Giving Prospects the Confidence to Hire You

When it comes to selling – many of us focus on our fears.

“Will they buy?”

“Are my services priced right?”

“What are they looking for?”

“Will they go with me?”

These questions inevitably lead to a dance that involves both buyer and seller, a delicate tip-toeing around the heart of the matter. We try to talk about needs, solutions, benefits, values.

But a buyer is not looking for those things alone. Above all else, a buyer is looking to feel confident that they made the right decision; that their business or needs are in the right hands.

Are you giving your prospects the CONFIDENCE to hire you?


A western journalist visiting the old Soviet Union, so the story goes, asked a worker if he was being paid well. The worker said, “It’s all pretend. We pretend to work and they pretend to pay us.”

Do you sell consulting? IT services? Accounting? Financial planning? Legal services? Then you too play a game of pretend – with your would-be clients. They pretend to care about your qualifications. You pretend to listen to their questions. You pretend to write a unique proposal. They pretend to read it. You pretend to sell. They pretend to buy.

All the while, behind the game of pretending, an unspoken and important vetting process is taking place.

For example, a company about to spend big on a CRM system, or make an investment in leadership training, or change its sales approach, will ask about the benefits of what’s being sold. The prospect will want to know the answer and they will pretend it matters most.

But what they really want to know is – will we have the confidence to sleep well at night given the choice we make?

And yet, this search for confidence – the thing that matters most – isn’t what’s actually discussed during the sales process.

Instead, prospective clients have been seduced by the trappings of “hard business.” They think “if you can’t measure it, you can’t manage it,” and they try to reduce decisions to metrics. That’s how we end up with clients wanting to know all about our qualifications – despite the fact that our qualifications were what already got us in the room in the first place.

And so, we all pretend that buying and selling is about talking. About words and numbers. About qualifications.

But it’s not. The fact is, clients make huge, complex, intangible decisions very much on the basis of gut, emotion, feeling, opinion, Kentucky windage, call it what you will.

As sales guru Jeffrey Gitomer says, people buy with the heart, and justify with the brain. It’s not about rational decisions, but about decisions rationalized.

The truth is this: people vastly prefer to buy what they need from people they feel good about. People they trust. People who they believe have their clients’ interests at heart, not just their own. People who make an effort to honestly listen to their clients. People who actually seem to care.

This goes beyond “people buy from people they like,” or “people buy from people similar to themselves.” It’s way more than schmoozing and finding out common interests.

It gets to the guts of the matter:

  • Do you actually seem to give a damn about me?
  • Do you act like you care about me?
  • Are you working your own agenda, or will you actually listen to mine?

Sales process designs won’t get you there. Metrics and CRM systems won’t get you there. Motivational speeches won’t get you there.

But two things will.

1. Genuine, Honest-to-Goodness Listening

That’s listening for real. Listening not to find out data, but to find out about the client. Listening not to make or confirm a hypothesis, but to understand another human being. Listening not to find out client needs, but to find out what makes a business and a person tick. Listening not so you get answers, but listening so that at the end of it, the other fellow feels heard. Listening not to provide great answers, but listening to earn the right to offer those answers later.

I’ve heard this called yellow-pad listening; no proposal or talking points in front of you, just a blank pad ready to take notes if necessary as issues come up. Whatever you call it, remember another old truism that is still true: People don’t care what you know until they know that you care.

2. Sample Selling

People don’t buy ice cream from verbal descriptions; they buy it from taste. Referrals may get people in the door, but samples sell them. We don’t use samples selling nearly enough when it comes to selling the intangible.

Give people a taste of what you do. Assume you’ve got the job, and start working it in the early stages. Don’t say how good you are at tax planning, grab hold of some business issues and show them how you do it — on their data.

If a voice in the back of your mind (or your boss in the front) says, “don’t give it away,” recognize that they are wrong. There is an inexhaustible supply of problems in this world. Giving away a few solutions doesn’t diminish your value — it earns you the right to solve more of those problems.

