Harvard Business Publishing

Interesting research. Living by your word goes back to the issue of trust. Trust is at the root of building a anything strong - if you lose trust with your customers you lose business, if you have trust issues with your employees you destroy the foundation of your business.
Trust is at the center of the current financial crisis. People have lost trust in Wall Street and are pulling their money out of the stock market. The bailout is an attempt to restore trust in the stock markets and credit markets.

Marshall,

Thanks for your recent most timely and truly great articles explained in plain English. Although I have been A CEO of the Bulgarian "Bank Consolidation Company" and my signature at 1992 was worth 5 billion U.S.$, your up today know how on banking is superb to mine and reading through your articles was a practical learning experience that I enjoyed tremendously. However at least from my level of personal bias and relative incompetence, Wall Street and the stock market, which all its varieties could be perceived as a well designed Pyramid, which kept on going and functioning while some necessary order , let us say the ratio- 20/80% was taken care of. The 20% were the sharks of different calibrates, and the 80% left were the tiny fish who fed the sharks, but the sharks on their side had the responsibility to take care of their food and its quality. It is a well known fact that in the U.S. some people play on the market, sometimes betting just 20 $(bucks). Both the economy and the financial system that are intertwined and interdependent could be perceived as an altogether successful socio- economic experiment that was to dominate the world after the collapse of the Soviet Union (classified as the empire of the evil, maybe not without any reason). Unfortunately the U.S., which the late Erick From, used to state in his "Anatomy of Human Destructiveness", love to play games they can't win by definition. So when they were left without a real opponent with whom to consider, they decided to outsmart themselves, falling into the trap of pursuing the mirage of the "Limitless freedom", one of the "Creator's(GOD)" smartest traps and jokes! "Now that we don't have to take care of given necessities, we can feel free to create "New Realities",was a statement that came from one of President's G.Bush, advisor's. By assuming that the sky was the limit, anything began to seem possible! I was completely amazed by the way the world started to function! Now and then someone came up with something scary of what is ahead and Alvin Toffler did not make an exclusion. . One could be right right to feel pessimistic about eastern teachings and wisdom, since the only thing that they really offer is some sort of personal therapy to stay cool and achieve some personal comfort no matter what happens with or against our will! They don't solve objectively anything in principle outside your aura, which is the sad part of the story. But are there objective solutions entirely dependent from us or are we manipulated in a strange way by some unknown trance dental powers that are using us to conduct their own game something , that has has nothing to do with human moral, values, reasoning,etc.??? A lot of things that happen strike me as impossible for the ' human brain' with all it's limits to consciously conduct, design, invent,etc.

Christianity with all it's updates is hardly the answer, neither any other religion can deliver the 'missing link', for the time being. But life without any religion can be very dangerous:'Dostoevsky used to state, that once you assume the absence of GOD, anything no matter how disgusting becomes POSSIBLE'. Science and Politics are the main FAILURES of the 20'th Century,that heavily relied on them for solutions. So I started to get truly annoyed with our civilization as a whole entity.

Then recession started to knock on our doors more and more often until finally, the economy ran out of control and "Complexity Theory", accompanied by 'relativity', 'quantum mechanics', 'chaos', 'catastrophe theory', 'uncertainty and risks', 'industrial and natural hazards' and 'human bias', greed, kleptomania, irresponsibility,wishful thinking and total lack of long range strategic visions resulted in a frightful phenomena-'The system slipped out of any reasonable control and was left on auto -pilot mode of flight.' A bit earlier than 2002, as Marshall,maybe had sensed and realized the fact. Unfortunately it was not a bicycle to repair and no living Guru, financial genius or whatsoever could coin up an adequate remedy, but this is another story.

