Trust in a Coffee Cup – The Intimate Actuary

I’ve often wondered: is our real workplace office the coffee shop?

Many years ago, when I started work as a management consultant, the smoking area was the place where information was exchanged, relationships forged, and informal deals brokered. There’s an informality when people congregate without agendas; barriers are dropped, titles mean less, and deeper social connections get forged.

Is this ‘informality’ the key to the Trust Equation’s key component of Intimacy?

Coffee Shop Intimacy

Being a Brit, we often think they’re the same thing. The beers after work and the ‘Cheeky Nandos’ (see here for our befuddled American friends) is our default to creating intimacy; but perhaps we should think a bit more deeply.

Intimacy as a component of trustworthiness is actually more about security and a sense of empathy, a less boisterous and socially connected emotion. It’s individual and personal, and is expressed differently from person to person. One size definitely doesn’t fit all.

I learnt this the hard way over a series of weeks working in a large financial services client. My personal default style is always openness and candid sharing of the personal (full disclosure: I’m Irish). I’m always looking for that connection. So – what happens when that openness meets The Actuary?

Actuarial Intimacy

I’m not suggesting by any means that actuaries are not able to display intimacy, but by the very nature of their work they are not emotional risk takers. Instead, they must be able to be analytical and reflective. The profession tends to attract those who feel simpatico with those requirements.  Social settings are rarely the default home of The Actuary. And yet – for them, as for all of us, Intimacy is still key to trust.

Throughout the weeks we worked together my daily routine began with a visit to the inhouse Starbucks; and every day (maybe 2-3 times a day) I’d offer to buy a coffee for my actuarial friend and client. And (of course) every day he would decline, much to my frustration. I wanted nothing more than to sit down with him and understand what his passions were, his family situation – who he was as a person.

We worked together closely, and made great progress, but for me it was like wading through cement – no conversation, no social interaction. It was killing me. Worse still, I had no idea if I was even making an impact with the work. His only foray into ‘real’ communication was to starkly tell me one afternoon, after my third coffee of the day, “You spend on average £7 a day on coffee; that’s close to £2,000 a year.” (I suspect he even worked out my life expectancy on the back of that).

Yet I couldn’t have been more wrong. In hindsight, this was his conversation starter, though it took me until the project was finished to recognize it as such. We delivered on time and with (to my mind) a great result. His expressed view was that we had delivered what was expected.

On our final day working together, before I left for a new client, I was sitting with colleagues both client and peers. We were engaging in what we knew best, that snappy ‘cheeky Nandos’ social interaction, and of course I was comfortable again – back to normal.

Just before lunch my actuarial friend paid me a visit. And, he came with a gift – a very risky gift for him, a branded insulated coffee-mug. Initially I thought, “Yes! I’ve converted him, he’s a social coffee drinker now.” But again, I had misread him.

He looked me in the eye and said to me, “Johnny, I’ve really enjoyed working with you. I’ve brought you something to say thank-you for making this a success for me, and for my team.”

Suddenly I was the one without words. I defaulted to my informal social style, we exchanged some trivial social niceties, and we said our farewells.

You Can’t Buy Intimacy

It took me months to realize that for him intimacy wasn’t about being social. It wasn’t bonhomie or office banter. In fact, it was much deeper than that. For him it was about me understanding him, including what was important to him and how he felt about it. That then translated to what needed to be done, by when and with what outcome.

Success wasn’t beers and back slaps: it was me realizing how important it was to him that the job be done well, and him being comfortable that I had understood that about him.

We had created intimacy and we had built trust – slowly and painfully for me, measured and appropriately for him. Ultimately, he felt safe knowing that we would get where we were headed, together, and that he could trust me to share that commitment.

I still see him in the airport lounge on my regular commutes between Edinburgh and London, and every six months or so he’ll introduce me to a colleague. He’s always polite, measured and professional. As for me, well, I always have a coffee in my hand.

But we both know.

An Old Standby for a New Normal

To say there is no shortage of COVID-19-related “best advice” out there is an understatement. Which means one thing that’s in short supply is focus. This post aims to help fill that void as we manage our new normal while also tending to our relationships, both personal and at work.

Enter The Trust Equation—a time- and recession-tested framework for personal trustworthiness (from The Trusted Advisor, by Maister, Green and Galford).

Source: The Trusted Advisor by Maister, Green, and Galford, The Free Press, 2000

Here are a few pandemic-sensitive tips on what to pay attention to, in order of priority.

Self-orientation (S). The biggest trust de-railer for us all right now is also the biggest driver of high self-orientation: fear. When it comes to trust triage in a crisis, this factor deserves the bulk of our attention.

Low self-orientation, which is what we should strive for, equates to a focus on others by (1) putting our attention on them, and (2) making choices that are motivated by their best interests, not ours. Consider it icing on the cake if there’s mutual benefit to be found.

Pandemic-induced fear can trigger our basest instincts: we default to protecting ourselves, obsess about stuff, avoid relationship risks (or any risks, for that matter), and more. Yet true trusted advisorship demands that we find ways to lead from our higher selves instead.

Here’s a starter list of simple strategies for keeping our self-orientation as low as possible:

  • Reach out to people—clients and beyond—for one simple reason – to inquire how they are. Period.
  • Make generous offers. What’s something concrete that you can give away that would be helpful right now? Think in terms of ideas, resources, even work. Bring value at a time when it’s sorely needed because you can, and because you want to make a difference. No strings attached. No. Strings. Attached.
  • Get and stay grounded. If ever there were a time to stay centered, to keep stress levels as low as possible, and to maintain perspective, that time is now. Too many professionals were already wrung out before the you-know-what hit the global fan. Whatever helps you be your best, do it and do it regularly: exercise, meditation, music, dancing, reading, cooking, art, any form of play, a gratitude practice … the possibilities may not be endless right now, but they are numerous.