If a client shows a pattern of stealing ideas from you, quietly drop them. After all, that’s the kind of client you’d prefer your competitors to have. Place your focus instead on those clients who want relationships of mutual benefit.

* * *

Listening and sample selling. These are actions, not thoughts. Deeds, not qualifications. Results, not process designs. Most of all, they demonstrate your devotion to your client.

After all, would you rather buy from someone who says, “Trust me”? Or, from someone who shows you why you should?

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Hitting a 7-Iron from the Tee Box

This weekend I joined a dozen school buddies for an annual golf outing. Now, I took up golf late in life, which explains why I’m pretty much the worst player in the group.  At least, that’s what I tell myself.

Nobody minds much, except for me; everybody respects everyone else’s level of play. After all, that’s why handicaps exist. That said, once per outing, I will ask one good player for some advice. This time, I got some great advice from Dave.

“Charlie, your drives are too erratic. When they’re good, they’re as long as anyone’s, but much more often they end up in the woods on either side. Put away your driver club and just hit a 7-iron off the tee. You’ll give up 100 yards in distance, but you’ll always be in the fairway.”

An Insult? Or a Challenge?

As golfers know, on the face of it, that’s a bit of an insult. A 7-iron is made for much shorter shots than the driver.  Telling me to use a 7-iron from the tee is like telling a cyclist to use training wheels, or a poet to go work on rhyming. But I know Dave, and he knows me, and I knew he was just trying to challenge my thinking in a creative way. And thinking is at the heart of the matter.

All sports are about one’s mental state to some degree; but no other sport can touch golf in the attitude-to-performance linkage. How can you miss a two-foot putt? Easy – start worrying about missing it.

For most golfers (me included), the tee shot leads the list of stress-inducing moments. There are a thousand ways to think wrongly about your tee shot – and every one of them can make for a self-fulfilling prophecy. The trick is to leave your thinking behind when you finally approach the tee, and let the habit of your muscle memory take over. Over-thinking is the root of all evil in golf.

Over-thinking: a Metaphor for Life

There was no way I was actually going to hit a 7-iron from the tee – these are my buddies, and I’m not all that ego-free! But I realized Dave had given me a gift. All I had to do was envision the result of a 7-iron from the tee – and duplicate it with the driver.

Mechanically, that meant slowing down, dialing back the swing, not trying to kill the ball. Mentally, that meant feeling relaxed, staying within my comfort zone, not pushing the limits – and especially not fearing all the bad things that could happen .

The result was powerful. I gave up some distance (less than 100 yards, though) but stayed within the fairway much more often. Result, better scores.

The Tee Box of Life

How often do you invite failure – because you’re pushing the limits on a dozen variables, living in fear of missing on one of them? Does it happen in sales calls? Client progress meetings? Presentations? Performance reviews?

Maybe you should try hitting a 7-iron from the tee box. Dial back the rough edges; stay within yourself; be very clear about the core message, the core values, the core parts of the relationship. Find your swing, and learn to trust it. Be clear and simple about what you’re doing. You may not make the occasional spectacular shot; but you’ll miss a whole lot of disastrous shots, and improve your score.

Sales, Narcissism and Therapists

I recently had some back and forth emails with Richard Osborne. Dick has 30-plus years’ experience as a therapist. His credentials[1] include a PhD in Clinical Psychology from Harvard where he studied under, among others, Chris Argyris.

We covered a lot of ground, starting with the idea of narcissism, but ending up talking about sales and about change: personal change, corporate change, and the role played by leaders and coaches.

Following are some excerpts.

Sales readers: hang in there—the good stuff’s coming.

RO: I read your article in Trust Primer Vol. 10 about sales and narcissism with interest.

CHG: Good. I should have asked you before I wrote it—is there a guru of narcissism?

RO: You mean, as opposed to narcissistic gurus? OK, that’s just my cynicism showing. But, having seen one self-proclaimed Holy Man after another come and go (often in riches or scandal or both…), I admit that I’ve developed a certain skepticism towards the type.

CHG: Scandals aside, can’t a guru say anything important about narcissism?

