The Truth About Trust

New Revelations About Trust

Whether to trust or not trust someone is a recurring dilemma in our lives. One of the fundamental lessons of The Truth About Trust, a new book from psychologist and researcher David DeSteno, is that there are no easy answers. One might think that the integrity of another person might be a deciding factor, but what about competence? We are obviously only going to trust a doctor if we feel he or she has both. And how do we judge such factors? Research shows, DeSteno writes, that we are not necessarily very good at judging the integrity of others.

The Unexpected Factor

One of the earliest of the many academic experiments that pack this book reveals the surprising complexity of why we might trust people. The experiment was designed to show whether someone trusts a person they are partnered with. The results showed, not surprisingly, that when the partner had previously helped the other person — by recovering lost documents on a computer, for example — the other person was more likely to trust the partner. This result falls into the easy assumptions one might make about trust: The Good Samaritan partner, after all, demonstrated his integrity. However, the results also showed that grateful participants also trust their partners more even if the partners were not the ones who helped them. In other words, simply being in a state of gratefulness — that someone had come to your rescue — will make you more ready to trust people… anyone.

Opening Insights

The Truth About Trust reveals the full complexity of trust, which encompasses biological instincts, societal guidelines, unconscious emotions, conscious calculations of self-interest and more. DeSteno’s crystal-clear writing in explaining the research and its implications makes this a fascinating read, helped along by the short lists at the end of each chapter that summarize the learnings of the chapter. For example, he brings his first chapter into focus with these insights:

1. The competing elements in trustworthiness are not good and evil, but short and long term. Being untrustworthy can bring short-term benefits but long-term pain, and the choice is not easy.

2. Reputation is overrated: Everyone cheats.

3. Trusting others is always better on average, which doesn’t mean a whole lot if you lose your life savings to a con man.

4. Competence is as important as integrity.

5. If you think you can trust yourself, think again.

Rules for The Trust Machinery

Every chapter is rich in detailed research and revealing insights that, in the end, help us understand what DeSteno calls our “trust machinery.” To effectively operate this trust machinery requires following some important rules. First, he writes, “trust is risky, but necessary, useful and even powerful.” Our minds are constantly weighing the risks and benefits of trustworthiness, although DeSteno emphasizes that our ethical principles may sometimes require us to override our instincts.

The second rule is that we must remember that trust permeates every area of our life from the moment we are born. It’s not just about the big contract or the wedding vow. A third rule is that reputation is situational, meaning that past behavior is not a good measure of trustworthiness. Rule number four is to pay attention to your intuitions. Don’t follow them blindly, DeSteno writes, but don’t ignore them in favor of simplistic and misleading signals (e.g., the averted gaze).

A fifth rule is to allow some “bumps in the road” — to keep a trusting relationship alive even though there might have been a slip, perhaps unintentional, in trustworthiness. Finally, DeSteno warns that helicopter parents who try to shield children from all feelings of shame or guilt may in fact be hurting their ability to trust in the long run. There are inevitably, after all, success and failures in the journey.

With every chapter offering new revelations about trust — from the complexity in children’s calculations of trustworthiness to the rigorously tested and confirmed conclusion that upper-class people are to be trusted less — this brilliant addition to the trust literature is almost an anomaly: a deeply researched, learned treatise that reads like the best of novels, keeping us wondering what is going to happen next.

Jeff Bezos and the Age of Amazon

THE EVERYTHING STORE

Jeff Bezos’ Dream Come True

While the face may be somewhat familiar and everyone knows his company well, Amazon founder Jeff Bezos has not enjoyed the iconic status of a Bill Gates or the ubiquitous (at least in business literature) Steve Jobs. And yet the Amazon story, as told in a new book from Bloomberg BusinessWeek writer Brad Stone called The Everything Store, reflects foresight, courage, vision, hard work and innovation that matches the story of any other major Internet or Information Age startup.

The company was started in a garage, although it stayed in the garage only for about three months. And it was not fresh, just-out-of-school whiz kids who started the company but a Wall Street veteran who decided that he, rather than the hedge fund company he worked for, should control his dream: to sell books over the Internet.

Bezos’ New York employer, a technology-driven hedge fund firm called D. E. Shaw, had already invested in several Internet ventures, and it would have been ready to finance an online retailer. But Stone describes how Bezos’ growing desire to strike out on his own was confirmed by his reading of the bestseller Remains of the Day — a brilliantly subtle but ultimately devastating novel of regret.