Things to avoid include anything that might smack of ambulance-chasing from where they sit (even if your intentions are noble), and conversations that focus only on the task at hand. It’s fine, even good, to channel our energy into productive work right now, but not at the expense of leading with genuine caring about the people in our lives.

Intimacy (I). Intimacy equates to safety, and there are many ways to achieve it in relationships. The first two S-lowering strategies above are really two-fers as they not only demonstrate caring, but also increase intimacy by building rapport and connectedness. Here are two additional tools:

  • Listen masterfully. Treat every conversation you have right now as an opportunity to hone your empathetic listening skills. It just may be the simplest and most powerful route to building intimacy quickly.
  • Let others get to know you. Our current circumstances are a forcing function when it comes to revealing our humanity. Who hasn’t been video-bombed by a small child or a needy pet in the past week? Even journalists broadcasting live from home are making news in unexpected ways. Embrace the opportunities to give others a little insight into your life. You might be surprised at how readily and voluntarily they reciprocate.

Reliability (R). The extent to which your actions are consistent and predictable determines how reliable others deem you to be. I’d normally call this trustworthiness dimension a distant third. Absent a crisis, reliability is table stakes, and generally far too heavily relied upon by services professionals at the expense of other variables. In a pandemic, though, its relative importance increases because of our basic human need for certainty. And while none of us holds the power to answer big questions such as, “When will we be able to go to a live concert again?” we can do things like:

  • Make small promises, then routinely follow through. And when plans get derailed, that’s OK, just get in touch immediately to reset expectations.
  • Communicate, communicate, communicate.Meetings and touch-points that occur at a regular cadence provide a sense of stability, even if you don’t have new information to share.

Credibility (C). Credibility is fundamentally about words: what you say, and how you say it. Knowing stuff might be helpful to others right now, but unless you’re Tony Fauci it’s not likely to set you apart. Zero in on being honest about your limitations and errorsinstead. For example, be willing to say, “I screwed up in how I handled that,” or “I don’t know”—straightforwardly and with a blend of ego strength and humility.

It’s my first pandemic, and there’s a lot I don’t know right now. One thing I do know is that the trust equation is a simple and profound framework that offers guidance in the best of times and the worst of times.

May we all use it well.

A (Better) New Year’s Resolution

Twelve years have passed since I first wrote the following thoughts on New Years resolutions. Frankly, it was good. And frankly I haven’t been able to write a better one.

Next year, maybe (though, probably not).

So, apologies to those who have read it year after year – though I suspect some of you won’t mind.

Happy New Year.
——————————————-
My unscientific sampling says many people make New Years resolutions, and few follow through. Net result – unhappiness.

It doesn’t have to be that way.

You could, of course, just try harder, stiffen your resolve, etc. But you’ve been there, tried that.

You could also ditch the whole idea and just stop making resolutions. Avoid goal-failure by eliminating goal-setting. Effective, but at the cost of giving up on aspirations.

I heard another idea: replace the New Year’s Resolution List with a New Year’s Gratitude List. Here’s why it makes sense.

First, most resolutions are about self-improvement – this year I resolve to: quit smoking, lose weight, cut the gossip, drink less, exercise more, and so on. All those resolutions are rooted in a dissatisfaction with the current state of affairs – or with oneself.

In other words: resolutions often have a component of dissatisfaction with self. For many, it isn’t just dissatisfaction – it’s self-hatred. And the stronger the loathing of self, the stronger the resolutions – and the more they hurt when they go unfulfilled.  It can be a very vicious circle.

Second, happy people do better. This has some verification in science, and it’s a common point of view in religion and psychology – and in common sense. People who are slightly optimistic do better in life. People who are happy are more attractive to other people. In a very real sense, you empower what you fear – and attract what you put out.

Ergo, replace resolutions with gratitude. The best way to improve oneself is paradoxical – start by begin grateful for what you already have. That turns your aspirations from negative (fixing a bad situation) to positive (making a fine situation even better).

Gratitude forces our attention outwards, to others – a common recommendation of almost all spiritual programs.

Finally, gratitude calms us. We worry less. We don’t obsess. We attract others by our calm, which makes our lives connected and meaningful. And before long, we tend to smoke less, drink less, exercise more, gossip less, and so on. Which of course is what we thought we wanted in the first place.

But the real truth is – it wasn’t the resolutions we wanted in the first place.  It was the peace that comes with gratitude.  We mistook cause for effect.

Go for an attitude of gratitude. The rest are positive side-effects.

Sex, Lies and Memory. And Trust.

She says he sexually assaulted her. He categorically denies it.

Surely one of them must be lying, and a Senate hearing is the right place to get to the bottom of it.

NOT.

I don’t usually write about current events, but sometimes a teachable moment arises that just begs to be waded into. So here we go.

Memory

Malcolm Gladwell’s Revisionist History podcast has two episodes (three and four, season 3) devoted to the issue of memory. His starting point is the memory that both he and a NYC neighbor have about their interactions on the morning of 9/11.

Both are utterly confident about their detailed recall: and yet each is at complete odds with the other. Clearly they cannot both be right. Clearly one must be lying – right? Yet each vehemently denies it.

Now let’s imagine two people trying to recall traumatic events of 30 years ago, when both were in their teens. One may have been very drunk, and may have behaved very badly toward the other. Or maybe not.