RO: Sure. Some raise some interesting questions about it–specifically, the phenomenon of charisma (which I’ll define as interpersonal presence and power). Some who are charismatic are also narcissists — but not necessarily all.

The true charismatic knows what he or she is about and is naturally confident. That clear belief in oneself and one’s role (or mission or product, for that matter) is powerfully attractive because we all suffer from what William James called “the will to believe.” Most of us feel less than fully whole or confident. The charismatic therefore represents a level of confidence and a wholeness that we lesser beings admire and desire; they believe in their ability to lead and influence us and we are grateful to follow.

The narcissist, on the other hand, may project charismatic qualities but, at his core, is wounded and insecure. He seeks praise and/or followers to reassure and shore up his shaky self-regard. But he also tends to use these people and even to hold them in some contempt because, not really believing in his goodness or rightness, he believes he has manipulated and even fooled others into becoming his devotees and sycophants. He has a tendency to shore up his own self-regard up by devaluing others. He also is much more sensitive to — and sometimes explosively reactive to — criticism. The true charismatic is solid while the narcissist is brittle and reactive.

CHG: How many of each type are there?

RO: Well, there are few pure types in the real world. Many people have genuinely charismatic qualities — but are a bit narcissistic too (i.e. a little too focused on kudos and competition with peers and a bit too thin skinned). Politics is full of these types. Hitler and Khadafi are probably as close as you can get to pure narcissism. Bill Clinton and Elliot Spitzer are charismatic — but a little narcissistic too.

CHG: I bet most people would buy that.

RO: So, back to your article: certainly the fear of rejection is powerful — and potentially debilitating. I understand what you are getting at with your advice to avoid becoming a “narcissist” — i.e. to stop personalizing sales encounters as a thumbs up or down on one’s core worth and, instead, cultivate an attitude of genuine interest in learning more about what works and what doesn’t and why. That is, to become an observer and student of one’s own behavior and its effects on others and on the sales process.

In therapist-speak, you are reframing the issue so that sales encounters are not seen as a test of one’s sales “mojo” or basic worth, but to develop a process of study and mastery — or learning how to learn. (This idea harks back to Gregory Bateson, cybernetics, and “second order learning” which Argyris pushed in his books and classes. A variant of that line of thought is expressed in books like “The Talent Code: Greatness Isn’t Born. It’s Grown. Here’s How.” by Daniel Coyle and “Talent Is Overrated: What Really Separates World-Class Performers from Everybody Else” by Geoff Colvin which discuss and promote the concept of “deep practice” and the like).

CHG: Shrinks have their own issues with this, don’t they? Are shrinks any better at it than salespeople?

RO: Sure, it’s the same struggle. It’s a profession in which a majority of clients drop out quickly without explanation, leaving a lot of therapists puzzled and scratching their bruised egos. [Sales folks: sound familiar?] There’s a wide spectrum with therapists who build successful practices with waiting lists at one end, and those who struggle to maintain a quarter time or third time practice with constant cancels and no shows at the other.

So, back to my quip about narcissistic gurus. Many of the very successful therapists are undoubtedly charismatic. Some are also narcissistic, the most egregious ones being those who sexually exploit clients to stroke their own egos (and raise malpractice insurance premiums for the rest of us!).

CHG: How does a therapist evolve past this? Perhaps even more than a salesperson, a shrink has to get beyond the self-centered crap. How have you done it?

RO: I don’t think I’m very charismatic as a person or as a therapist. I know that there are clients who are disappointed with that. They are willing potential believers in search of a therapy guru. Temperamentally, I’m too skeptical and philosophically savvy to have a true belief in any one school or technique. I am an eclectic by default because any other position is intellectually and professionally untenable to me.

But I am not flying completely blind. What little science there is in my field has repeatedly yielded the following robust findings:

Schools and techniques account for a very small portion of therapy outcome. Instead, the biggest sources of variance are:

a. What the client brings to the party

b. The person of the therapist and his/her ability to form an effective therapeutic relationship.