Naturally when so many DEVILS assemble together - HELL has to pay the BILLS!!! Yesterday our great financial wizards who can Predict-Nothing, as well as Prevent even less than anything- but only inflict Harm, told us that the Lehman Brothers had perished with dignity,leaving Meryll Lynch in a situation in which as the word goes -'We will pray forever!." If you are curious enough,see:www.mediapool.show/ ?storyid=143645, Bulgarian interpretations of the phenomena. But, take it easy-here come the 2 - Nobel Price Winners, that reassure us that the long range perspectives are very encouraging! There is no reason,'The Wise Gays" argue that IF(????) the Eastern countries manage their economies well(???), continue to educate their population as brilliantly as usual and keep open to the rest of the world(Do what ether Bush or Putin preach), they don't see any reason why we shouldn't be able to succeed in totally ruining our economy, digging for unlimited wealth under the bottom line! We also have an option to give Warren Buffet a 2billion$ dinner for some priceless advice! His 'Majesty'-the Market has to muddle out of the crisis all by himself (Cosmic consciousness), while the stability of the money flows has to be regained by a purely political Decision and Will (Now you have a clear explanation, why I am so exited about decisions, no matter clever,stupid, human or non-human).Ex: It rains because it rains.And this encompasses an understanding off all the interactions that happen between raining, evaporation, air cur renting knowledge and when it is noise ans so forth. Satisfied?- This is Wisdom: evaluated understanding! In my latest article on "The 'LEHMAN' FINANCIAL crises in the U.S.", I wrote that only 1 % of the whole population of the U.S., consisting of JEWS and WASP(White ANGLO -SAXON Protestants), are running the big financial show. This 1 %, gets more income than the rest 40% on the line. Maybe I am ,stupid but I fail to comprehend WHY the ordinary American voter has to give his vote faithfully not for his own benefit, but in favor of this 1% financial and political elite, whose interests - any possible Government of the U.S., has to defend as it's top priority delegated from the sky above "US"??! Until not long ago it was 'funnily assumed', that the limitless prosperity of this so called "ELITE" was quarantining the wellbeing of the rest 90% of the population. Suddenly it turned out that this is not the case whatsoever! Even more- when "The WISE Folks-1%," win - they are supposed to pick up everything -'The winner takes it all!'. When they loose - The Taxpayers have to pay their Bills! It is as simple as that! And we are supposed to watch this theater being played right in front of our eyes from the back seats and clap until our hands start to ache from Democracy! WOW! I forgot, that after all we all are part of an 'Organization'!
And here is a definition I truly like and am willing to share it with the rest of our great informal community.

An organization is like a tree full of monkeys, all on different limbs at different levels. Some monkeys are climbing up, some down. The monkeys on top look down and see a tree full of smiling faces. The monkeys on the bottom look up and see nothing but assholes.

I only wonder what Marshall, will respond to all my "important nonsense' ,ala "Why does water run downhill?" Interestingly enough, if one asks a pure operational scientist,'Does water run downhill because it chooses to or because it has to?" he would answer "Neither." It simply does. I find this delightful, since even most Zen Buddhists would agree with him on this point.

Marshall, Its me again. Banking is banking,but where do you see the place of banking supervision? There is an essential question here begging for an answer: If some of the people involved in the banking system have made deals, operations,etc., who have turned out to be losing their client's money,since the combinatorics failed: Isn't it ' Fair' for the ones that lost their money because of their faith in the banking institutions to claim back the money commissions they paid for the ' successful' banking operations in which they were cheated in? Lastly no matter of the "Virtual specifics of most financial operations" in dealing with plain paper, instead of money in the classical sense of the world: Where after all did the real money that was lost vanish? I am asking these questions, because of the interdependency of everything created by out of our "Great Brains",since now in this financial environment , one can loose money, from cyber -crimes occurring out of falsely manipulated information(The losses of Apple for illustration),etc. I am far from thinking that this is the end of the world but the most important thing now is to keep our heads clear and cool, as to mobilize and pull ourselves out of a very dramatic situation facing mankind. In this collapse of prices where one can purchase an immense variety of property, who do you perceive as the potential winners , ala the swiss bankers after the great depression in the 1930's ?

