Stig Brodersen  04:40

Yeah, we’d like to talk about the title of the book, right? So speed and trust and how they go hand in hand. I think when you understand what he’s meaning, I think you will probably look at your business and your organization, and your leader differently. I like this example and this is not for me to say whether or not it’s the right decision or the wrong decision, but he’s talking about trust in airports. And he’s saying that prior to 9/11, he might go to the airport and be there, like 30 minutes before the takeoff. But now with domestic flights, you might be there 90 minutes before and two to three hours for international. And it’s because there’s another type of trust. And when trust goes down, speed goes down. So I think that’s a very nice way of illustrating his point.

Preston Pysh  05:24

So to go a little bit further, and I love that you brought that up, because that’s kind of the main crux of the book is when things slow down, that means they cost more. When things speed up, they cost less. And so his main premise of the book is that trust ultimately is an economic situation that allows a leader to create more value within his organization because they’re able to execute and do things in a more timely manner. 

So he gets into a lot of details talking about how you can quantify the value that trust is creating within your organization, which I found just an amazing concept and something that I never even thought about all that much. So let’s give a couple more examples because Stig talked about travel in the airline industry and how when people weren’t trusting each other the whole process takes a whole lot more time. 

06:18

So let’s talk about a husband and wife that are getting a divorce. So if a person’s going through a divorce, and they trust each other, which typically is a really… You see this sometimes. You see some people that can get divorced, and they’re just like, “Yeah, I trust them. They’re not that bad of a person. We just don’t get along anymore. And we just don’t want to be around each other.” That situation is a lot less common than others. But when you do see that, that divorce goes quickly, that divorce typically ends in… and probably a whole lot less money spent between both parties. 

Now let’s talk about a divorce that is ugly. The other person’s a liar. No one trusts, and that’s the keyword, no one trusts anybody anymore no matter what. If they said, the sun’s out, then they would immediately think that it’s nighttime. And when that happens, those divorces take a decade and it cost hundreds of thousands of dollars. So there’s one example. Sorry to use such a grim example. But I think it illustrates this idea of speed and money being completely correlated and tied to trust. 

Stig, go ahead. Did you have another example? Or do you want to comment on the divorce example?

Stig Brodersen  07:34

Oh, not the divorce thing. But I think he mentioned Warren Buffett a few times in the book. And we’re big on Warren Buffett here and one of the reasons why it’s the same reason as Stephen Covey. He endorses the way he works because he only works with people he trusts. 

One example that comes to mind is his deal with Rose Blumkin and at the Nebraska Furniture Mart. Warren Buffett walked in and he asked Rose Blumkin how much for your store, and she said, “$60 million.” Mr. Buffett said, “Let’s do it. And this is an amazing store.” Well, you probably had a figure in mind. But I think the whole idea is that if he gave her $60 million in cash, she would get $60 million cash. If they went through like an army of lawyers and still agreed on 60 million in cash, guess what? You would not receive $60 million right? And Buffett might be paying more in the end. So this is just another like a business example of why trust is so important and why when you don’t need it, it just makes all the transaction costs superfluous.

Preston Pysh  08:35

One other thing that I want to talk about was the speed of trust when you’re talking about a brand or a business. So when you go into Walmart, and you’re looking at an aisle of DVDs, and you don’t know which one to choose, and you see one that has a Disney emblem on it. Let’s say you’re buying a video for your kids, and you see that there’s a Disney emblem on it. And you don’t know which one but you know that that brand and that trust that you have with Disney is going to speed up your purchase. You’re going to have trust that you’re going to get a quality product. 

And what you’re talking about when you’re talking about trust, when you’re talking about it from a corporate standpoint, you’re talking about brand loyalty. You’re talking about something that is a relationship that you’ve established with a company or a business, and think about how fast you’re able to make a decision. The examples go on and on and on. And I just personally never thought of it a lot in that context of it trusting. But after reading this book, I’ll tell you, it was very enlightening to kind of hear all of his examples. 

But the thing that I liked is he then goes into how can you build trust? And what are those key elements to build that trust? And so then that’s the next thing that we’ll be talking about as we go further.  

09:48

So in the second chapter, it’s called the “First wave: self-trust.” And so the great thing about this is you can increase trust with other people and he gives four core elements do that. So the first core element is integrity. Let me read all four of them, and then we’ll kind of quickly discuss each one of them. So the first one is integrity. The second one is intent, which we’ve talked a lot about intentions on this show. The third one is capabilities. And then the fourth one is results. He says that those four things are what allow a person to develop and harness this element of trust. 