  • Is it possible that the accused acted so far out of character in his drunkenness that his unconscious blotted out the memory? (Not to mention plain old drunken blackout effects).
  • Is it possible that the accuser felt so traumatized by some event that her unconscious, talking to no one else over the years, scrambled dates, names, and even events?
  • What are the odds that either party has crystal-clear memories of what transpired at a teen-age party three decades ago? Is it possible that each might have subtly and unconsciously rewritten history just a tad?

Not only is it possible, it’s downright likely. Human memory is far from the tabula rasa we like to believe. The boundaries and limitations of eyewitnesses and their memory have been well discussed in the law.

A Tale of Plagiarism

I faced this myself. Years ago, in the midst presenting some material to a faculty at a well-respected US University, I was publicly and dramatically accused of plagiarism.

I was astonished, outraged, and indignant. I had done no such thing! The audience was entirely on my side, embarrassed on my behalf for the rudeness of the accuser.

Yet in the following four hours, doubt began to seep in. I slowly peeked back into the past, and realized that in fact I had taken some material, used it, and somewhere along the line forgotten to include the original citation. My accuser was right – to my horror!

By the end of the day, I publicly apologized to my hosts, and to the accuser.

I felt bewildered: what was happening to my memory, my ethics – my sanity.

But I have since learned that Malcolm Gladwell was right. Memories are very tricky things.

It is not at all impossible to believe that both Kavanaugh and Ford are utterly sincere. It is extremely unlikely, in my opinion, that one of them is “lying,” in the sense that we usually mean.

And yet, we are about to play out in public what is billed as a morality tale – but what is really a humanity tale.

The Court of Binary Opinion

A public senate hearing is about the worst place to find “the truth” about what happened. It is high stakes; it is being proposed in very little time; the pressure is enormous; it is as public as can be; there has been almost no investigatory work done. And yet it appears we’re about to pit one fallible human’s memory against another – ostensibly in the search for “truth.” What a débâcle.

Why is such a polarizing event about to take place? In one way, it fits with the increasing narrative of us-vs-them politics of division that is overwhelming us.

In Jonathan Haidt’s new and excellent book, The Coddling of the American Mind, he and co-author Greg Lukianoff identify three Great Untruths. One of them is “We are Right, and They are Wrong.”

Polarization, tribalism, victimhood and blamethrowing are all the death of a reasoned democracy. This event – billed by each side as The Truth vs. The Liar – can serve no good purpose, but will be one more false binary division of good people.

What can you do? Don’t get sucked in. Recognize that memory is fickle, that people are not all good or all evil, that “the truth” is rarely black and white. Most of all, don’t view the political theater about to be served up as a morality play, but rather as a sad example of our failure to see people as human, and to deal with them in human-respecting ways.

 

 

Working Too Hard to Make the Sale

Let’s talk about working hard.

Maybe you think you’re not working hard enough; maybe someone else is guilt-tripping you into thinking so.  On the other hand, maybe you’re worried about work-life balance; or maybe you’re looking for that magic 2-day work week.

These thoughts rest on one definition of working hard: hours spent. I’d like to suggest another definition: mental effort.

If you’re in sales or business development, you’re bombarded with athletic metaphors. Here are two extremes:

  • No pain, no gain
  • When you do it right, it’s effortless.

So – which metaphor is right for sales?

Many respected sales authors will tell you that an essential ingredient in selling – perhaps the essential ingredient– is effort. They call it gumption, attitude, grit, hustle, sweat, get up and go – whatever the word, the message is that success is tough. That’s the “no pain, no gain” message.

By this view, selling is a lot like football: the team that exerts the most effort wins. And there is a lot of truth in that viewpoint.

But consider another truth. Think about hitting a golf ball. As any golfer can attest, the quality of your golf shot is in inverse proportion to your effort. That pleasing “click” of a well-struck iron almost never comes from trying hard.

Instead, the “trick” in golf is not how hard you swing – it’s how smooth, relaxed, and “at ease” your swing is. If you’re swinging too hard, you’re almost certainly doing it wrong. And there’s a lot of truth in that viewpoint as well.

Most dichotomies like this, I’ve learned, are false. Selling isn’t only like football or like golf. It’s both, in different aspects. This article is about just one side – the golf side, if you will, where if you’re working too hard at selling, you’re doing it wrong.

Adam Smith, Competition, and Selling

Blame it on Adam Smith’s The Wealth of Nations. The Scottish moral philosopher and economist famously claimed that by the self-oriented struggling of the butcher and the baker, the “invisible hand” of the market makes itself known by balancing out all for the greater good. Out of individual selfishness grows the maximum collective good.

While Smith has been unfairly characterized as arguing against regulation and in favor of unfettered free markets, there’s no question that his powerful formulation rhymes with competition – individuals seeking their own betterment. Ever since, business has been full of metaphors from war and sports – and nowhere more than in sales.

Consider this list for one sport alone: pitch, curve ball, hitting cleanup, bottom of the ninth, pinch hit, get our signals lined up, strike out, bases loaded, don’t swing at the first pitch, home field advantage, double play, we’re on the scoreboard, leaving men on base, pop-up, foul ball, home run hitter, shut-out, and so on.

Here’s the thing about sports metaphors: they’re all about competition. Real Madrid vs. Barca. Yankees vs. Red Sox. All Blacks vs. Wallabies. Seller vs. competitor.

But most of all – seller vs. buyer.

Selling without Competition

It’s hard for most people to even conceive of selling without that competitive aspect between buyer and seller. Isn’t the whole point to get the sale? Isn’t closing the end of the sales process? If a competitor got the job, wouldn’t that be a loss? And why would you spend time on a “prospect” if the odds looked too low for a sale?

When we think this way, we spend an awful lot of energy. It’s hard work – most of it spent trying to persuade customers to do what we (sellers) want them to do. This is never easy (if you have a teenager and/or a spouse, you know this well).

