John McCain, Trust and Politics

Don’t worry: this is not a political blog, nor about to become one.

In 2000, Sen. John McCain campaigned for the presidency from his bus, the Straight-Talk Express. His image and strategy were about being the Man you could Trust to Tell you the Truth.

In November, 2003, John McCain said:

"Ethanol is a product that would not exist if Congress didn’t create an artificial market for it. No one would be willing to buy it. Yet thanks to agricultural subsidies and ethanol producer subsidies, it is now a very big business – tens of billions of dollars that have enriched a handful of corporate interests – primarily one big corporation, ADM. Ethanol does nothing to reduce fuel consumption, nothing to increase our energy independence, nothing to improve air quality."

In August of 2006, McCain said, "I support ethanol and I think it is a vital, a vital alternative energy source not only because of our dependency on foreign oil but its greenhouse gas reduction effects.”

And oh yeah—that’s while he was visiting Iowa, land of corn ethanol and presidential primaries.

I’m not bashing John McCain. He is not unique. Remember “read my lips—no new taxes?” “I did not have sexual relations…?” Or, going back, the “secret plan to end the Vietnam war?”

But McCain’s case acutely raises a dilemma. Can you—or can you not—speak truthfully and be elected? I don’t mean to be coy or cynical. I mean to pose a serious question: is the notion of trust fundamentally compatible with the practice of politics?

Do Honesty and Trust Win You Votes?

It would appear that McCain has answered in the negative. On the face of it, he is saying that direct appeal to various groups’ economic interests is a better strategy for getting elected than the “straight-talk” strategy he had before.

Resolved: Straight talk is a viable strategy for success in politics.

First, the ayes. Voters tirelessly say they want someone trustworthy. Bush scored big points on Kerry’s “flip-flop”— his convictions were unstable, he could not be trusted. Jimmy Stewart cleaning up Washington sells big movies.

Now, the nays. Politics is the art of balancing interests—“truth” is not relevant, compromise is. Except in state-threatening times of war, bi-partisanship and selflessness just gum up the works. People elect people to promote their interests. Politics is about allies, not trust; the art of the possible. If all sides hurt equally, the process worked.

I don’t think this is a no-brainer. Many businesspeople tell me that CEOs can be successful by embodying the values of trustworthiness and devotion to customer, employee and shareholder value. But, those same people say, you simply cannot do that in politics.

Would Iowans vote for someone who spoke the truth, even when it conflicted with their own sectarian best interests? Would you?
McCain answer is clear: the nays have it.

I suspect he may be right. Still, it would be most fascinating to see someone actually test the proposition someday.

(Further reading: John McCain’s biograph from Quick Overview)

Trust Tip 7: Returning Calls Unbelievably Fast

This is a simple tip with outsized impact.

How many people have not returned a call (or email) you placed to them 3 days ago? 4 days ago? 5 days ago?

Think about what those non-actions cost you. They create a low-grade, chronic, sub-conscious tension, a sense of annoyance and resentment that you can’t do anything about. And the longer it gets, the more annoying it is.

Why haven’t they called back? I know they’re in town. Don’t they realize this is sort of important? Don’t they realize I need to schedule things based on their response? Are they avoiding me? Was it something I said? What are they afraid of telling me? Why are they avoiding me? How did things get this bad? And so on.

There’s not much you can do to get people to return calls. But you have all the power in the world to return calls yourself.

How to Return Calls Fast

Don’t confuse returning calls with having answers. This is not about dropping everything, not about response time..

The intent of it sounds like this:

Joe, I just got your call. I may not get to it until Thursday, but I want you to know I got it. I’m on the case. It’s on my to-do list, it’s on my mind. I’m thinking about it in the shower in the morning, on the way home in the evening, and in between. Just wanted to let you know. You can take it off your worry list, it’s on mine.

There are add-on benefits. For one, this helps you manage your schedule.

But the biggest benefit is forcing you to confront. Sometimes people don’t return phone calls just because they’re busy, and/or not thoughtful. But frequently it’s because they don’t know what to say—or they do know what to say, and don’t want to say it.

Most of us are terrible at constructive confrontation.

But confrontation is not the enemy—disengagement is. If you commit to developing the habit of returning calls unbelievably fast, you will also be committing to facing tough issues head on, instead of dodging and avoiding them.

