INTERVIEW: The Economics of Trust – Trust is a rising tide, it lifts everyone’s boat

How do you define trust?
In very simple way we might define trust as confidence. In fact in many languages, the words trust and confidence are the same word. Another way of looking at this is to look at its opposite – the opposite of trust, distrust, is suspicion. If I don’t trust someone, I’m suspicious about their motive or their agenda, or I’m suspicious about their integrity or their track record.
But I do trust when I’ve got confidence. It’s like Jack Welsh, the CEO of GE, said “I could give you dictionary definition of trust, but you know it when you feel it.”
What you feel is confidence, as opposed to suspicion. But it’s not blind confidence or blind trust, it’s confidence that emerges out of character and competence. And it’s that combination of character and competence that enables us to have more confidence in person or in company, or in brand or in partner – that they can deliver, both because of their character but also because of their competence, their ability to perform and their track record of performing.
Where trust really works well and where you see what I call the dividends of high trust, is in companies, in organisations, in societies that have learned to earn and maintain that confidence. And they get huge advantages from moving at greater speed and at lower cost.

Your book talks about the economics of trust, are you able to elaborate on that?
The premise is that trust is not just soft, nice-to-have, social virtue. Trust is hard-edged economic driver. The basic formula for the economics of trust: when trust goes down in any relationship – in team, company, with customer or client, or for that matter in community – when trust goes down, speed goes down with it. Every­thing takes you longer to do, while cost goes up, everything costs you more. This is tax, low-trust tax. Distrust doubles the cost of doing business effectively and triples the time it takes to get things done.
Thankfully the opposite is true as well. When the trust goes up in that relationship – in that team, company, or with the customer – speed goes up with it. Everything happens faster and the cost comes down – that is dividend, high trust dividend. It really is that simple, that real and that predictable.
We also point out that trust is quantitative, it’s measurable. You can measure an improvement. Or if it’s going down, you can actually get good at moving the needle on trust and improving it. As that trust need­le moves up then you’ll find that every other measure tends to go up with it because trust is like the rising tide that lifts all boats. That’s economic and that’s exciting to take this soft topic and make it hard-edged.
It’s interesting that we often take this for granted. We ignore it and neglect it until it gets abused. We shouldn’t do that, we should become deliberate about it, explicit about this, because the very act of doing that helps us increase it.

What are the key behaviours of trust?
We have identified the 13 key behaviours that are common to high-trust people, organisations and companies around the world. [They are: talk straight, demonstrate respect, create transparency, right wrongs, show loyalty, deliver results, get better, confront reality, clarify expectations, practise accountability, listen first, keep commitments, extend trust.]
What’s important is to recognise that if you behave in these ways deliberately and explicitly it tends to build trust, especially if you build on foundation of credibility (of having character and competence as I said earlier).
But if you don’t behave in these ways, if you behave in their opposites or what I call their counterfeits (when it looks like the real thing but fails on closer inspection) then you’ll actually diminish the trust and in some cases even destroy it. The biggest challenge for most companies tends to be the counterfeit: when people spin, twist, posture, manipulate. When they technically tell the truth but they leave the wrong impression.
The number one behaviour that creates trust, according to the data, is to keep commitments. The fastest way to build trust in any new relationship is to make commitment and then keep it. Then make another commitment and keep it. Repeat that process and as you do that, you build trust and you build it fast. That’s also the fastest way you lose trust in any relationship – to make someone commitment and to have broken it. You do that twice and you may not have third time. Another of the behaviours which builds trust [as listed above] is transparency. The opposite of that is that we obscure, we cover. The counterfeit is when we operate with hidden agendas. When people operate with hidden agendas they diminish the trust, especially if the trust is already low. So open it up, become transparent, let people see through. Tell the truth in way that people can verify and validate for themselves.
The point is that you can actually learn these behaviours and you can recognise them, get good at them so it becomes second nature for you. And equally important is to recognise that the opposite of these behaviours will always destroy trust, and the danger is that counterfeits will also diminish the trust. And yet those counterfeits disguise themselves in most companies and they look like ‘that’s just the way everything is done around here’.

If you have an employee who comes from culture of mistrust into the opposite culture, but they automatically distrust their manager, what are your thoughts on combating that?
That’s reality for many people and the interesting thing is that trust is contagious. The only thing more contagious than trust is distrust. So it is all about helping people to transition and finding what we call the third alternative or the sweet spot where it’s at neither extreme. It’s not at the extreme where there’s blind trust and where you just indiscriminately trust anybody and everybody – that’s being gullible and not very smart. But nor is it at the extreme many people come from where they no longer trust anybody. As someone transitions out of that, you need to frame trust in the economic terms [we’ve discussed] and you make the creation of trust explicit and deliberate – and you explain why. You help people move along because their experience may have taught them to be careful and cautious and that’s okay.
The whole premise of smart trust, the third alternative, is that you have high propensity to trust but you also have good analysis so it’s verified trust. You start with trust and you provide the verification. It helps people transition and have an element of control. They learn to develop their own judgement, and, increasingly, that there’s dividend to trust and cost to distrust.
Too many people have never really calculated the cost, the consequences, the risks of not trusting. They’ve often said there’s risk in trusting people and yes there is, but there’s greater risk in not trusting people because of what that does to the team, to the relationship, to the culture – the huge costs that creep in. So we help them recognise this and to see the third alternative – smart trust, trust and verify but start out with trust.
And sometimes you might be in company where the company itself has had historically low trust but now new leaders are coming in and they want to rebuild the trust. These new leaders are paying tax, it’s an inheritance tax, not one they created but one they inherited and nonetheless it’s real. So they have to help rebuild trust in culture where trust has been low. So restoring trust is vital part too.

What if people can’t trust themselves?
That’s your starting place. There are five waves of trust; envisage the ripple effect metaphor where drop of water comes down and then the waves come out from there. The very first wave of trust, where it all begins, is with yourself, self-trust. Do I trust myself and do I give to others person that can trust? You start th