CHG: OK, this is getting very cool. I believe the therapist-client relationship has a lot of parallels with the salesperson-customer relationship. So let’s make the translation. If the metaphor holds true, that would suggest that:

The methodology of sales you choose accounts for a very small portion of sales success. Instead, it would be driven a lot by the buyer’s predilections, and by the salesperson’s ability to form an effective buyer-seller relationship.

Does that make sense to you?

RO: I’m no salesperson, but yes.

CHG: OK then, the obvious question—and you can answer this from within the therapist metaphor—are therapists made, or can they only be born?

RO: I used to believe that the ability to form successful therapeutic relationships was simply something you had — or not; i.e. the innate talent that Coyne is referring to. For some, natural charisma is part of it.

But I have come to believe that wherever one is on the innate talent/charisma continuum, one can improve significantly through the sort of process that you are recommending to sales people — becoming a student of the interpersonal process.

CHG: We at Trusted Advisor Associates also believe that trustworthiness—which includes a lot of what we’re talking about here—can be learned. On the therapy side of the metaphor—what does it take to make it work?

RO: One key ingredient is, of course, getting feedback. Therapy research has produced another repeat finding: therapists are often poor judges of how their clients feel and react to them.

We believe we are being effective when we are actually missing the boat; and we often wrongly assume we have failed when clients drop out when some of those clients have actually gotten a great deal out of that limited therapeutic encounter.

In other words, we’re often simply clueless, groping in the dark because we’re not asking for feedback and using that to self-correct.

CHG: So: let’s review the bidding. Don’t be a methodology ideologue. Get over yourself. Learn how to relate to others—which can be done. And learn how to seek, and learn from, feedback.

Dick, what with insurers cramming reduced fees down your throat for everything you do in your profession–have you considered going into sales training? I have a sense you’d be good at it.

RO: Only if it includes trout-fishing on the Battenkill on Thursday afternoons.

[1] Dick’s also my brother in law, but don’t hold that against him.

Hamburgers, Confidence and Trust

It was a beautiful day in March, warm and sunny. My husband and I spent the morning kayaking on Seattle’s Lake Washington. Afterwards, we were ready for a hearty lunch. We found the perfect spot: a restaurant with sidewalk-seating in the sun. 

We settled in and placed our order for burgers and iced tea. The waiter brought us our drinks. Then we waited.

And waited.

And waited.

And waited some more…way too long.

Between the time the waiter delivered our drinks and the time he delivered our burgers, we never saw him. 

What we didn’t know was that this restaurant was a sports bar, this day was the first game of March Madness, and the local team was playing. Inside, the bar was packed. The kitchen was overwhelmed. Once the game started and we heard the fans screaming, we figured out what was going on. 

We could not find our waiter. With no way to communicate with him, we had a tough decision to make. Should we stay or walk out? We stayed and eventually had okay burgers.

This is a story of the difference between confidence and trust.

During our extended wait, once we realized how busy the kitchen and the wait staff were, we wondered if our order had even been delivered to the kitchen. We wondered how long it would take the kitchen to make our burgers. How many orders were in line ahead of us?

These questions are about confidence: we did not have confidence in the kitchen or the restaurant. There was no face attached to our lack of confidence. We lacked confidence in the process. 

During our wait, we also wondered about the waiter. Where was he? Why wasn’t he communicating with us? We didn’t even have a chance to ask him about our concerns because he just disappeared. 

These questions are about trust. We did not trust the waiter. Trust is personal. It’s about another person. 

I thought about the difference between trust and confidence when it came to my clients. What is the source of their trust and confidence in me? And since many of my clients are professional practitioners, it’s useful for them to think about how they generate trust and confidence in their clients.

Clients want to have confidence in our professional competence: a tax lawyer’s knowledge of tax law, a surgeon’s skill in the operating room, a real estate agent’s knowledge of the market, my skill as an executive coach.  

But that has nothing to do with trust.

Clients have trust in me because of my personal characteristics: the care and concern I show towards them and their needs, the degree to which I am predictable and dependable.