Much of the outline of the Amazon story is well-known, from its first focus on books and then a few other categories (e.g., movies and toys) to its current status as the behemoth of online retailing for just about any product, a giant in the e-reader space, and more recently, a major player in cloud computing with Amazon Web Services. Today, the company is headquartered in a campus of a dozen buildings and reached $61 billion in sales in 2012. Most people watched as new initiatives came online — Search Inside This Book, Super Saver Shipping and, more recently, Amazon Prime are three examples — and quickly became expected features. In fact, it is almost surprising to learn that Amazon is only 18 years old. The first book ordered on Amazon was Fluid Concepts and Creative Analogies by Douglas Hofstadter; the date was April 3, 1995. The buyer was a former colleague of Shel Kaphan, a founding employee of Amazon.

The Stories Behind the Story

Although the overall plot of the story might be well known, The Everything Store is filled with the unknown stories and the vital but often anonymous people who made the Amazon success possible. Kaphan is an example. A veteran programmer when he was hired, Kaphan, who Stone calls Amazon’s “primary technical steward,” was responsible for turning the dream into a functional reality. Promised that he could stay with the company for as long as he wanted, Kaphan lasted five years before, as described by Stone, he was made less than welcome by Bezos.

Bezos, of course, is the star of the story. The portrait offered by Stone is of a complex, driven, hands-on, creative entrepreneur, which is no less than expected. It seems that there is an archetype for the successful entrepreneur and one that seems to run counter to the generally accepted view that respectful, team-oriented leadership works best.

According to Stone, one mention of work-life balance in a job interview at Amazon during the early growth years would kill your chances. Bezos, however, has had some formidable sparring partners, including Barnes & Noble and the New York publishers, not to mention the challenge of a dot-com bust, all of which would have conquered a less confident — and visionary — opponent.

The Everything Store is a fascinating exploration of a unique company and its equally unique founder.

Strategies for Building Your Company’s Most Valuable Asset

TRUST INC.

Winning Back the Public’s Trust in Business

The rise and fall of Aaron Beam, the former CFO of heath care giant HealthSouth who served prison time for accounting fraud, might not be as well known as the legendary wrongdoing of Enron’s Jeffrey Skilling or WorldCom’s Bernard Ebbers. Yet his story – helping company co-founder Richard Scrushy build it up into a multi-million dollar corporation, then “cooking the books” so that he and Scrushy, whose wealth was based on the stock value of the company, could continue raking in the millions – is typical of the ongoing scandals of the past two decades that have destroyed much of the public’s trust in business. Today, corporations are refocused on regaining the trust of stakeholders and the general public, with the help of corporate organizational trust consultants and thought leaders such as Barbara Brooks Kimmel, the editor of Trust Inc.: Strategies for Building Your Company’s Most Valuable Asset. Kimmel is Executive Director of Trust Across America-Trust Around the World (TAA-TAW).

In Trust Inc., Kimmel has gathered more than 30 other consultants, authors and academics to explore the many facets of this subject. The contributing chapters cover a wide variety of topics, from how a village in Africa exemplifies the power and potential of economic trust, to the emotional components of trust, to the importance of moving from corporate social responsibility to a more strategic and committed corporate social innovation. There are a number of to-do lists and guidelines that reinforce the messages of the contributors.

Randy Conley of the Ken Blanchard Companies, for example, shares the organization’s ABCD Trust Model. Specifically, leaders who want to be trustworthy must be:

Able. People will trust leaders with experience and expertise but also want to see results.

Believable. Trustworthy leaders demonstrate integrity, treat people fairly, and always walk the talk.

Connected. This means taking a sincere interest in people and being willing to be openly sharing information about themselves and the company.

Dependable. People must know that their leaders are going to do what they say they will and follow through on their commitments.

Contributors Bob Vanourek, a former CEO, and Gregg Vanourek, a professor at the Stockholm School of Entrepreneurship, describe the trust responsibilities of all the stewards of a company, including CEOs who must hire and promote trustworthy officers, develop processes to monitor trustworthy behavior, lead the board and senior management on the development of shared purpose, values and vision, get rid of toxic employees, and keep their ego under control.

The Inspiration

Many of the stories in Trust Inc. emphasize the role that empathy plays in building trust. Patricia Aburdene, co-author of the bestseller Megatrends 2000, tells the story of Greg Merten, former vice-president of Hewlett Packard who managed HP’s multi-billion dollar inkjet business. Merten attributes his success to the inspiration of his son, Scott, who died tragically at age 16. Merten was once a relentless, no-holds-barred, results-driven executive. Scott, Merton told Aburdene, was “a real people person” whose example “inspired me to get better at relationships.” He started blocking off a full day monthly for his staff to meet and focus on relationships.

In her contribution, consultant Linda Locke notes that trust is about emotions and that an exclusively rational strategy is not the best way to restore trust.

