How do you know whom to trust?
Here are 3 ways I know. I'll start with the personal, because that's easiest, and move on from there:
First, I have personal experience of someone over time, or at least a number of experiences with that person, and they generally
• tell the truth, and
• honor their agreements, i.e. do what they say they’ll do when they say they’ll do it, or
• tell you if they need to change an agreement, and
• are reasonably predictable
So with friends, it’s pretty easy. I know who tells me the truth to the best of his or her ability. Yes, people make mistakes – that’s okay. But telling me what they know to be false – that’s not okay.
I know who does what he says, when he says he will. I know that Rob is always on time. I know that Michael is reliably 10 minutes late. I don’t like it, but I can deal with it, because it’s so predictable (i bring a book or some work to do while I wait). I know that Jinny has a bad habit of canceling at the very last minute, like after I’m already at the restaurant for lunch. I no longer meet her anywhere but her house or mine – because she can’t not show up at her own house, and because if she doesn’t show at mine, hey, I’ve got lots of other things to do. And frankly, we don’t see each other all that much any more.
This is how I hire contractors. I call at least 3 references and ask the references if they were happy with the contractor's work, and did the contractor do the work when they said they would, on time and on budget. If the contractor won’t give me references, I’m not interested. If the references aren’t 100%, unequivocally positive, I’m not interested. It works -- I’m generally very happy with the people I hire.
Third, an institution is regulated by, or perhaps insured by, some other institution that has a public record of telling the truth, and honoring their agreements.
This is why the SEC exists. It’s why public corporations are required to keep their books according to generally accepted accounting principles, and why those books are examined by independent auditors. It’s why the FDIC exits. All of these institutions, and many more, exist to ensure that we can trust the folks that hold our money.
What if an institution – or a lot of institutions – break our trust? This is precisely the problem now. Many of us now feel we can’t trust institutions we used to. The ‘financial crisis’ comes down to the fact that banks don’t even trust each other enough to lend to each other overnight! If they don't trust each other, whom do they trust? If they don’t trust each other, should we trust them? Well, that’s what the FDIC is for.
But after the appalling response to Hurricane Katrina and being lied into the Iraq war, to name just 2 instances, many of us don’t even trust our government. And it is the government who is supposed to be the ultimate guarantor of trust and safety.
So what we’re having is a (well-deserved) systemic crisis of trust in our institutions, which is only manifested in a financial one. The problem is that over time, we have been lied to so systematically by so many institutions that we no longer can reliably tell truth from lies, nor whom to trust. It's time to change that.
How do you resolve a crisis of trust?
Like everything else, trust starts at home. Here are a few ideas:
1. If you already have an accurate sense of what is trustworthy and what isn't, honor it. Maybe it's a feeling in your body, or some other sort of knowing.It doesn't matter how you get your information -- it only matters that you get it -- and that you trust yourself.
2. If that sense is not 100%, learn your lesson from each time your trust is breached -- and add that to your 'trust meter' (aka b**s**t detector).
3. Make sure your trust meter is on at all times. If it seems too good to be true, it is.
4. if you don't understand something, keep asking till you do. If you never do, walk away. If it doesn't make sense, walk away. (And if you can't read a balance sheet, please learn how. There's a decent article here.)
5. If you are not already the sort of person other people can trust, work very diligently to become that person and gain others' trust. Tell the truth, honor your agreements, or tell people up front when you can't. This is the single best way to improve your trust meter -- not to mention your relationships.