Why does this distinction matter? Because there are different paths we can take to increase the level of trust and the level of confidence our clients have in us. 

When we want to increase confidence, we take steps to increase our knowledge and skills and we provide clients and prospects with information about our competence (hence all the letters after my name). Competence can be increased in the classroom. 

Confidence can also be increased by delegating work to competent others. I chose my financial advisor not simply on the trust I have in him, but also because of the confidence I have in the competence of the company standing behind him. 

Trust is won or lost in personal interactions. Trust is built over time by working together, dealing with difficult decisions together, experiencing and repairing breakdowns in the relationship.

On that warm and sunny March day, we were hungry not just for burgers but for the trust and confidence required for a relaxing dining experience. Unfortunately, although the burgers came, no trust in the waiter and no confidence in the restaurant were served that day. 

© 2010 Ann Kruse. All rights reserved. 

Restoring Trust and Confidence in Business: Part II

In yesterday’s blogpost, we critiqued the performance of a CNBC-selected all-star business panel. Their assigned subject matter was “Restoring Trust in Business.” 

We said their answers were largely non-responsive, and mainly boiled down to two: jobs and tax cuts. Make that one, actually, because the panel’s preferred route to jobs appeared to be tax cuts.

Suppose someone asked you, “How should we go about restoring a decades-long decline in confidence in business and the markets?” How many of you think the obvious answer is “tax cuts?” That’s not what first occurred to us.  

Of course, it’s easy to criticize, hard to be constructive. So here’s our attempt to answer the very serious question that CNBC posed: How can trust and confidence in business and the markets be improved?

1.    Communications. Let’s start by suggesting how you should behave when facing the public: for example, if you’re invited to speak on CNBC. 

Years ago, Robert McNamara gave this advice to dealing with reporters: “Never answer the question they asked you; answer the question you wanted them to ask you.” That may or may not be good advice for politicians, but it’s 100% wrong for businesspeople that want to increase long term trust in business.

Instead, give a direct, responsive and thorough answer to the question asked. Then, if you think the question is off-point, say so directly and quickly—and resist the inclination to speechify.

How does this help build confidence in business? Because business is often seen as lacking integrity. You don’t regain integrity by spinning people; you get it by behaving with integrity. 

Let’s define integrity as being integrated, or whole; in short form, being the same person to all people at all times.  If you’re going to treat the press antagonistically, we can only assume you do the same with employees and customers. If you tell truth to one party and lie to another, you aren’t a 50% truth-teller; you’re a 100% liar. 

Role model the trustworthy leaders you want us to see—don’t emulate Sunday morning politicians doing the spin thing. (Remember, they rate even lower than you do in the confidence ratings).

2.    Leadership: Why not step out from the crowd and acknowledge that business success is dependent on the quality of goods and services you deliver and not the difference in the marginal tax rate paid by corporations or highly compensated individuals?

Are you delivering the value you promise to customers and honoring the deal you make with employees? Are you treating your employees as ends in themselves, fellow-human-citizens to be treated with dignity? Or are you treating them merely as “human capital,” evaluating them via return-on calculations that can be monetized and compared financially with other asset classes?

3.    Incomes. Here’s what perhaps the leading academic student of trust, Dr. Eric Uslaner, has to say: “[taking] steps to reduce the gap between the rich and the poor is the single biggest factor in whether societies are more or less trusting.” Another key driver, Uslaner says, is education. Education leads to greater acceptance of others, more income equality, and a lessening in corruption. All of which help business’s reputation.

We in the US like to think we live in a meritocracy. But the data say otherwise. One survey concludes, “In the U.S., 50% of a boy’s chance of climbing the ladder is the result of his father’s income. In Denmark, it’s only 15%.”

Do the few billions extra paid to top executives for beating the street justify the health care cutbacks, layoffs or pay freezes imposed on average workers? Will your executives truly put forth less effort or will you sacrifice the quality of your leadership? Will your employees’ greater purchasing power and loyalty outweigh any difference?