Marshall,, One last question. The team I work with was claiming that !,U.S.,$ does not exceed the covered cost of 5 cents. So in all the speculations that were realized, was a conscious cheating and trading with useless papers, not the real assets that are liquid , ,totally neglecting the interdependency of different industries, hoping in the acceleration for a future income never to be born- the result being what ironically is understood by scientific research: A research where the costs are real but the final results is image nary! Now after all this occurred it is the turn of the European currency to get hurt overpricing it in the near future to come. I am saying this that Western Europe+allies is the most stable and reliable economy left,that could be predicted,compared even to Russia and China,that remain essentially unpredictable. Am I missing something? Marshall you are the only great person , who has given me personal feedback on this blog that I enjoy and constantly learn new things, as well as old well redressed. I hope you will not turn me down this time also.

Marshall,

Thanks for your recent most timely and truly great articles explained in plain English. Although I have been A CEO of the Bulgarian "Bank Consolidation Company" and my signature at 1992 was worth 5 billion U.S.$, your up today know how on banking is superb to mine and reading through your articles was a practical learning experience that I enjoyed tremendously. However at least from my level of personal bias and relative incompetence, Wall Street and the stock market, which all its varieties could be perceived as a well designed Pyramid, which kept on going and functioning while some necessary order , let us say the ratio- 20/80% was taken care of. The 20% were the sharks of different calibrates, and the 80% left were the tiny fish who fed the sharks, but the sharks on their side had the responsibility to take care of their food and its quality. It is a well known fact that in the U.S. some people play on the market, sometimes betting just 20 $(bucks). Both the economy and the financial system that are intertwined and interdependent could be perceived as an altogether successful socio- economic experiment that was to dominate the world after the collapse of the Soviet Union (classified as the empire of the evil, maybe not without any reason). Unfortunately the U.S., which the late Erick From, used to state in his "Anatomy of Human Destructiveness", love to play games they can't win by definition. So when they were left without a real opponent with whom to consider, they decided to outsmart themselves, falling into the trap of pursuing the mirage of the "Limitless freedom", one of the "Creator's(GOD)" smartest traps and jokes! "Now that we don't have to take care of given necessities, we can feel free to create "New Realities",was a statement that came from one of President's G.Bush, advisor's. By assuming that the sky was the limit, anything began to seem possible! I was completely amazed by the way the world started to function! Now and then someone came up with something scary of what is ahead and Alvin Toffler did not make an exclusion. . One could be right right to feel pessimistic about eastern teachings and wisdom, since the only thing that they really offer is some sort of personal therapy to stay cool and achieve some personal comfort no matter what happens with or against our will! They don't solve objectively anything in principle outside your aura, which is the sad part of the story. But are there objective solutions entirely dependent from us or are we manipulated in a strange way by some unknown trance dental powers that are using us to conduct their own game something , that has has nothing to do with human moral, values, reasoning,etc.??? A lot of things that happen strike me as impossible for the ' human brain' with all it's limits to consciously conduct, design, invent,etc.

Christianity with all it's updates is hardly the answer, neither any other religion can deliver the 'missing link', for the time being. But life without any religion can be very dangerous:'Dostoevsky used to state, that once you assume the absence of GOD, anything no matter how disgusting becomes POSSIBLE'. Science and Politics are the main FAILURES of the 20'th Century,that heavily relied on them for solutions. So I started to get truly annoyed with our civilization as a whole entity.

Then recession started to knock on our doors more and more often until finally, the economy ran out of control and "Complexity Theory", accompanied by 'relativity', 'quantum mechanics', 'chaos', 'catastrophe theory', 'uncertainty and risks', 'industrial and natural hazards' and 'human bias', greed, kleptomania, irresponsibility,wishful thinking and total lack of long range strategic visions resulted in a frightful phenomena-'The system slipped out of any reasonable control and was left on auto -pilot mode of flight.' A bit earlier than 2002, as Marshall,maybe had sensed and realized the fact. Unfortunately it was not a bicycle to repair and no living Guru, financial genius or whatsoever could coin up an adequate remedy, but this is another story.