The competitive approach is the traditional, competitive, zero-sum-thinking, buyer vs. seller – the age-old dance that  gives selling a faint (or not-so-faint) bad name. It is one-sided, seller-driven, selfish. This is the football approach – no pain no gain.

Social media, CRM systems, and AI have empowered this approach, even weaponized it. Just look at your inbox, spam filters, LinkedIn requests, and Twitter come-ons.

You have to work hard to sell that way.

The Other Approach

The second approach is different. The fundamental distinction is that you’re working with the buyer, not against the buyer. Your interests are 100% aligned, not 59%. If you do business by relentlessly helping your customers do what’s right for them, selling gets remarkably easier.

All you have to do is just change the whole approach to selling. You’re not in the competition game: you’re strictly in the helping game, with a partner called your customer/client.

You don’t have to think about what to share and what not to. You don’t have to control others. You don’t have to white-knuckle meetings and phone calls, because there are no bad outcomes. You don’t have to relentlessly screen out unqualified leads. You don’t have to practice “handling objections,” because objections are just invitations to further dialogue.

The “trick” is simple: just do the best you can to help the client. Period. Detach from the outcome. Go where the client conversation takes you. Your goal is not to get the sale. Your perspective is long-term success, not this transaction. Don’t focus on monthly quotas, just go where your help is most needed. Just help the client.

If you do that, two results become clear:

  1. You will not get every sale; you may not get this sale; sometimes you don’t deserve to get it, or the goal changes, or it gets postponed – sometimes you may even recommend a competitor;
  2. In the medium-to-long run, however, you will get more sales.

Selling this way works very well for one fundamental reason: all people (including buyers) prefer to deal with sellers they can trust – those who are honest, forthright, long-term driven, and client-focused. All people (including buyers) prefer not to deal with sellers who are in it for themselves, and constantly in denial about it.

If you give them a choice, they will gladly act on those preferences.

This is the golf part of selling: the part where if you lighten up, relax the muscles, let it flow, you end up with superior results. There’s a whole lot of truth to that view. And by that view, if you’re working too hard, you’re not doing it right.

Trusted Transactions, or Trusted Relationships?

Justice Potter Stewart once remarked, with respect to pornography, that it was virtually impossible to define it, but, “I know it when I see it.”

Ditto for trust. It’s both a verb and a noun. Its objects are implied and contextual, as in “I trust my dog with my life – but not with my ham sandwich.”

Increasingly, we need to make explicit another dual-meaning of trust. We trust relationships, and we trust transactions.  I trust John – to have my best interests at heart. I trust eBay – to create trustworthy transactions with strangers. It does not follow that I trust an eBay customer to go out on a date with my daughter.

Much of the public dialogue today confuses these two distinctions. Is it Congress that people don’t trust? Or is it members of Congress who themselves are considered untrustworthy? To the average voter, it’s a distinction without a difference. I suspect the inability to tease them apart is itself a source of anger. But if we fail to separate them, we doom ourselves not only to nasty public discourse, but to failed solutions.

Lessons from the 2007 Financial Crisis

Back in 1970, the US mortgage industry was still adequately described by the perennial Frank Capra Christmas movie “It’s a Wonderful Life,” with Jimmy Stewart as George Bailey, president of the Bedford Falls Savings & Loan. Bailey (for he and the company were inseparable) made loans to people he knew personally.

The bank’s depositors were Bailey’s friends and neighbors. The depositors were also the borrowers; likewise, the employees. The loans stayed on the S&L’s books, presumably to term. Those who took out mortgages had no intention of doing anything other than paying them off, with burn-the-mortgage parties at the end.  No moral hazard here.

This was relationship trust. The strength lay in personal ties, cemented over time. A man’s word was his bond, and anyway you knew where he lived. His reputation was everything, at least until it wasn’t. Relationship trust served business and society well.

But relationship trust was about the only kind we had, and it had its limits.

Transactional trust in George Bailey’s world was shallow and fragile indeed. The S&L was at risk of being forced out of business by a single competitor, the evil Mr. Potter. It was at risk of the low-tech deposit processes of Uncle Billy. Most importantly, it was at risk of a bank run. It was a good thing George Bailey worked the relationship trust game well, for he had precious little else to depend on.

Trusted Transactions in the Mortgage Business 

Fast forward to 1995, Dwight Crane, Robert C. Merton and others published The Global Financial System: a Functional Perspective. A masterpiece of what sociologists knew as “functionalism,” this book laid out the case for transactional trust, viewing the mortgage business as one part of a complex and, ideally, integrated financial system.

In the chapter on mortgages, they ran down the characteristics of a system you could trust. It would have markets – markets for deposits, markets for mortgages, markets for loan originations. The book listed the costs of not having a systemically integrated system: risk of meltdowns, differential pricing within very narrow geographic regions, low liquidity, gross inefficiencies.

In short, George Bailey’s relationship-driven-trust was considered too risky, too costly, too uncreative and too unresponsive. Above all, it was too expensive. Consumers – the would-be purchasers of mortgages – were subjected to higher prices than necessary, driving up the cost of home ownership, and therefore driving down the economic livelihood of those seeking the American dream.

You simply could not trust such a system, the good professors opined.  “It’s a Wonderful Life” was now half a century old. George Bailey was quaint. (No one noticed that only one year before the 1995 book, contributor Robert C. Merton had become a Board Member of the soon-to-be-notorious little hedge fund called Long-Term Capital Management L.P.)

In business, Progress was synonymous with all these terms: systemic, low-cost, efficient, market-based, liquidity. No one was about to cast doubt on the important and positive nature of all these terms.  The academics and wunderkind of Wall Street were creating institutions you could trust.