Trust Inc. is a valuable and diverse overview of a topic that should be on the front burner of every company hoping to rebuild the public’s trust in business.

The Defining Skill that Transforms Managers into Leaders

In 2001 the business world was rocked by news of the Enron scandal. Over the following decade many other company scandals have come to light, further eroding trust within companies and about big business in general.

In response to this flurry of scandals, business writers began to publish articles and books about the issue of trust in the workplace and between companies. Among those authors was Stephen M. R. Covey, son of the late Stephen R. Covey. In 2006 he released The Speed of Trust, focusing on how trust between individuals and companies can speed up the way we do business. This was followed up in 2012 by Smart Trust, with a focus on how trust affects our careers.

Now in late 2013 Covey has released an extensive update to Smart Trust, with a focus on the importance of trust in developing strong leaders. With this latest update, we’ve invited Stephen back to bring us up to date on his latest findings in this important area of trust in the workplace.

Please join us on December 12th for The Defining Skill that Transforms Managers into Leaders with Stephen M. R. Covey. With a whole new generation of workers moving up through the ranks, it’s more important than ever to make sure that trust practices are part of their training.

McKinsey’s Secret Influence on American Business

THE FIRM

A RARE LOOK INTO MCKINSEY’S HISTORY

In the world of management consulting, McKinsey sits at the top of the mountain. Yes, there are others, notably Boston Consultant Group (BCG) as it is inevitably called in the trade), but McKinsey remains the marquee firm of the industry.

Not surprisingly, McKinsey consultants don’t come cheap. But are they worth it? And in an ever-changing world of new challenges and pressures and paradigms – a world in which entire industries can disappear, iconic firms can be pushed aside by impertinent upstarts, and management and leadership norms and guiding theories can travel from pedestal to trashcan in just a few years or quicker – why does an intellectual capital-based firm that came to dominance in the 1920s and 1930s still retain its dominant position? These are some of the questions that financial journalist Duff McDonald attempts to answer in The Firm, his exhaustive study of McKinsey and Company.

Merlin or Rasputin?

The story that emerges from these pages is neither a story of a wise Merlin nor a devious and destructive Rasputin, but a mix of both. On the Rasputin side of the ledger is the barely remembered fact that McKinsey was the consultant of record for Enron and General Motors, the first a criminal enterprise, the second a dominant behemoth that lost its long-held world leader position in its industry. McKinsey also accompanied the once well-regarded Swissair airline into bankruptcy and, according to court records, tutored Allstate in avoiding payment on claims. And then there’s the head-shaking story of the 1950s government contract in which the government official on one side of the table and the McKinsey consultant on the other side of the table were one and the same man.

Such stories, however, would have horrified the eponymous founder of the firm. In the mid-1920s (the founding date of the firm is 1924 or 1925, according to different sources), James McKinsey was an academic with a long list of degrees, including law, philosophy, and accounting degrees, who had written several very dry tomes on the nitty gritty of accounting.

McKinsey’s brilliant insight, however, was to see accounting not just as bookkeeping, but also as a strategic tool. Although blindingly obvious today, at the time, McDonald notes, “the idea of planning, directing, controlling and improvement decision making by means of regular and rigorous report of company results was novel.” McKinsey turned these ideas into what he called the General Survey Outline, a 30-page system, McDonald writes, “for understanding a company in its entirety, from finances to organization to competitive positioning.” The GSO would be the core intellectual foundation of the firm, helping McKinsey consultants to completely analyze the workings of the client company and thus be able to isolate and develop solutions to their specific problems. While the Rasputins grabbed the headlines, the Merlins went steadily about their work.

Luck and Ambition

McKinsey launched his firm on its journey, but it is managing partner Marvin Bower who built the firm up through much of the 20th century and is responsible for its leadership position in the field. It is Bower who developed the firm’s culture, including the concept of value billing: simply charging its clients what it thinks its services are worth without bothering with the mundane issue of hours. And it is Bower who expanded into government and across the globe.

There have been challenges and setbacks – from scandals to serious competitive attacks from the likes of Boston Consulting Group – but in 2011, it is still McKinsey that presidential candidate Mitt Romney chose to invoke when asked how he would reduce the size of government. “I would probably bring in McKinsey,” said the former head of, ironically, an offshoot of McKinsey competitor Bain and Company.

The Firm is a good overview of the history of the company, which benefitted not only from the ambition of its leaders and hard work of its consultants but also the luck of its timing. A little more detail on some of the successful advice given to clients would have been welcomed, but that is probably a function of the company’s secrecy. The culture of the company, McDonald explains, is to let the client get all the credit – which, in the long run, also lets “the firm” escape the blame.