Naturally when so many DEVILS assemble together - HELL has to pay the BILLS!!! Yesterday our great financial wizards who can Predict-Nothing, as well as Prevent even less than anything- but only inflict Harm, told us that the Lehman Brothers had perished with dignity,leaving Meryll Lynch in a situation in which as the word goes -'We will pray forever!." If you are curious enough,see:www.mediapool.show/ ?storyid=143645, Bulgarian interpretations of the phenomena. But, take it easy-here come the 2 - Nobel Price Winners, that reassure us that the long range perspectives are very encouraging! There is no reason,'The Wise Gays" argue that IF(????) the Eastern countries manage their economies well(???), continue to educate their population as brilliantly as usual and keep open to the rest of the world(Do what ether Bush or Putin preach), they don't see any reason why we shouldn't be able to succeed in totally ruining our economy, digging for unlimited wealth under the bottom line! We also have an option to give Warren Buffet a 2billion$ dinner for some priceless advice! His 'Majesty'-the Market has to muddle out of the crisis all by himself (Cosmic consciousness), while the stability of the money flows has to be regained by a purely political Decision and Will (Now you have a clear explanation, why I am so exited about decisions, no matter clever,stupid, human or non-human).Ex: It rains because it rains.And this encompasses an understanding off all the interactions that happen between raining, evaporation, air cur renting knowledge and when it is noise ans so forth. Satisfied?- This is Wisdom: evaluated understanding! In my latest article on "The 'LEHMAN' FINANCIAL crises in the U.S.", I wrote that only 1 % of the whole population of the U.S., consisting of JEWS and WASP(White ANGLO -SAXON Protestants), are running the big financial show. This 1 %, gets more income than the rest 40% on the line. Maybe I am ,stupid but I fail to comprehend WHY the ordinary American voter has to give his vote faithfully not for his own benefit, but in favor of this 1% financial and political elite, whose interests - any possible Government of the U.S., has to defend as it's top priority delegated from the sky above "US"??! Until not long ago it was 'funnily assumed', that the limitless prosperity of this so called "ELITE" was quarantining the wellbeing of the rest 90% of the population. Suddenly it turned out that this is not the case whatsoever! Even more- when "The WISE Folks-1%," win - they are supposed to pick up everything -'The winner takes it all!'. When they loose - The Taxpayers have to pay their Bills! It is as simple as that! And we are supposed to watch this theater being played right in front of our eyes from the back seats and clap until our hands start to ache from Democracy! WOW! I forgot, that after all we all are part of an 'Organization'!
And here is a definition I truly like and am willing to share it with the rest of our great informal community.

An organization is like a tree full of monkeys, all on different limbs at different levels. Some monkeys are climbing up, some down. The monkeys on top look down and see a tree full of smiling faces. The monkeys on the bottom look up and see nothing but assholes.

I only wonder what Marshall, will respond to all my "important nonsense' ,ala "Why does water run downhill?" Interestingly enough, if one asks a pure operational scientist,'Does water run downhill because it chooses to or because it has to?" he would answer "Neither." It simply does. I find this delightful, since even most Zen Buddhists would agree with him on this point.

Marshall, Its me again. Banking is banking,but where do you see the place of banking supervision? There is an essential question here begging for an answer: If some of the people involved in the banking system have made deals, operations,etc., who have turned out to be losing their client's money,since the combinatorics failed: Isn't it ' Fair' for the ones that lost their money because of their faith in the banking institutions to claim back the money commissions they paid for the ' successful' banking operations in which they were cheated in? Lastly no matter of the "Virtual specifics of most financial operations" in dealing with plain paper, instead of money in the classical sense of the world: Where after all did the real money that was lost vanish? I am asking these questions, because of the interdependency of everything created by out of our "Great Brains",since now in this financial environment , one can loose money, from cyber -crimes occurring out of falsely manipulated information(The losses of Apple for illustration),etc. I am far from thinking that this is the end of the world but the most important thing now is to keep our heads clear and cool, as to mobilize and pull ourselves out of a very dramatic situation facing mankind. In this collapse of prices where one can purchase an immense variety of property, who do you perceive as the potential winners , ala the swiss bankers after the great depression in the 1930's ?