The new trust was almost entirely cast in terms of systems and transactions. Transactions replaced relationships. Where markets couldn’t handle the job, models could. Of course, from today’s vantage point, this looks as naïve as the academics’ view of George Bailey a few decades ago.

In a few short decades, the “trust” pendulum swung from a man’s word to the solidity of a system. We went from high personal trust to high systemic trust – each extreme without the moderating influence of the other.

We Need Rich Trust

The transactional revolution in mortgage banking indeed delivered on most of its systemic promises. Markets were established, costs were lowered, liquidity was raised. But it all, as we know, ended very badly.

The confusion over trust went way beyond semantic. Alan Greenspan himself in 2008 famously said:

“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms.”

In other words, Greenspan thought that transactional trust would have the same sort of reputational bias that relationship trust had. He was, sadly for all of us, mistaken.

Transactional trust absent relationship trust had its own internal seeds of destruction. The absence of long-term relationships was crystallized in the Wall Street acronym IBGYBG – I’ll be gone, you’ll be gone, let’s do the deal. Just as personal trust doesn’t scale easily, so transactional trust doesn’t easily foster ethical behavior.

George Bailey wasn’t wrong, he just had no system. The professors weren’t wrong, they just assumed relationships. The truth is: we can’t afford just one form of trust or another, we need a rich mixture of both.

Well Beyond Mortgages

The mortgage industry is but one example. The electorate, reflecting it all, ends up exerting single-issue us-vs-them pressure on its own.

The polls are basically right: we do have a crisis of trust. But what crisis? It is not just a failure of morality. We cannot fix it solely by getting back to ‘family values,’ or seeking out leaders of impeccable morality. Those are, in fact, necessary conditions, but they’re not sufficient.

On the other hand, those who insist that the system is sound, it just needs tweaking, are dead wrong as well. This is not a matter of incentives needing adjustment. This is not a matter solely of transparency in markets. Those too are necessary conditions – but not sufficient.

We live in an interconnected world: transactional trust is critical for us to do live a life built on global commerce without it.

At the same time, there is no social structure or business process that can work without humans. There is no lock that can’t be picked, no code that can’t be broken. There is no inhuman system that can’t be perverted by humans.

Did anyone say Facebook? Uber? Airbnb? Zuckerberg and Sandberg today are as enamored of the potential for better algorithms to solve trust problems as Crane and Merton were about the potential of markets to unilaterally fix trust back in their day.

Trusted transactions? Or trusted relationships? Yes. We need ‘em both. Always have, always will.

The Reverse Elevator Speech: Disaster and Recovery

Trust requires that someone take a risk. Perversely, that means the avoidance of risk is tantamount to preventing trust.

One of the hardest things to do is to recognize this need in the face of mundane, everyday interactions, where it always seems that taking a risk is inappropriate.

So rather than give a mundane business example, let me do this one by metaphor.

A British account executive years ago told me the following story:

“I was going to see a potential client for what could have been an important piece of business for us. Unfortunately for me, I missed the scheduled plane by minutes, and thus was delayed by an hour. I called, and they agreed to reschedule the meeting to accommodate me.

“When I arrived, a bit flustered, the team of a half-dozen clients execs had gathered downstairs, and we all then went to the lift to go upstairs to the designated conference room.

“Unfortunately the lift was made for about four people. We all crammed into the lift, and it slowly began to climb. At that point someone – how shall I put this – well, as we English say – passed gas. The lift continued its crawling pace upward. No one, of course, said a word, nor even altered their expression. There was dead silence.

“As the doors finally opened, we all rushed to get out – all at once. And all 7 of us thereby tumbled onto each other on the floor. We all picked ourselves up, even more embarrassed, and again without saying a word to each other, made our way into the conference room.

“As I set up at the head of the room, I could feel the weight of this triple discomfort: I was late, the tumbling all over each other – and of course the ‘gas’ incident in the middle. It was all contrived to create a mutual sense of misery.

“What to do? I stood in the front of the room and said, ‘Gentlemen, little did I know this morning what a fine level of intimate relationship we should all achieve in so little time here this afternoon. I am honored indeed.”

“Well, everyone fell all over each other laughing; I had somehow managed to prick the balloon of the unspoken that hung over us like a cloud, and the rest of the day went marvelously. And oh yes, we got the sale.”

What this gentleman had done, in our nomenclature, was to Name It and Claim It; that is, to speak aloud the one thing that no one could figure out how to talk about. He did it with humor – an excellent tool – and was rewarded for the relief he caused by an appreciative relationship, and even a sale.

So What?

Charming, you think, but quite beside the point. What’s it got to do with me?

Well, as it happens, I had another conversation just last week (with, as it happens, another Englishman). He was a business development manager, tasked with what felt like an impossible burden.

“The senior partner insists on bidding a job in a sector in which we frankly have no experience. Certainly far less than anyone else. And he wants me to pretend it just doesn’t matter, or to dazzle them with bluster, or in some way to just blow through it. It’s simply not going to work, and we’ll look the fool.”

Well, yes they’ll look foolish if that’s how they go about it. They don’t recognize the relevance of the reverse elevator speech.

The solution is for the senior partner to say something like this:

“You may be wondering why a firm with so little experience in this sector is even here pitching you at all today. Certainly I wondered it! But I assure you we don’t make a habit of tilting at windmills.

“There is an angle here that I fear conventional wisdom might not point out. We’ve seen it a few times before, and it can make the difference between a run-of-the-mill project and a truly game-changing solution.