4.    Time. It’s time to break the back of our epidemic of short-term thinking. Don Peppers and Martha Rogers say, “The Crisis of Short-Termism is the Mother of All Problems.“ Business people need to apply a systematic focus on longer time frames across all aspects of business: Why not pay for performance over the longer term, recognizing that “long term selfish” provides an equal if not greater reward than beating the quarterly expectations? 

Are you building a one-season team or creating a dynasty? Short-termism needs to be attacked in pension fund management, securities analysis, accounting policy, and in the curriculum of MBA programs. No one supports short-termism in theory—yet so many support it in their actions. It’s time to unveil the curtains and act on principles.

5.    Strategy. For decades now business’s focus has been on Competitive Strategy. We are now living in an age that demands Collaborative Strategy. From outsourcing to global capital flows to global terrorism to environmental issues—we are integrally connected for better or worse at this point. The critical issue is no longer how to beat one’s competitor, but how to thrive in a world of inter-dependencies

Treat your customers as allies, not as guardians of their wallet or as your competitors. Treat your suppliers as part of your team, not competitors to be dealt with through sharp contracts. Treat your industry association as a force for better quality and customer relations, not as a lobbying tool to gain competitive advantage. Stop going to leadership programs on competitive advantage, and start going to ones on collaboration.   

6.    Motivation. Reduce extrinsic incentives, increase intrinsic incentives: An HBR study recently pointed out that the top motivational factor is the one rated dead last by participants in a major survey on motivation: the number one factor is progress. This is astonishingly simple and obvious: people want to succeed at their work. Yet business insists on perpetuating the carrot/stick rats-and-cheese models of behavioralism from Pavlov and Skinner.  

Why not recognize that most employees (including leadership) take their greatest rewards from achievement and recognition, and that compensation beyond what it takes to meet primary needs is about scorekeeping rather than true reward? We all have mirrors in our homes…think how good it is to look in them and feel good about what we have contributed? No one’s epitaph says, “I should’ve spent more time at the office.” Stop treating workers otherwise.

So there you have it: our answers to “How can trust and confidence be restored to business and the markets.”

But, what do you think? Is it better, or worse, than “tax cuts?”

CNBC Asks Experts How to Improve Confidence in Business: Hmmm..

On July 22, the Gallup organization released their 2010 poll on US Confidence in Institutions. As Gallup headlined it, Congress scored an all time low (for all 16 institutions ranked, not just for Congress). 

Barely beating Congress for lowest confidence ratings were, in order, HMOs (15th out of 16), Big Business (14th), organized labor (13th), and television news (12th). The Presidency, which also shows declines, still ranks 7th out of 16.

So it was fitting that CNBC (that would be in the 12th out of 16 group) put together a three part special panel discussion on “Restoring Trust in Business” (that would be in the 14th out of 16 group). The panelists included Gordon Bethune, Bill George and Myrtle Potter (representing the 14th out of 16 group), and Christie Todd Whitman (there wasn’t a category for ex-State Governors and Bush cabinet secretaries, but I’d hazard a wild guess she generally fit in).

Interestingly, there was consensus on the panel about how to restore trust in business. 

Answer: It’s the government’s fault.

How Good Shows Go Bad

Given Charlie’s blogpost of yesterday about the hazards of relying on those-who-summarize (including me), here are links directly to the show so you can make up your own mind.

The show—originally advertised (we recall) as “Restoring Trust in Business,” ended up after broadcast on CNBC’s website in three different sequences: “Leadership in Government,” “Leadership in Corporate America,” and “Leadership and Trust.” As CNBC’s John Harwood points out at the outset, the declining trends are long-term—since the 1970s, and particularly since 1994–and they apply across nearly all institutions. (See Gallup’s historical data, here.)

The four leaders invited have some fine credentials. Bethune was a revered CEO in the airline industry, where it’s very hard to be revered by anyone. George was a successful CEO, and writes on leadership. Potter was a COO at Genentech, and Whitman ran the State of NJ and the EPA. Good choices to opine about how business can regain confidence.