Marshall,, One last question. The team I work with was claiming that !,U.S.,$ does not exceed the covered cost of 5 cents. So in all the speculations that were realized, was a conscious cheating and trading with useless papers, not the real assets that are liquid , ,totally neglecting the interdependency of different industries, hoping in the acceleration for a future income never to be born- the result being what ironically is understood by scientific research: A research where the costs are real but the final results is image nary! Now after all this occurred it is the turn of the European currency to get hurt overpricing it in the near future to come. I am saying this that Western Europe+allies is the most stable and reliable economy left,that could be predicted,compared even to Russia and China,that remain essentially unpredictable. Am I missing something? Marshall you are the only great person , who has given me personal feedback on this blog that I enjoy and constantly learn new things, as well as old well redressed. I hope you will not turn me down this time also.

Ciprian-I agree with you! Trust is a critical, root issue today.
Dr. Yanakiev-Thank you for sharing your thoughts! Tony's thoughts about cheating come to mind... As he said in the interview, "Even if cheating is not more prevalent, the fact that people think it is makes us vulnerable to a self-fulfilling prophesy."

As an investigator of fraud for close to 15 years it is amazing to me to see people and companies take shortcuts for short term profits. What many people and companies fail to realize is that your reputation is your most valuable commodity. It is what creates your long term value. Your reputation creates the trust others have in you. Your integrity is the fuel for your reputation. Without integrity, what do you have?

What I have seen consistently in my investigators is that fraudsters never set out to perpetrate a major fraud but rather rationalized individual acts that created a slippery slope of unethical behavior. This behavior, in my view, was rampant on wall street, even before the subprime crisis. This is not only a credit crisis but a leadership crisis.

John-I agree. We do have a major crisis on our hands. I do believe also that it's time to pull together, buckle down, and work our way through it.

Thank you Marshall for bringing a welcome discussion. I have particularly liked the concept of " Integrity Dividend" here and would like to know more about them.
With various companies adopting various measures such as Sarbanes Oxley, Non-executive directors, DJSI Indexes and other sustainability practices in the past - in my humble opinion and Integrity Dividend appears futuristic and it would be great if this gets more visibility thru research papers.
Thanks again.

Great piece and comments that follow it.
We started a group this past month called Bellingham Business Integrity Group because we were finding how easy it is to move from what we know is right to what is the "standard practice" of our chosen field. It seems as I get busier, I want to spend less time talking with family at the dinner table about my work. It is easy to begin to write off talking about the challenging decisions by saying "they wouldn't understand" but the reality is that sometimes the people closest to us...that are not in the thick of it DO UNDERSTAND better than we. My wife's question, "Isn't that lying?" jolts me back from trying to keep a "positive"..more positive spin on a business venture than I should. And certainly everything isn't simple; life is complex. But a good friend of mine always reminds me, "would you want those decisions to be put on a billboard, would you want your children to know that choice". In the end as much as we try to compartmentalize our lives we are whole people and we need to live a life that we can be proud of, warts and all.

Dear Marshall,

Excellent survey with sound results that prove that the dividend factor is real. Shooting straight is the only way for doing business at the speed of trust and guarantee sustainable results. With the current world wide crisis, cheating in business deals might come to an implosion if we take the opportunity to learn from it on a deeper level. It could be a wake-up call to see the "get rich quick" as a fast food fantasy instead of an American Dream. The implications for society would be huge...

Jay-You're very welcome. Thank you for your comments.
Otto-Well said. Thank you!

Dear Dr. Michael,
Thank you for your response. Upon reflection, I am not a big believer in the 'conspiracty theory'. In most a cases I don't believe that a few clever, manipulative people come up with successful schemes to control things. From my experience, life is much more chaotic - with leaders being humans who, like all of us, make mistakes. Many of the mistakes that led to our current problem were made by 'mathematical genius' models that were based upon one invalid assumption - what never has happened never will happen. When a 'perfect storm' of events occured this assumption proved to be invalid - and things began to fall apart.