And that creates trust.

 

 

The Next Big Trust Scandal: Options Backdating

The scandal du jour is options backdating. Recently, it was illegal snooping by a Board Chairman. We’ve seen late-trading and front-running charges at mutual funds, payoffs and rigged bids in the insurance industry. We’ve seen over-reported oil reserves, and under-reported profits.

The mothers of all recent scandals—Worldcom and Enron—have pretty much wound down. In perhaps the longest-playing scandal, Walter Forbes, former Chairman of Cendant, was convicted of accounting fraud in 1998 in his third trial in 8 years.

So—what’s up next?

You could make a case for executive compensation.

CEO Compensation Through Time

You’ve read about the increasing gap between CEO compensation and that of the rank and file. The Economic Policy Institute says the ratio of CEO total compensation to annual earnings of a full-time minimum wage employee went from 51 in 1965 to 821 in 2005 (due in part to low increases in minimum wage, and in larger part to increases in CEO compensation).

The Institute for Policy Studies and United for a Fair Economy in 2005 says “the ratio of CEO pay to average worker pay increased from 301-to-1 in 2003 to 431-to-1 in 2004. By contrast, in 1990, the average large company CEO made just 107 times the pay of the average production worker.”

Let’s assume the general direction is true: a higher gap, not a lower one. (If you think these sources are flawed, check their methodologies and feel free to add a comment on other sources here).

Now check Gretchen Morgenson’s excellent NYTimes article on 26 November, 2006, “Peer Pressure: Inflating Executive Pay.”
Morgenson maps a cross-institutional morass of plausible deniability, heretofore obscured by the absence of disclosure requirements. Here’s how it works.

A CEO’s compensation is generally determined by a subcommittee of the Board (note the interesting dynamics that creates between Board and CEO). The Board, in turn, typically hires an external executive compensation consultant. Some of the big ones are Hewitt Associates, Towers Perrin, Hay Group, and Watson Wyatt; executive compensation is one of several lines of business for them, so visibility is a little obscure.

Most importantly, the accepted methodology is to identify “comparable companies” for purposes of comparing base CEO pay; and also for purposes of comparing performance. Note: it’s better for the CEO if you compare base pay to bigger companies, and performance to lower-performing companies. Amazingly (well, it was to me), there’s no requirement those two comparable groups be the same.

So, how do those groups differ? Dunno—they don’t have to say, and choose not to.

Finally, what company, board or compensation consultant enjoys declaring that “our policy is to have our CEO paid in the bottom half of his comparables list?" The temptation is to dodge the issue by fudging the comparison bases, and hoping no one asks. As Morgenson points out, this is Lake Wobegon on steroids—all the CEOs are above average. (Are you comfortable with the idea that there’s a 50% chance your doctor graduated in the bottom half of his or her class at med school? Think about it.)

That’s a lot of opportunities for blame-throwing and conflict-avoiding people to point fingers at others, hide behind “methodologies,” and generally obfuscate.

Do you believe it when someone says “the reason for high CEO pay is that it’s a competitive market?” I like free markets, but I’m finding this one hard to believe. I don’t think the supply side is the issue here; it’s the demand side.

Maybe that’s about to change. Beginning December 15, the SEC will require a company “to reveal which companies it uses in its peer group and to provide an extensive description of its compensation philosophy.” According to Mercer HR’s website, “the new rules allow companies to withhold specific, confidential performance criteria only if disclosing it will result in competitive harm. The SEC is expected to scrutinize this area to ensure robust disclosure in the CD&A.”

Scandal time? Consider this: SEC Chairman Chris Cox said of executive compensation, “no issue in the 72 years of the Commission’s history has generated such interest.”

More likely, it’ll be another crack in the dam. But as more data emerge, one thing will become clear yet again—the real crime is the cover-up.

CEO compensation is significant, it could make a difference if redeployed, and we don’t like such evident greed. But the even bigger issue is the cost we pay as a society when institutions are seen to have tweaked data, kept information secret, and in various ways loaded the dice—all the while claiming not to be doing so.

We are all creditors to a system based on trust; and we’re all left holding the bag when some players default on that trust. Trust betrayed is trust eroded. Let’s start letting some sunshine in.
 