“I simply could not let the situation rest un-addressed. And that is why I am here in front of you today. Now, what we see going on here is…”

You may have picked up that there’s a ‘catch’ here.  The catch is that you actually have to have something consequential to say. If you have nothing consequential to say, then you shouldn’t be there in the first place, and you deserve what’s about to happen to you.

But if you do have something to say, the surest way to strangle it before it sees the light of day is to deny the elephant in the elevator – the lack of relevant sector experience, in this case.

Hope, they say, is not a strategy. Hoping somebody won’t notice the obvious is a strategy-killer. In such cases, not to take a risk is the biggest risk of all.

Get credit for stating the obvious, for telling the truth, and for relieving the tension that everyone feels. Put it out there. That way everyone is leaning forward on their seats, waiting to hear the idea that just might be so good as to overcome the banality of traditionalism.

Take the risk. Call out the wind in the elevator. Like a vaccination, it amounts to taking a little risk to mitigate the much larger risk staring you in the face. And you’d be surprised at how often it works.

An Interview with Andy Paul

Andy Paul is an old friend, and a true expert in the field of sales. His books include Zero-Time Selling: 10 Essential Steps to Accelerate Every Company’s Sales, and Amp Up Your Sales: Powerful Strategies that Move Customers to Make Fast, Favorable Decisions.  As you can see by the title, one of his subjects is the power of speed in sales.

Today’s interview was triggered by one of his over-600 podcasts from Accelerate!, his ongoing podcast.

CHG: Andy, welcome back to Trust Matters! It’s been awhile. Let me start by noting – 600 podcasts? Holy cow. Not everyone can think of 600 things to say, but I know you can.

AP: Well, it’s maybe 100 things repeated six times. Or 50 twelve times. There are some eternal verities.

CHG: True enough, and there are endless ways to communicate them. Well, let’s talk about some those verities.

Let’s start with the old bit about change. Which is true: things are changing more than ever? Or the more things change, the more they stay the same?  What’s the state of change in sales?

AP: Well, despite all the new buzzwords and technology that are flooding into sales, selling really hasn’t changed that much. Effective B2B selling primarily is still about what happens in those critical person-to-person moments when the seller communicates with and delivers value to the buyer. Those moments can’t be outsourced to technology today no matter what vendors may promise you.

CHG: Music to my ears. Meaning, of course, I agree with you.

AP: I’ve spoken with some very clever marketers that are attempting to repackage and relabel sales strategies that have been around since the Pleistocene Era of B2B selling. Some of these are fads and shall pass. In the meantime, my guests have been nearly unanimous is believing that sellers need to remain focused on mastering the fundamental principles of sales. Sellers will always be able to depend on these.

CHG: What’s the biggest fake-change fad? And what’s an example of one of those fundamental principles?

AP: I’d start with Account-based Marketing/Selling. The idea of selling to targeted accounts instead of relying on random lead generation to sell into the enterprise hardly qualifies as revealed wisdom. Using marketing automation tools to reach out to (i.e. spam) a broader spectrum of potential points of contact within the enterprise is new. But, I doubt that there are many potential buyers within enterprise accounts out there that are excited about that.

However, there are some vendors doing interesting work in this space with tools designed to manage account orchestration. It’s another new buzzword but if they really can facilitate the process of the complex sale then it’s promising.

CHG: Let’s talk about another Big Topic: what about technology? Is it here yet?

AP: Despite the massive infusion of technology into sales, there’s no data that exists to prove that it’s contributing to higher levels of sales or elevated levels of true sales productivity. In other words, are the companies that are investing heavily in sales technologies generating more revenue dollars per employee than they did without the technology? Entire business models have been created around the assumption that the answer to that question is “yes.” However, it’s not evident that is the case. It should be. And, it will be. But, we’re not there yet.

CHG: So, is it all just snake oil? Will it always be thus?

AP: It’s important to keep in mind Amara’s Law. Roy Amara was a leading futurist. His succinct formulation about the impact of technology is very relevant here. “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” This is what is happening in sales with sales technologies.

CHG: So, in the short term, what are the negative effects of over-estimating technology?

AP: The influx of sales technology has created in many sales leaders a blind conformity to their sales process rather than blind devotion to serving the needs of their buyers. For many sales teams this has resulted in an unwieldy sales process and an out of control sales tech stack that creates a burden on their sellers. Salespeople are overwhelmed and distracted. It’s a problem sales leaders have largely created. And one they need to take responsibility for solving.

CHG: Amen. This is closely related to another pathology I see – the mistaking of metrics for the things they were supposed to measure. We fall in love with the process, and forget the process was supposed to be a means, not an end in itself.

AP: Which is related to the problem that sales leaders generally don’t know how to use data. This is a bigger problem than just in sales. Technology enables more data to be captured and made available in every facet of life and, as John H Johnson points out in his wonderful book “Everydata: The Misinformation Hidden in the Little Data You Consume Every Day,”  most of us woefully unprepared to accurately interpret it.

CHG: Isn’t the promise of tech supposed to be about productivity?

AP: Here’s the problem: we confuse performance with productivity. They aren’t the same. Productivity is a rate of output based on the investment of a unit of input. That’s how we should measure productivity in sales. Instead we are still aiming at the fixed target of a quota. As long as sales leaders are fixated on quota attainment, instead of being focused on improving the dollar amount of sales produced per hour of sales time by an individual seller, sales productivity won’t improve.

CHG: Fair enough. But isn’t ‘productivity’ still just a measure of efficiency? I find that focus on ROI in sales ends up too often focusing on reducing the I, and not in increasing the R.

AP: Well, I find it interesting that while supposed experts are busy touting the “modern sales” process, they are still using an obsolete method, a arbitrarily assigned quota,  to quantify and measure the productive capacity of a sales rep.