Excellent connection between the slippery slope of dishonesty and trust. It brings to mind The Service Profit Chain (Heskett, Schleshinger and Sasser) and the link between employee satisfaction, customer satisfaction, customer loyalty and ultimately, profitability. I contend that the underpinning of loyalty at each link is TRUST. In their research, profitability for apostles (highly satisfied, highly loyal customers) was 6 times greater than profits of average customers (mercenaries), even within the same firm.

Also, I couldn't agree more with Dr. Yanaviev about our callous, insensitivity as a society to corporate theft. Indeed,without a moral compass, based on the God's Word, we are left to moral relativism.

Marshall,

Good stuff to be sure. As someone whose life-work is about trust, I resonate with what you've said here--and I'd like to add one wrinkle to it.

First, the link between trust and integrity is powerful, regardless of how one defines them (defining those two terms turns out to be somewhat complex, and even circular, though still meaningful).

I like to think of trustworthiness as being comprised of credibility, reliability, intimacy (a sense of being safe for another), and a low level of self-orientation. The latter is the most powerful. In simple terms, if I sense that you actually care about me, then I trust you. If sense you are focused on yourself--whether selfishly or just neurotically in some self-absorbed fashion--then I sense you care only about yourself, and I do no trust you.

"Integrity" cuts across several of those: am I reliable? Can you believe me when I say I'll do something? Do I have a commitment to a goal higher than myself (e.g. a sense of duty or honor?).

Now for the wrinkle. There is absolutely no doubt the trust "dividend" is real. The question I'd like to remind us of, however, is--therefore, what?

If one is convinced by empirical data showing a trust "dividend," and thereby sets out to be trusted in order to earn the profitability associated with the dividend--well, he is faking it. He is insincere; he is self-contradictory because his motives are self-oriented, and he has no honor or cause beyond his own self-aggrandizement.

It can be a slippery slope to talk about the trust "dividend" if we use it in order to justify behaving with integrity, or creating trust.

Trust is essentially--at its root--paradoxical. If you try to fake it, you will lose it. If you try to be trusted because it is profitable, you will not be trusted. If you set out to make money by following the path of integrity, you will accomplish neither.

In the western business world, we are all about rational, deductive, causal, linear thinking. We like to break things into pieces, assign metrics to them, and then link them up to behavioral motivational systems (aka "measurement and rewards"). If we apply this kind of thinking to integrity and trust, we destroy them. (Imagine the absurdity of incenting people to behave unselfishly by rewarding them with quarterly bonuses).

I'm not saying anyone is advocating this; I'm just reminding us that trust and integrity are and must be their own reward. If you pursue them this way, then trust dividends and profitability are themselves spun off. But as byproducts, not as goals.

I like to say this notion of trust is where Buddhism meets capitalism. It is not just a Beatle song, or a mantra; it is also a business model. But only if we keep the paradox intact.

Mark-Thank you for commenting. It is great food for thought!
Charles-Thank you for this wrinkle. I agree with you--trust and integrity are their own reward.

Hi Marshall, time has made this blog entry more relevant than ever. My business partner Stephen M R Covey and I had the privilege to attend the "Summer Davos" in Tianjin China in September 2008. At the close of the World Economic Forum we participated in a general table discussion on the topic of the top challenges facing organizations in the coming year. Each table of the 2000 plus participants identified one issue and then using keypad voting every one voted to force rank the top issues (now keep in mind this was taking place the weekend that the US congress and Senate were working on a rescue program). We were all surprised that the global financial crisis was voted #2. The #1 challenge was a crisis of Trust and Confidence. The consensus was that the impact of the financial crisis is exasperated as trust declines. The financial crisis at is root is a trust crisis. Especially because it involves credit and everyone is afraid to part with their cash and are rightfully reluctant to risk because they do not know who they can trust given the downfall of several hundred year old institutions. Think about it—credit is trust and trust is credit.