Trust Your Teen, Trust Your Economy

Let’s say your 17-year old daughter wants to have a few friends over when you’re out of town overnight. Do you say:

a. No way, unless (no more than three friends, only girls, gone by 10PM, neighbor checks in, etc.) or,

b. okay, and I expect you to behave responsibly or you’ll be grounded for a month.

Which you choose may say something about how you view the issue of corporate trust and malfeasance. At the level of social trust, we broadly have two solutions to lapses in trustworthy behavior by our institutions. We can either say that:

a. left to their own devices, people will misbehave, so we must remove temptation and potential conflicts of interest; or

b. expect the best of people, grant them latitude, and impose strong sanctions against them if they do violate expectations.

(The third possibility—give them latitude, and impose weak sanctions if violated—tends to be no better social policy than it is parenting).

To put it in the broadest of terms, the first route is epitomized by Sarbanes Oxley—legislation that prevents harm by preventing temptation by preventing contact. The second route is epitomized by Elliott Spitzer (or was, while he was New York’s Attorney General)—aggressive pursuit of sanctions against those who gave in to temptation.

There are interesting anecdotal arguments in favor of each approach, and I’ll be writing about some of them in future. But one thing to note now: the sanctions route is more socially efficient, if it can be made to work. The big question is: how many social trust issues can be solved with sanctions, rather than with preventive constraints?

What do you think?

Abraham Lincoln, Thanksgiving and a Thank You Note

First, I want to thank all those who have commented on this blog in its early weeks. I appreciate, it and so do the many other readers who have yet to make the jump to commenting themselves: to whom I’d say, come on in, the water’s fine!

Maureen Rogers
Brooks Sackett
Steve Smith
David Andrew Thompson
David Maister
breakingranks
Ian Welsh
Dan Keeney
Drew Neisser
Martin Calle
Vince Kuraitis
Chui
Sharon Horstead
Karen Hudak
Mike Slater
Barbara Garabedian
Todd M. Warner
Martin Calle
Michael Fabiano
Shaula Evans
Philip McGee
Eddie Rogers

A few words about Thanksgiving.

Many of you may already know that Thanksgiving was initiated by Abraham Lincoln in 1863, in the heart of the Civil War (but not me—I didn’t know until Tom Hudak set me straight). It is worth reading Lincoln’s words in the original; few writers can improve on Lincoln.

I am hardly unique in my great admiration for Lincoln. He was not only a world-historical figure, but a freak of humanity. He burst upon the world from obscure Kentucky roots. He had four sons, 3 of whom died young, with Robert living into the 1920s—none of them leaving any descendants.

Lincoln had an astonishing capacity for empathy. You get the sense that he personally felt deeply the loss of every soldier from both sides—in the hundreds of thousands.

No doubt there were politics involved in the proclamation—maybe someone can comment on that—he was profoundly political. But he was also conscious of subordinating politics to the pursuit of broader goals. Or so it seems to me.

In any case, the holiday he started has become perhaps America’s favorite. Largely secular (or at least non-denominational), and largely non-nationalistic—Lincoln’s appeal explicitly transcends our national boundaries—it appeals to our better impulses.

It is good to aspire to an attitude of gratitude, and, thanks to Lincoln, to have a holiday that reminds us to do so.

 

 

Charles Handy vs. Web 2.0

You know eBay and Amazon. You’ve probably heard of LinkedIn. You may have heard of Opinity. You’re less likely, I suspect, to have heard of RapLeaf. Here’s how they describe what they do:

Linked-In: People search; promote your business; get a job; publish your profile; hire through referral; one-click ref checks…
Opinity: Using your Opinity profile, you can … – Bring your already established reputation to any new site you want. – Build your reputation quickly and gain trust.
Rapleaf: Rapleaf is a portable ratings system for commerce. Buyers, sellers and swappers can rate one another—thereby encouraging more trust and honesty. We hope Rapleaf can make it more profitable to be ethical.

Of the three, Linked-In seems to be the most successful—and the most thorough. Rapleaf seems to be the least successful—and the least thorough. Accident? I think not.

It’s tempting to view trust as yet another issue ripe for conquer by the web. BCG’s Philip Evans (Harvard Business Review, July August 2005, “Collaboration Rules”) talks clearly about the huge economic potential available to us in a networked world by figuring out how to scale trust.