So the first one, I think, goes without saying is integrity. I would kind of like to talk about integrity a little bit. And the person that I like to talk about when it comes to integrity is not somebody that you would ever expect. But it’s Adam Smith, the writer of “The Wealth of Nations.” So, Adam Smith, everyone knows him as an economist. I have more respect for Adam Smith for his “The Theory of Moral Sentiments.” which is the name of one of his first books that he wrote. And Adam Smith would classify himself as a philosopher more than he would as an economist. I think a lot of people don’t know that. 

So in Adam Smith’s book, “The Theory of Moral Sentiments,” one of the things that he talks about being the fundamental building block to being moral, and a person of integrity is a person that has empathy for other human beings. So let’s talk about this a little bit more. So if you were a person that owned a store, let’s just say a Quick Mart or like one of these gas station stores, and you paid for all that inventory and you had it all in there like potato chips, and all that kind of stuff is all in there and you owned it. You have an appreciation for the cost and the money that it took for you to own all that inventory and all that stock. So whenever somebody comes into your store, and they steal a bag of potato chips, and they walk out the front door, and they try to do this, and you would have no idea as a store owner. You’d have no idea that they did it. That person that stole from you lacks the empathy and the understanding of your vantage point. They completely failed to acknowledge that you worked hard to buy that bag of potato chips. All that person can see, that thief, all they can see is their own vantage point. That’s why they did it. 

12:23

What Adam Smith gets at is that your integrity is based on your ability as an individual to have empathy and understanding for other people outside of your own understanding. So when you think of it in that context, if I can understand Stig’s position on maybe a call it anything. I’m going to be much more empathetic and I’m going to have a higher level of integrity because I’m going to have these roadblocks that are going to prevent me from doing bad things to another person because I have this larger universal knowledge and understanding of what’s happening around me and respect for maybe somebody else’s hard work or labor that they performed. 

I’d like to highlight that when we’re talking about integrity because I think it helps people look at things from a different context. A lot of people want to get into a discussion of when they talk about integrity, they want to talk about something being right or wrong. And I think that maybe a better discussion is, how would the other person feel that maybe you’re conducting these actions towards if you understood things from their vantage point? I think that’s a fruitful conversation to have and for you to think about before saying whether something’s right or wrong.

Stig Brodersen  13:32

Yeah, so I think the whole idea about intent as Preston said, we discuss this like endlessly on the podcast, but it’s always a good discussion to talk about intent. And what Covey is saying is that it’s okay to have an agenda. We all have agendas, right? But you need to be upfront with that, otherwise, people won’t trust you. And I just think of a request I got some months back from a broker and that blogger asked if we were interested in having our content displayed on his website. And obviously, we don’t want our content to be displayed on any website in the world. That might be an awesome idea, but it should be a good site. 

And so I went to the site and *checked and I thought, well, that could be awesome to have embedded the podcast on some of the blog posts or because they had like a huge section with educational material in there. And then we were just talking back and forth, shooting each other a few emails. This might be a blogger we could endorse, I don’t know. But we never got to that part because I felt that I simply couldn’t trust the person. In the end. he wasn’t interested in displaying any of the content that we had on his site. He just wanted us to make like a free app for what they were doing, which was just… It just felt all wrong, because his intent was wrong. If he approached me another way and said, this is what we would like you to do. I might say, yes, I might say no, but at least we are speaking about the same thing and we can start trusting each other in the relationship.

Preston Pysh  15:00

So now, let’s imagine that that’s a relationship that you were forced because maybe you were working together and that now you have to continue that dialogue with that same person in the years to come because maybe they’re in your workplace. As soon as that trust barrier was broken, wow, when Stig has interacted with that person, let’s just say you had to interact with him again, in the future, his conversation is going to be a lot more in-depth. He’s going to ask more questions. He’s going to require more information before he acts on anything because he now has this experience where trust isn’t necessarily all that high. So you can see how the speed of trust is slowing down. That’s what he’s getting at in the book when he talks about different examples. 

15:41

So let’s go to the next one. The next core element of trust, which is the third one, and its capabilities. I like this. So he says that if the intent is the root of the tree, your capabilities are the very branches that bear the fruit. And so what he’s getting at is, let’s say that somebody trusts you. Then when it comes down to you performing your job and doing the things that you’re supposed to do, then you just totally fall on your face and don’t get it done, the person is not going to trust you, just because you have no ability to see the action through fruition. 

And I’ll tell you, this one’s big for me is when you get around a person, that’s all talk, and they can’t execute and complete what it is that they’re saying, I don’t trust that person at all. So that’s such a core element instead of beating it up. And going further, I think everyone gets that and kind of understands what that’s getting at. 