Give CNBC credit. Not only did they tee it up right, but nearly half the questions they asked more or less rhymed with, “how has business lost confidence?” or “how can business and the markets regain confidence,” or “what must be done for Americans to regain confidence in business?”

We would expect that the first thing we’d hear from any one of these leaders on the subject of restoring confidence in their institutions would be a straightforward acknowledgment of what was lost, and a statement of responsibility for having lost it. Is that not unreasonable to expect of distinguished leaders?

And indeed, every leader did get off at least one direct acknowledgment that business might have to improve itself—but having done the curtsey toward the question, the bulk of their comments were reserved for tax policy, government regulatory foibles, and flawed federal government policy. 

Instead, here’s what we got (we’re paraphrasing: go ahead, check our interpretation here.)

Q. If you look at the data Hartman reviewed before for us, the congressional approval rating is low. Yet contrast that with the issues that got accomplished this year; various reforms—what is it that isn’t connecting here? 

Whitman: You’ve seen a move in government away from policy to politics; everything’s partisan now. (She then proceeds to attack Nancy Pelosi).

Q. What do you think needs to be done to restore trust in business?

Potter: Business needs to take responsibility for stewardship and its own governance. We can think of examples where that didn’t happen. We also have to think carefully about how we’re paying so we can drive innovation. Innovation used to drive the world from the US, but not now.

Q. I’m interested in your view, Mr. George; you say the crisis wasn’t caused by subprime or derivatives. Wasn’t it caused by flawed leadership putting its own interests before its clients or its people?

George: No question about that; we saw flawed leadership in Enron and all the companies that blew up back in 2003, we saw it on Wall Street. Most of those leaders and their companies have gone away. But it is about leadership in government. We need to emphasize policy not bickering; we need a jobs policy. I’d like to see the President step up to a rebuild America program. 

Q. In terms of business’s relationships to government, why doesn’t it seem to be working? 

Potter: Well everyone’s feeling the crunch, but what stands out is jobs. Jobs are so critical to America feeling more confident about the country, and yet this chasm has to be closed between government and business.

Q. What is your best advice to the administration on what can be done to restore trust and confidence in business and in Wall Street? 

Whitman: Clearly we need a rigorous regulatory policy, but we need to stop this gotcha attitude of blame-throwing in congress. The BP disaster turned into a criminal investigations instead of focusing on how to fix things. Clearly there was a problem on the regulatory side as well. We need to show respect for each other.

Bethune: You have to demonstrate some performance, not talk. No one in our government ever ran a business. The administration shouldn’t have focused on health care or regulatory reform, but on jobs…business doesn’t like uncertainty.

Q.  Most people don’t expect as good a world for their kids as they had.

Whitman: The main thing is we’ve got to do is get deficit spending under control.

Q. One reason people don’t have trust in business is that, at the height of the crisis, big financial companies took big bonuses and were bailed out: what’s your take on that, Mr. George

George: Goldman didn’t pay any bonuses last year. Trust is the fuel that enables society to run….but we need policies from government that create incentives. Goldman, JPMorganChase and are rethinking compensation to have pay for performance….investing in America….lower capital gains tax. But that won’t solve this jobs crisis. We’ve got to get back to investing in America.

Q. What is your one piece of advice that would reassure people that the future is going to be better for them?

Bethune: Tax policy; articulate it, make it pro growth, pro business, put cash to work, make the future clear in order to get confidence.

You be the judge, but let us suggest a simple headline. 

When the institution that ranks 14th out of 16 shows up to talk about restoring confidence in their institution—given a decades-long decline—we ought to expect something more than a short-term political bashing of the 7th– and 16th-ranked institutions, a la the Sunday morning interview shows.

Business, heal thyself.

(At this point, you might be thinking, "Oh yeah? Think you guys could do better?"

Well, yes we do, and that’ll be tomorrow’s blogpost.  Tune in again.)

What’s the Market’s T/E Ratio Lately?

Yes, I said T/E ratio.