Alex Todd writes about Trust Enablement. Todd defines trust as "acceptable uncertainty," and suggests that “the separation of information from sources of trust…makes it possible for business architects to think about trust as something that can be engineered, rather than only a behavior that social scientists can modify…Trust Enablement makes trust less dependent on personality congruence and more of an objective process.”

There’s a lot to what Evans, Todd and others have to say, and it’s exciting.

Then there’s Charles Handy, one of the great business gurus, who wrote 10 years ago that “Trust is not blind. It is unwise to trust people whom you do not know well, whom you have not observed in action over time, and who are not committed to the same goals. In practice, it is hard to know more than 50 people that well…Large organizations are not incompatible with the principle of trust, but they have to be made up of relatively constant, smaller groupings.”

Is trust scalable through social networking sites? Or is Handy right that trust is personal; or is he hopelessly out of date? Or—is this all just semantics?
The answer, of course, is it depends. And as usual, the key is on what.

Here are a few statements as a starting point:

1. the more trust has to do with motives, as opposed to information, the less you can scale or automate it;
2. the narrower the application, the more you can scale trust;
3. the less at risk, the more you can scale trust.

Rapleaf aims to be a “portable ratings system for commerce.” If everyone rates everyone, we’ll have complete transparency, hence complete trust. Right?

In contrast, Handy says, “trust needs boundaries. Unlimited trust is, in practice, unrealistic.” Or, as my friend David Krathwohl more prosaically puts it, “if you’ve got a great rating on eBay, I’ll buy a PDA from you. That doesn’t mean I want you to date my daughter.”

If Rapleaf thinks that collecting testimonials is going to scale motives, show me some stock to short. When they urge users to get friends to testify to the users’ integrity—so that the users can make more money—well, there aren’t enough breadcrumbs to find my way back to clean motives on that one.

BCG’s Evans talks about high-trust cultures within the Linux family; but the risks there are low (as Krathwohl points out, Linux programmers have day jobs), and Linux is, after all, a pretty narrow field of endeavor.

Alex Todd’s framework leverages information, not motives. Does information alone cover the trust waterfront? As Handy puts it, “organizations based on trust need [a] personal statement from their leaders. Trust is not and never can be an impersonal commodity. Trust needs touch.”

It’s tempting to reduce trust to an inter-linked system of cross-referrals. Or, to collect everyone’s history such that our past becomes a predictor of future trustworthy performance. And there’s a lot to be gained from so doing.

But there’s still that other element. Trust is more than measured risk-taking. It involves looking someone in the eye and having to decide whether or not they are telling the truth, and whether they have your best interests at heart. The risk is higher at first meeting, but it never goes away.

Betrayal typically consists not in bad risk analysis, but in the surprising exertion of free will on the part of another person—i.e. someone behaving human. Trust without the human part is prediction. But just prediction.

Trust is more than that. And that’s not just semantics.

Trust Tip 20: How to Close a Sale

For those of you in business development and sales, what would you say is the most important aspect of that process?

Here’s what the market thinks. Or, at least what Amazon’s search algorithm produces when the word “sales” is linked to a related term:

Sales 302,410
Sales price 24,969
Sales pitch 11,797
Sales meeting 5,608
Sales close 5,390
Sales leads 5,270
Sales buyer 4,756
Sales quality 4,616
Sales presentation 4,610
Sales decision 3,041
Sales qualify 691
Sales screen 597

I’ll talk another time about the issue of price. (Doncha love how sales “pitches” get mentioned nearly three times as much as “presentations?”).

Let’s focus on closing—clearly a big deal to people who must persuade others for a living. What’s the relationship of trust to closing?

Here it is:

If you stop trying to close, you’ll build trust. And you’ll close more.

And yes, that’s a paradox. So is much of life. Here’s why it works.

Closing a Sale

First, why do you want to “close” the deal? The usual answers are:
 

a. to get my sale now
b. because if they leave, they won’t come back
c. because they need that little “push” to make a decision
d. because closing uncovers objections that need to be overcome.

The first reason is selfish and will reduce trust; you deserve a “no” if that’s all you’re up to, because it’s manipulative.

The second is only a disguised version of the first.

The third infantilizes the customer; fine for the emotionally needy, not for most competent buyers.

The fourth—to identify and overcome objections—is the most serious. It comes from a belief that buying is about rational decision-making.