16:32

The final one that he has, which is very related to the capability. The capability addresses more of the person’s potential to bear the fruits. The last one is the actual results and what they created. So let’s say that in the end, they were supposed to give you a report, a five-page report. Well, you got a three-page report and there are grammatical errors all through it and there are mistakes. So the person might have the capability to write a great paper and they might have the capability to proofread it which they didn’t. So you’re getting into what is the final product typically look like? And what is the quality that they produced at the very end of the result?

So those are the four pieces. The first one’s integrity. The next one’s intent. Then capabilities and results. This wraps up a person who is creating trust everywhere that they go. Stig, did you have any other points on top fourth?

Stig Brodersen  17:25

No, I just think I would like to add that you need to have all four of them. He used the example of a family doctor. His intent might be right, his integrity might be perfect. But if you don’t know what he’s doing, you probably shouldn’t let him be your surgeon. This is his way of explaining it. And I think if you’re running it down or taking notes or thinking about it, just think that you should have all four. Obviously, you can start one place but you really, need to think of all four as, one when it comes to building trust.

Preston Pysh  17:55

All right, so the third chapter in the book, it’s called the second wave “Relationship trust.” And in this section, Covey discussed behavior in the second chapter, but he goes into a lot more detail here. The second wave is also known as the relationship trust, and it revolves around the behavior. So here he writes about 13 behaviors while providing examples. He names these behaviors as trust accounts. 

So every time you do something for, you know, a perfect example would be the relationship that you have with your spouse. That’s a trust account that you’re building, you know, some, like my wife and I. If I go up there and I do the dishes, or she does something with the kids or whatever the case might be. When you’re doing these things to help each other out, you’re building and you’re drawing and you’re putting credits and deposits into that trust account. And you’re drawing from it, back and forth, back and forth. 

When one person is doing everything and the other person is kind of taking from the other person. He describes that as kind of sucking the trust account dry. And when that happens, that’s when you’re going to have some issues and you’re gonna have some problems. He also gets into a little bit of a conversation where people that have like an ongoing relationship, like a husband and wife, they don’t necessarily keep tabs on where the trust account might be at any given point in time. It’s just this overall feeling and sentiment that people have because it’s just an ongoing relationship.

When you’re at work and maybe it’s a person that you have dealing with maybe three or four times a year, this trust between each other in this reciprocation is much more accounted for. And I think that that’s kind of an interesting conversation. 

19:36

But back to these 13 behaviors. So in the book, he goes through in great detail, we’re not going to list all 13 or talk about all 13 here on the podcast. But I will say this in our executive summary that we have typed up, we talk about all 13 in there, and we go into much more detail describing each one of these qualities in our executive summary. So if you’re not signed up on our email list, go to our email list and sign up. It’s simple: put your email address in there and your name. And you will get these executive summaries that Stig and I write up. They’re about five pages long and they go into detail, outlining every single book that we read. It’s completely free, they cost nothing. We don’t send out any marketing or spam. These are the only things that we send out via email. So if you sign up for that you can benefit from seeing what those 13 behaviors are. It’s fantastic. He lays out all these different behaviors that are very beneficial for you to read through and kind of try to internalize.

Stig Brodersen  20:28

I think my key takeaway is how the trust that you have with another person is also a choice that you can make. I’m thinking about the latest job interview I went to like, what was like three years ago or something like that. And I think it’s very common in the states and it’s definitely very come here in Denmark that you get all sorts of questionnaires, and you go through a lot of tests and then they measure your personality. And apparently, I have a 10 out of 10 in terms of the trust. And this is not like the more, the better. It’s not one of the most… I’m sure I get like letters from people saying I’m a prince of something, I just need to send them my, I don’t know… Account number or something. I don’t know. But if anything, 10 out of 10 might be a bit naive, I guess. 

But now, I think it’s interesting to be tested like that. And does that mean that I’ve never had any adversity and people have always been nice to me? I don’t think so. I had this experience what was perhaps five, six years ago, and it was a very close business partner. And this is not my way of saying, yes, I have a friend and then it’s me or I have a business partner. And that’s Preston, it was not Preston, but I had a very close business partner. And we made a contract and it was at the contract, it was open to interpretation. And it was a written contract, but it was a written contract and kind of like a handshake. And that’s usually how I do contracts anyway. 

And when I left the business, I felt that wasn’t the right way. It wasn’t like I couldn’t say goodbye to my business partner or shouting anything like that. But I felt like I trusted that person and the way I left the company, I felt that my trust was broken. And it took me a year to cope with that and to figure out what happened, because whenever you trust a person, like trust the person, and you feel that that’s misused, it’s not something you can just brush off your shoulder and just get on, at least that’s something I can’t do. 