Not P/E, as in the ratio of price to earnings; but T/E as in the ratio of trust to earnings.

The P/E ratio of a company, industry, or market, signals many things. High P/E ratios may signal expectations of high growth, understated earnings, or low returns from alternative asset classes.

But P/E ratios also reflect levels of trust that certain things will continue to work:

• The law of gravity will not be repealed (at least not before Q4).
• The sun will set, as we anthropomorphically put it, in the west.
• Banks will still lend money to each other
• Interest rates will remain positive
• Oopsie…

P/E ratios, in other words, have a lot of co-variance with what we might call the Trust/Earnings, or T/E ratio. But while the numbers may overlap, they are not the same.

It’s one thing to have a certain level of confidence that CitiBank will work its way out of its difficulty. It’s quite another to trust that borrowers will continue to feel the same moral obligation to pay down a mortgage when 11% of borrowers are underwater. Or that they will trust their fellow man with their money in the form of government-insured deposits (interestingly, zero percent interest rates are bullish for institutional trust–it says whole lots of people find government-issue paper at zero to be safer than investing in anything).

This blog writes mostly about personal trust, not social or institutional trust. But they are related, and powerful.

Our economic and commercial world is astonishingly inter-related. If we start losing trust in the complex ways we have evolved to cooperate with strangers–banking, insurance, credit–we are all at risk.

Fortunately, we have personal, human habits, manners and customs that keep us in the habit of behaving nicely with others.

We need to make sure our institutions reflect those habits, not undermine them.

As for P/E ratios, the bad news is we are down considerably from the highs of 2002. The good news is, that was the height of the dot com silliness, and are now at the high end of average for the last 70 years.

Since no one has invented a T/E ratio (and I wouldn’t trust it if someone did), let me make a few assertions unconstrained by facts. Assess them against your own gut instincts.

The P/E ratio is much more volatile than the T/E ratio.

When the P/E ratio was in the 40s a few years ago, that was over-confidence, not over-trust. If anything, we saw the abuse of trust in commerce.

A P/E ratio now at the high end of normal might seem comforting, but I suspect that again Wall Street optimism masks not only the depth of the recession, but some erosion in the T/E as well.

A decline in the T/E is of more concern than a decline in the P/E. The world economy depends a whole lot more on us learning to trust each other—individually and collectively—than it does on interest rates.

For evidence, see the case of Japan over the last decade. Oh, you didn’t notice what happened with Japan? I rest my case.

Does Trust Drive the Dow?

Over at Room 8 , Larry Littlefield suggests that the history of bear and bull markets in the US is the history of consumers’ trust in business. That is, market forces are, at a macro-level, governed by the public’s view of business.

Littlefield walks through eras in US history—the Robber Barons, the Progressives, corporate leadership in WWII, the Great Depression, Reaganism, the dot-com boom and crash—and points out the correlation with public confidence and trust in business.

Now there’s an audacious view for you. Wish I’d thought of it.

Is it true? As with any grand scope theory, the concept of “proof” is not really applicable. The point is to make you think.

With such a sweeping thesis, there are bound to be problems of definition, and problems of cause vs. correlation. What caused what? What what is “confidence” anyway, and how does that relate to trust? And so on.

Still. At a certain macro-level, he is most assuredly right. Markets do depend, at the end of the day, on confidence. Confidence about the prospects of the future relative to the present. Confidence about the economic good that business will bring forth. Or lack thereof.

Confidence at that level is wholly dependent on the belief that things will work out, that people and institutions can be depended on to play certain roles, that their motives will be socially acceptable, that the social fabric will continue to be intact.

You could certainly call that trust.

And from that vantage point, it surely is enough to move markets, both up and down.

Trust isn’t just the stuff of personal relationships and surveys; it has real economic consequences, to societies, economies, pension funds and people. Trust is money.

But its economic currency depends on all the rest. Economic value, for all we in business like to talk about “hard” things, really does depend on mutual trust—the “softest’ of things.

Wall Street and “tough” managers would do well to remember it.