If they haven’t bought, so the logic goes, there must be a reason. If I can uncover the reason, I will remove the blockage to their buying. Repeated attempts to close (the ABC rule, Always Be Closing) make sense based on this logic. And it doesn’t have to be manipulative.

But it’s still not quite right. As Jeffrey Gitomer puts it, “the buying decision is made emotionally, and justified rationally.” Lawyers, consultants and accountants think this doesn’t apply to their clients, but it most often does.

When buyers buy, it isn’t because their objections have been met; it’s because they’ve gotten comfortable with the decision. And the chief road to comfort is not through a rational litany of point-counterpoint, but through a human process of being listened to, clarifying issues, and envisioning outcomes.

Which late-discussion question do you think is better?

1. Are you ready to buy now?
2. What would you like to do now?

The first question, whether you say it that way or use similar words, is what’s usually called closing. It’s ultimately all about you, the seller. And the customer knows it.

The second question, whether you say it that way or use similar words, is all about the customer. The subtext says “the timing is yours, the next steps are yours—I’m here to be of help to you. What do you want to do?”

The second question isn’t “closing.” But it closes better than the first question.

And that’s the paradox.
 

 

Advertising and Trust

When is an ad not an ad? Does the movie Borat mock Kazakhstanis, or Americans? Is Bill Clinton really good at faking sincerity? And what does all this have to do with trust? Fasten your seatbelts for this one.

Anastasia Goodstein, over at Ypulse, posts The Chinese Wall Has Come Tumbling Down. She’ s referring to the NYTimes article “Brands Produce Their Own Shows” about the trend toward what’s called branded content—variations on the the involvement of advertisers or producers in the creation of content, blurring the traditional lines between the two.

Advertisers VS. Content

Anastasia waxes nostalgic about the disappearance of a Chinese Wall between advertisers and content. As she puts it:

The journalist in me feels like there needs to be obvious disclosure for these branded entertainment products, and as paranoid as it sounds, I worry about marketers baking in some sort of subliminal messages into these entertainment products…

I just think the "Chinese Wall" provided some sort of ethical boundary between marketers/advertisers and the content itself. With it completely gone, it feels like we’re heading down a slippery slope where marketers get to call the shots about what makes the final cut.

Is it live, or is it Memorex? Are we watching the ad, or the show?

It’s tempting to view her complaint through political eyes—right wing commercial forces vs. left-wing idealistic youth; globalization vs. protesters. But it would be wrong.

The deeper issue Anastasia raises is our relationship to reality vs. fantasy, and whom we trust to manipulate it.
Take film. Take Borat.

Writing in the NYTimes, John Tierney, in The Running of the Yokels [by subscription only] finds the movie funny, but despicable. “What bothers me most about the movie is its premise: that villagers who have not embraced Western values are violently anti-Semitic, racist, homophobic and misogynistic.”

In the same publication’s film review section, Manohla Dargis says Tierney gets it exactly wrong.

"Like Borat and Bruno, another of the comic’s similarly obtuse television alter egos who made regular appearances on the shows, the joke was equally on Ali G and on the targets of his calculated ignorance…some people are definitely not in on the joke, though only because some people are too stupid and too racist to understand that the joke is on them."

Whom is Sacha Baron Cohen making fun of—the Kazakhs, or the Americans? Is it an ad, or a TV show?

Bill Clinton is renowned for his remarkable empathic ability one-on-one; even by some people who call him Slick Willy, and note his ability to “turn it on.” When he turns on the empathy, which is he—the ad or the TV show?

When a parent reads Grimm’s Fairy Tales to a child (someone in this post-PC world must still do that), don’t we ham it up, put on a ton of inflection, and generally help “pretend” the story is real? The kids know it’s fake; if we read it to them as factual history we’d scare them to death! So, are we reading an ad, or a TV show?

Being fooled is highly entertaining. TV and movies fool us for a while, for entertainment. Movies about fooling—meta-movies—like Punk’d, or Candid Camera—are doubly entertaining. As long as it’s within bounds.

It is about trust. We trusted kindly old Alan Funt not to abuse us when he fooled us; and we trust his current incarnation, Ashton Kutcher. It’s no accident that both hosts smile enormously, all the time.