And then a lot of thoughts about should I trust another person again, that almost sounds like love or something. But you know, when you are working every day with a business partner, it’s your whole life and it’s almost like having a spouse. So whenever you feel like you’re left, it’s something that affects you. And it took me a long time, but I decided and this my point, sorry for taking so long on this. But my point is really, you can make your choice that you want to trust other people again.

23:00

I think when it comes to business, there’s no way around that. See, what Preston and I are doing. Like I have expenses, I have revenue coming in. And like Preston doesn’t see any receipts from me. He just seems to me typing up an Excel sheet and saying, “This is the, you know, a debt upstanding on your end and on my end.” And that’s it because you can’t have a partnership another way. You can’t keep track of everything if you’re a business partner or spouse for that matter.

Preston Pysh  23:27

So I love the fact that you talked about this because I think it gets to something that I don’t necessarily find in the book, but something I want to discuss. So when a person goes through this experience in their life, that maybe they were treated in a manner that they don’t trust another person. A lot of the time people will take that experience and hold on to it very tightly. And when they’re faced with experience, later on, they let’s just call it time now, to trust somebody again. A lot of people choose to not trust because of their past experiences. And I can tell you that that’s very… I don’t want to say that it’s bad because sometimes that might be a good thing to not trust somebody because maybe the parallels to what happened before are there and exist. Maybe you shouldn’t trust this other person. 

But what I will tell you is I think people need to work very, very hard at being objective, and separating a past experience from a present experience when the way that they’re treating other people and whether they’re trusting or not, because this is the last point and this is the third chapter. I’m sorry, the fifth chapter, where he talks about trust being reciprocal. So when I extend trust to Stig, he will then extend trust back to me, and not only will they extend it back to me, but he’ll also extend it to maybe other people in his life because he’s now receiving and kind of experiencing good solid trust with good fundamentals to it. 

25:01

And so the thing about trust is that it’s a reciprocal thing that ripples through an entire organization. So that’s why I guess I say it’s so important that if you are this person that maybe has experienced a lack of trust in the past, and you are now being associated with new people, new experiences, and whatever that might be. You have to look at every single situation independently. And you got to look at it with a fresh set of eyes and realize that you yourself, when you extend the trust and you initiate it, it’s something that goes out there and spreads within the people that are around you, then it comes back to you. And I think that that’s so incredibly important for people to understand, especially people that have been burned in the past and are maybe trying to move forward. 

And let me tell you this, the book reads, I mean, it’s a fantastic book. I highly, highly recommend this book, especially for any leaders out there. But the thing that I think people need to understand is that Stephen Covey and he says this numerous times, “I’m not telling you just to go out and do blind trust, I’m not saying that at all.” But what he is saying is, maybe err on the side of trusting upfront, when it’s risks that you can assume. And it’s not like a catastrophic risk that you can’t afford to take.

26:18

But trust upfront and extend that olive branch of trust to the people around you and what I think you’re going to find is that not only do you get it back, but you get it back in multiples. And you’re just going to create this environment for yourself but don’t be stupid with the way that you trust. You have to be somewhat calculated about it is this, you know, am I just gonna give somebody my car that doesn’t even know to drive around? No, that’s stupid. You know, that’s a dumb decision. 

But if it’s somebody that you trust and you know, here’s the other thing too: a person that is trustworthy, will not put you in the situation that, “Hey, can I borrow your car because I don’t have one and I don’t want to tell you anything about myself.” A person that’s trustworthy will never put you in that situation. So that’s another kind of red flag that will go up. Is this somebody I can trust? Is this a situation that I would put another person in that I don’t know? Reverse the roles. And if it’s something that you wouldn’t do to yourself, then maybe that’s something that would raise a flag that you say, you know what, maybe I need to dig into this a little bit more and maybe not be as trustworthy with this person as maybe I need to be. 

It’s a balance like anything in life. It comes down to a balance. But I think it’s important for you to think about the speed of trust and the cost of not being trustworthy whenever you’re making decisions. So that’s the book. 

27:42

So what we’re going to do right now is we’re going to pull up a question from our audience. For anybody else out there, if you’re listening to the question that we’re going to play on the show, you can go to asktheinvestors.com and you can record your question and get it played on the show. If you get it played on the show, we will send you a free signed autographed copy of our book. the Warren Buffett Accounting Book. So right now what we’re going to do is we’re going to play a question. 

Okay, so this question comes from Chris Pauly. And this is a fantastic question. I think you guys are gonna like this one.

