?

Leadership and Role Modeling are Key to Change

Answer: you do it through role-modeling, and you do it young.

Back to Petter’s story.

The Little League coach didn’t just encourage his team to swing the bat. He told the kids’ coaches and the kids’ parents to tell their kids to swing the bat, and with the passing of this dedicated coach just before this year’s baseball season, you now hear his mantra – “Good things happen when you swing the bat” – echoed on every playing field in his town.

The kids got the message, but here’s what he told the coaches:

Look, guys. I know you all mean well. But when a kid swings at a pitch a foot over his head, what do I hear you tell him?  “Lay off the high cheese,” you yell, gesturing with your hand high above your head, “wait for a good one – wait for your pitch. ”

And that is just wrong. These kids look up to you. You’re their leader. This is one of the few remaining times in their lives they’re going to listen to someone, and it’s you they’re listening to now.

These players are very young, and they’ll get more coordinated, that’s nature, but they won’t become better batters unless they swing the bat. There are plenty of other people who will teach them over and over the dangers of taking a swing; don’t you add to that.

Because if they wait for life to serve them up “their” pitch, they’ll lead wasted lives, waiting for that pitch. In life, that pitch rarely comes.

Don’t do that to them. Instead, teach them that if you swing, all things are possible. If you don’t, nothing is. Don’t you wish someone had taught you that?

I know I do. Thanks Petter for that story, and lesson.