When Borat confuses us, that’s high art. To get the NYTimes to war with itself, now, that’s an artistic achievement. And no harm done, as long as it stays in the art game.

Transparency and Trust

But what about life imitating art? When that border is blurred, people get really uncomfortable. Does violence in movies cause kids to act out? Does porno desensitize sex and objectify women?

Check out John Mack’s posting at the Pharma Marketing Blog, "Influencing the Dialogue: Marketers Suck at it." Mack rants about a poster to his blog whom he feels is clearly a marketing-blogger masquerading as a customer to sell drugs for his pharma client; his indignation is palpable.

Danah Boyd makes the same point about misuse of her blog, but is in a position to furthercomment on what it means for social networking.

Mack says the issue is transparency. Anastasia says much the same thing in her “Chinese Wall” construct.

It’s subtler than that. We enjoy messing with the truth. We love a movie that blurs the lines—as long as we know we’re in a theater. We love someone to fool us a bit—as long as we can trust their motives afterward. And we love being fooled about the lines between ads and marketers—as long as we either know the name of the game that is being played, or trust the person playing it.

Trust—in particular, transparency at the outer limits—gives us permission to enjoy the fantasy. Is it the ad, or the show? We love the conundrum, as long as we can trust he who poses it.

Legacies, Left Tackles and Investment Banking

Three cool books to tell you about.

Looking Back – The Power of Legacy

First is Your Leadership Legacy, by Robert M. Galford and Regina Fazio Maruca. [Disclosure: Rob was my co-author, along with David Maister, on The Trusted Advisor].

It’s built around one of those ideas that can sound fluffy and vague—until you grasp it firmly. Galford & Maruca have discovered a powerful application for the notion of looking backward from the vantage point of the future. (We called it “envisioning” in Trusted Advisor). The subject matter they apply it to is one’s own leadership.

Now, for my money, the literature on “leadership” has staked out more than its fair share of vacuity in the pantheon of business books. But this approach has power. By asking people to look back at their own careers and think of the legacy they are leaving, a lot of remarkable things happen—which the authors document. It actually gets people to think differently—no small feat.

I think the power of this simple but clean idea was tapped by Mark Twain years ago in Tom Sawyer: the vision of sitting up in the back of the church, watching an entire town deliver your eulogy. That same power was invoked by Dickens in A Christmas Carol. And yet again in Frank Capra’s cult-for-the-masses Christmas movie, It’s a Wonderful Life.

Looking backward from the future, focused on the meaning we will have left the world, focuses the mind wonderfully, and is an antidote to cynicism and short-term focus. You can’t help but think about your own legacy as you read it. Which, of course, is their point.

The Blind Side: Evolution of a Game

Second is Michael Lewis’s The Blind Side: Evolution of a Game. You may know Lewis as the author of Liar’s Poker, or as the sports-oriented author of Moneyball and Coach: Lessons on the Game of Life. It’s one of those multi-level books: it’s about football, and the evolution of the left tackle position in particular. It’ll let you second-guess John Madden in any jock argument and look like you know what you’re talking about.

But it’s also about the hard edges in our society—the enormous gaps between the various American sub-cultures—and about how hard it is to reach escape velocity from any of them.

Finally, it’s a ripping good read about the decency of some people, and the hard-won, big-yet-small gains that their efforts yielded. It reminds me of that story about the kid on the beach throwing back starfish into the ocean after a storm. An adult comes along and says, "Kid, there are millions of starfish who were beached here; it’s not going to make any difference." The kid throws back another starfish and says, "It did to that one."

The Accidental Investment Banker: Inside the Decade that Transformed Wall Street

Third is The Accidental Investment Banker: Inside the Decade that Transformed Wall Street, by Jonathan Knee. Knee was an investment banker at Goldman Sachs and Morgan Stanley in the go-go years 1998 – 2003, so he certainly had a good seat at the feast. What sets Knee apart from his fellows is the ability to be in it and yet—at least in his telling—not of it.

He does a job I’ve not seen anyone else do well—articulate the higher aspirations and social good that can come out of the role of investment banker, properly done. In this regard, it’s quite the opposite of Liar’s Poker and most expose-type books about the wild and woolly excesses of Wall Street.