Chris  28:09

Hi, Preston and Stig. This is Chris from Long Island, New York. I listen to your podcast about four times a week when I drive to and from school. I love it. I just came across it and it’s great. Thank you. My question today is about confirmation bias. I read mostly non-mainstream media. And I keep reading about falling EPS numbers and downturns in the economy, and I completely agree with it. However, when I read an article in the mainstream media, and they go on to say that the economy is strong, the markets are going up. The job numbers look great. I just can’t help but think that that is just crazy. So I worry about my confirmation bias and how does one not be susceptible to that? I don’t know. Maybe you have some insight into how to not be susceptible to one’s own confirmation bias. Thank you very much.

Preston Pysh  29:02

Wow. So this question is awesome. In my opinion, the fact that you’re thinking about confirmation bias, in my opinion probably puts you ahead of what, Stig, 99% of other people out there?

Stig Brodersen  29:14

Yeah, easily.

Preston Pysh  29:16

Because most people don’t even realize that they’re a victim of confirmation bias. So the fact that you’re acknowledging that it exists, and then you’re trying to figure out a way to combat it, I think is just an awesome question and awesome highlight to our audience. 

So I’ll tell you, I’m aware of confirmation bias, but I think I do a poor job at trying to ensure that I’m not being influenced by it. Now that I’m answering this question, I guess I’m thinking through ways that I could combat that. So this is my approach, at least. I think a person needs to start with a thesis. And I think the thesis needs to be like you mentioned in your question, you said, you know, I’m reading these articles and I think that the market is going in a bad direction because earnings are going down or whatever. So I think you start with the thesis: Is the market condition improving? Or is it getting worse? Is credit contracting? Or is it expanding is kind of like the way I look at market cycles? 

So if that’s your thesis, now let’s find the supporting evidence on both sides of the fence to try to either confirm or deny whatever that thesis is. So maybe, earnings are contracting would be one thing that would say this market is trending downward. Is credit contracting? Well, you could look at high yield bonds or the interest rates on high yield bonds going up or going down. You could layout all these different metrics. And before you go searching for the metrics, you want to list these things out on your own. Probably a white piece of paper and say these are all the things that would confirm whether something is getting worse or getting better. And then what you do is you go out and you try to find the statistical evidence for one thing or the other. And that separates the opinion of other people versus your own opinion and your own research and taking the actual facts that support what it is that you’re looking for. 

But I think you have to have that framework, I think you have to say, Hey, this is what it would take for me to believe that this is the actual situation. Then whenever you’re out there reading these articles that are favorable or not favorable, you can kind of add those to where they fit inside of your framework and all your statistics that prove your thesis of whether it’s true or not. I love the question. This is a fantastic way to look at things and to kind of account for the risk of yourself. So I’m curious to hear what Stig has to say on this one.

Stig Brodersen  31:35

I think it’s very important that you build that thesis up by facts. And whenever you’re reading these articles, think about what is a fact and what is an opinion. It’s two very different things. And I know that this might be a hard task because it might still be a fact that there are from in earnings. 

But now you’re reading different opinions about when does it bounce or do the earnings bounce in the first place. And obviously, that will be the struggle so you will have to go back. And I would say at least that’s the process I’m using. You have to go back and speak to the right people about that. I think one of the things that confuse me whenever I’m following the media is I don’t know whom to trust. So I have some people that I discuss with and that trust especially when it’s not fact-based when it’s based on opinion. I am approaching people that not only do I know I can trust but they will also tell me when I’m wrong. I bring a thesis to them. And then I’m saying this is the three best reasons why this thesis is correct. And this is the three best reasons why it’s wrong, and then I go from there.

Preston Pysh  32:43

All right, Chris. So we enjoyed that question. For anybody else out there, member, go to asktheinvestors.com and you can record your question. We’ll send you a free signed copy of our book, Chris. So thank you so much for that very intelligent question. That wraps up our episode.

Again, if you guys want to sign up on our email list to get the executive summary. Also, we listen to all of our books through Audibles. If you use any of the links on our website for Audible, you can listen to your very first book for free. So if you guys want to listen to this book, The Speed of Trust” for free, use our link and sign up for Audible and you can listen to it on your car ride in the work or wherever you guys have free time to do it. So that’s all that we have for you guys, and we’ll see you next week. 

Outro  33:19

Thanks for listening to The Investor’s Podcast. To listen to more shows or access to the tools discussed on the show, be sure to visit www.theinvestorspodcast.com. Submit your questions or request a guest’s appearance to The Investor’s Podcast by going to www.asktheinvestors.com. If your question is answered during the show, you will receive a free autographed copy of The Warren Buffett Accounting Book. This podcast is for entertainment purposes only. This material is copyrighted by the TIP Network and must have written approval before commercial application.