CHG: What about training and development? What have your multiple guests taught you about the need for, or the appropriate type of, sales training?

AP: It has been a consensus among my guests that the sales training model is broken. A new model for sales education is required. Again, the right solution hasn’t been developed. Yet. However, until that happens, sellers at all levels have to assume greater responsibility for their own professional development.

Guest after guest on Accelerate! has lamented the lack of curiosity among professional sellers to learn more about their craft. I’m at one extreme. I’ve read approximately 150 books on sales, marketing and leadership in the past two years. Unfortunately, the other extreme is zero. However, can zero be considered an extreme if that is the typical number of sales books read by the average sales leader and sales professional each year? Changing this even slightly (one book per month?) would have a profound impact on overall performance in the sales profession.

CHG: Well, as a fellow author, I can certainly get behind that recommendation.

Andy, it’s been a pleasure speaking with you, as always.

AP: Charlie, it is always a pleasure. Thanks!

Can You Trust Bitcoin?

In a word – no.

But the reason why is not the usual critique. Let me explain.

Origins in Distrust

Bitcoin was born of distrust. Its original fan-base was an amalgam of nerds, futurists, libertarians and survivalists. They were enticed by several features of the new crypto-currency:

  • a decentralized network, beyond the control of governments and regulators
  • a secure payment system, guaranteed by blockchain technology
  • a fixed supply (fixed by innate technological design), preventing inflation by printing press.

All of these features were and are attractive to those who distrust central authority (on some level, all of us). But while the first two features are indeed truly intriguing, the third one turns out to be a poison pill in sheep’s clothing.

Success of Bitcoin

Bitcoin has been a wild success story by most metrics, certainly including its exchange rate, which has been meteoric (see graphic). Many analysts and investors are dazzled by its success, most recently including the famed Motley Fool investor newsletter, which has just jumped on the Bitcoin Bandwagon. A few cynics, most famously Jamie Dimon, have called it a ‘fraud’ or a bubble.

But no one that I’m aware of has pointed out a fundamental contradiction at the heart of Bitcoin – one which ultimately makes the doomsayers right.

(Note: I’m not at all criticizing the underlying power of blockchain, of which Bitcoin is merely one instantiation; blockchain has immeasurably great opportunities to transform the world in powerful and positive ways).

The Role of Bitcoin

The most basic argument for Bitcoin is that it will revolutionize the world of currencies, for the reasons stated above: decentralized, secure – and that third item, a fixed supply of Bitcoin.  Never mind the side arguments about gold and international currencies – its stated value is its power as a currency.

At some point in the future, the argument goes, Bitcoin will become accepted massively as a medium of exchange. Note: the value of Bitcoin does not rest on a nation’s economy, or a valued good (like gold); it rests on its future value as a preferred medium of currency. Period.

But what if its  value as a currency is, literally, unachievable?

Read on.

The Underlying Value of Bitcoin

The proponents of Bitcoin – this Nasdaq article is a good example – will tell you that Bitcoin has value because of “the network effect.” The more people use it, the more valuable it will become. The massive volatility that exists in Bitcoin right now will settle down and stabilize as it becomes an accepted means of currency exchange around the world.

Sounds plausible, right? We’ve seen the network effect in technologies as simple as the telephone and as complex as Facebook.

But there is one massive problem, which everyone I’ve seen who writes about it tends to skate right by.

Is Bitcoin a Currency, or an Asset Class?

Most fans will tell you it’s both – and they don’t see a contradiction between the two. But there IS a contradiction, because of one of the core features of Bitcoin – its limited-by-intent supply of Bitcoins (currently 16 million, and capped by design at a maximum of 21 million).

What you want from a currency is a stable level of purchasing power. What you want from an asset class is an appreciating price.

  • An asset that has high volatility and a growth rate of 500% is called a great investment opportunity;
  • A currency that has high volatility and an exchange rate variation of 500% is called hyper-deflation.

The fact that Bitcoin is limited – by design – to 21 million bitcoin means that, by the immutable laws of supply and demand, the more popular it becomes, the higher the price is going to be. Until it is less popular, when it will drop like a rock.

In other words, the limited supply aspect of Bitcoin guarantees that it will behave as an asset class – and not as a currency.  Note this is not seen as a bug – this is pitched as a feature.

A currency that is by nature volatile is a currency that will attract only speculators – and the more volatile, the more that is true. After all – if you expect Bitcoin value to rise, why would you ever use it to buy a car, or to settle debts? You would only be incentivized to hold on to it.

And if you expect Bitcoin value to drop, why would you ever want to hold on to it? You would only be incentivized to short-sell it – or to unload it on a bigger fool. (And as any trader can tell you, the latter is better: the market can stay crazy longer than you can stay liquid).

The only exceptions are, as Jamie Dimon pointed out, international thieves for whom short-term volatility costs are outweighed by the chance to conduct illicit business and not get caught.

Bitcoin is Not a Ponzi Scheme: It’s Worse

The term “Ponzi scheme” gets overused. Technically it’s a situation where the later investors buy out the early investors at inflated valuations. This is not exactly the problem with Bitcoin.

Bitcoin is more akin to the original tulip craze. But even there, everyone saw tulips as an asset class, and the smart money either stayed out or schemed to unload an over-valued asset to the greater fool.

This is worse than tulips.  Here the scam is based on a fundamental confusion between assets and currencies. To put it simply, it’s closer to being a little bit pregnant:

You simply cannot be both a currency and an asset class.