Which makes the contrast all the more telling when Knee does get to talking about those excesses. The most vivid of all, to me, is his acronym IBG YBG. It’s what one investment banker would whisper to another when the most absurd of deals were getting cut, when propped up hype was about to be packaged and sold down the line to the next greatest fool.

It stands for “I’ll be gone, you’ll be gone,” and it aptly reflects the cynicism and greed that characterized the dissolution of those good intentions, especially in the later years of the boom.

And all three are about trust—trust me.

 

 

Two Dogs Sniffing: The Economics of Trust

John Newman heads a highly successful turnaround management company, focused on medium-sized companies. He’s a transplanted New Yorker, a UCLA MBA, with a CPA to boot. He lives in Fayetteville, Arkansas.

And he defines the economics of trust beautifully.

This story is taken from his website. Make sure you read the punchline at story’s end.

TWO DOGS SNIFFING

Commentary by John Harrison Newman
Northwest Arkansas Business Journal – September 16, 2002

A few years ago, we bought 160 acres of woods about 20 miles south of town. It was cheap because it had no legal access, but we had taken a risk. If we could not get a neighbor’s permission to drive through their property, we would not be able to use our land.

We approached each of several neighbors whose land bordered ours. They all had the same answer. The best way into our property was always through a different neighbor’s land. It was a polite way of saying no.

I talked to a lawyer. Yes, there was a way to obtain access by suing, but it was slow and costly. It was not a practical option. Besides, I did not want to start off by antagonizing the neighbors.

I thought, "Let’s take one last try before we give up." So, we spent some time looking at topographical maps and walking around the land. We determined that the best route into our woods was a private road owned by two brothers, Herschel and Tom Villines. They controlled access to the road with a locked gate.

I phoned each of the Villines brothers. They didn’t return my phone calls. I wrote a letter to them, asking if they would just simply meet with us, suggesting that perhaps I would sue if I could not get access otherwise. Three weeks went by, and still I had no response. Then one evening I received a call from Herschel, asking us to come down and talk with them. Finally, getting access seemed possible.

It was a warm August evening when Darla and I drove down the dirt road to Herschel Villines’ home in the mountains. Upon arrival, we were greeted by a pack of mangy but friendly dogs. They escorted us to the house, and Herschel invited us to come have a seat on his front porch. It was a large porch crammed with old junk. He led us through a maze to a rickety table, and offered us some iced tea.

Seated at the table, surrounded by old car parts, rusting appliances, and the dogs, we had a beautiful view of the wooded mountains. We sipped our tea and talked with Herschel and his brother Tom. We talked about the weather. We talked about the cows. We talked about the new highway. We talked about the chickens and the snakes.

I held my wrist under the table and peeked at my watch, discovering that we had been there for nearly two hours! Of that time, at most five minutes had been spent talking about our land.

Now, I grew up in New York, and that just isn’t how things are done back east. New Yorkers don’t waste time getting down to business. I would likely have been asked "Whaddaya want? and "What’s in it for me?" within the first minute of the conversation.

I thought to myself, "What the heck am I doing here?" The conversation seemed to be going nowhere. Nevertheless, I sat politely as we spent the next fifteen minutes sharing our expert opinions on when it would next rain.

Then Tom drawled, "If y’all ‘ll excuse me, ah gotta get back to the house. Mah wahf is holdin’ supper."

And I thought, "Oh hell. That’s it? He’s just going to leave and go eat? Not even give us an explanation on why he won’t give us access?"

Then he stood up. As he did, he reached in his pants pocket, pulled out a key, and tossed it across the table to me.

I was flabbergasted, but just smiled and said thank you.

We said our good-byes and headed back to the car. As we drove home, I was feeling excited and confused. "What was that all about!" I asked Darla.

Her reply was short: "Trust."

I thought about it a lot in the days that followed, and came to see that perhaps the whole conversation was very much about business. It was their way of getting to know us, of deciding if they could trust us, whether we would likely be good neighbors.

And today, as we read about fraudulent financial statements, when hype seems to be the norm, the business issues surrounding how you can build trust with someone are as relevant as ever. If you are just going after the quick buck, if your goal is to build the next Enron or WorldCom, then perhaps this is not for you. Long term success, though, is built on solid relationships. And they are built on trust.

And in the course of only two hours, the Villines brothers decided that, yes, they could trust us. Back east that might have taken several years.

Indeed.