Muddled-thinking Bitcoin fans are fond of citing gold as a counter-example. It’s not. Unlike Bitcoin, the supply of gold is not fixed; it varies with price, as known deposits become more or less economically viable. (The term “Bitcoin mining” has had the unfortunate effect of metaphorically linking Bitcoin to precious metals). Gold even has some serious industrial uses; about 10% of it is used in industry of various types. Bitcoin, by contrast, has no stated utility other than as a currency.

To those who say there are traders in all currencies, and there are ebbs and flows of price, yes – but nowhere near this order of magnitude. Currency traders swoon over volatility of a few hundred basis points. And if things were to get really out of hand with your dollar or your renminbi, you can always print more of them to stabilize the price. Not so if your currency supply is fixed, forever, by design.

The Trust Scam: Bitcoin as Snake Oil

Nearly all the talk about Bitcoin lately has been about its stellar performance as an asset class, precisely because that’s how it’s being treated. And, as I’ve argued, it always will be.

The ultimate vision of Bitcoin – the argument that Bitcoin will reach its true value as a currency – is little more than snake oil. It can never function as a currency as long as the supply is statutorily limited, because it will always be subject to the whims of supply and demand; which in turn makes it unsuitable for the most basic function of a currency, which is to serve as a vehicle of exchange. Bitcoin is a trader’s delight – a digital volatility machine – and therefore a currency user’s nightmare.

In the end, Investopedia has it right: Bitcoin only has value “because it is popular.” It may not have a central bank behind it, which some see as a plus, but it also has no economy behind it. Because of its internal poison-pill design, it is doomed to forever be treated like an asset class, based ultimately on how many people have bought into the fiction that a limited-supply currency can ever be anything other than a vehicle for speculation of the greater-fool variety.

 

It’s ironic that a high level of distrust in national currencies gave rise to the enthusiasm for  something so massively more untrustworthy.

The Opportunity Cost of Mistrust

We all suffer – some of us more than others – from the fear of getting ‘stiffed’ by our soon-to-be client.

Fortunately – or maybe not – there is a plethora of lawyers just waiting to sell you protection. Of course, your soon-to-be-client has tapped into the same infinitely deep pool of legal imagination.

Maybe it’s just me, but the business of commercial contracts seems to have gotten approximately 250% more complex in the past decade.

What’s the pitfall in taking all these steps? Of course, there’s the lengthy amount of time and money spent on drafting contracts, sending them out, having both sides review them, back and forth again if any changes are requested. But time is just the first thing to go. Because when you lead with so much mistrust, you’re signaling something.

The signal we’re sending is that we are obsessed with one question: How much money would we risk losing by trusting our customers?

It’s the wrong question. 

Case 1.
David Maister
wrote about his service guarantee.  His precise words are, “If you are anything less than completely satisfied, then pay me only what you think the work was worth.”

One commenter on the posting said, “I like the post quite a bit, but I’m surprised that no one has commented on the first thing that came to my mind on the guarantee – those customers who will take the opportunity to stiff you on good work simply because of the opportunity via the guarantee.”

David’s reply:

“It has never, ever happened to me. And if it did, I’d apply that old slogan “Fool me once, shame on you. Fool me twice, shame on me.”
I don’t work for cheats or people I don’t trust. And if it ever happened by mistake, I wouldn’t be tempted to change the pricing policy to accommodate it! A pricing policy designed to accommodate SOBs sounds like a disaster to me.

Case 2.
I have myself on three occasions offered a complete refund of my fees because I felt the result wasn’t good enough. The client refused in each case and paid in full.

Case 3.
Joel Spolsky posts Seven Steps to Remarkable Service. I spoke to him a few years ago.

Step Seven is, “Greed Will Get You Nowhere,” wherein he talks about Fog Creek Software:

I asked what methods they found most effective for dealing with angry customers.

“Frankly,” they said, “we have pretty nice customers. We haven’t really had any angry customers.”

I thought the nature of working at a call center was dealing with angry people all day long.

“Nope. Our customers are nice.

“Here’s what I think. I think that our customers are nice because they’re not worried. They’re not worried because we have a ridiculously liberal return policy: “We don’t want your money if you’re not amazingly happy.”

“Customers know that they have nothing to fear. They have the power in the relationship. So they don’t get abusive.

“The no-questions-asked 90-day money back guarantee was one of the best decisions we ever made at Fog Creek. Try this: use Fog Creek Copilot for a full 24 hours, call up three months later and say, “Hey guys, I need $5 for a cup of coffee. Give me back my money from that Copilot day pass,” and we’ll give it back to you.

Try calling on the 91st or 92nd or 203rd day. You’ll still get it back.  We really don’t want your money if you’re not satisfied. I’m pretty sure we’re running the only job listing service around that will refund your money just because your ad didn’t work. This is unheard of, but it means we get a lot more ad listings, because there’s nothing to lose.

Over the last six years or so, letting people return software has cost us 2%.

2%.

And you know what? Most customers pay with credit cards, and if we didn’t refund their money, a bunch of them would have called their bank. This is called a chargeback. They get their money back, we pay a chargeback fee, and if this happens too often, our processing fees go up.

Know what our chargeback rate is at Fog Creek?

0%.

“I’m not kidding.

“If we were tougher about offering refunds, the only thing we would possibly have done is pissed a few customers off, customers who would have ranted and whined on their blogs. We wouldn’t even have kept more of their money.

“I know of software companies who are very explicit on their web site that you are not entitled to a refund under any circumstances, but the truth is, if you call them up, they will eventually return your money because they know that if they don’t, your credit card company will. This is the worst of both worlds. You end up refunding the money anyway, and you don’t get to give potential customers the warm and fuzzy feeling of knowing Nothing Can Possibly Go Wrong, so they hesitate before buying.  Or they don’t buy at all.

How much money are you leaving on the table by not trusting your customers? That’s the right question.