RESTORING TRUST

HIGH-TRUST GROUPS DON’T HAPPEN by accident, and they don’t happen overnight. They’re created deliberately, painstakingly, by leaders disciplined in their exercise of the 10 Laws of Trust. Molière was correct: “Trees that are slow to grow bear the best fruit.” Taking all of the conscious steps to build a high-trust culture is a patient, one-person-at-a-time, conversation-by-conversation process.

And it’s worth it. Negotiating with, raising children with, and building businesses with trustworthy people make life rewarding. Reinforced by good experiences, our bias is to trust, to act as if betrayal is unlikely. This turns out to be a pretty good bet if the decision to grant trust is grounded firmly in the three core conditions for trust that’s smart: Character, Competence, and the Authority to deliver. And if, after having chosen to trust those who meet these tests, we secure that trust by following the 10 Laws for building high-trust relationships, the odds of betrayal diminish dramatically.

Of course, there will always be those who betray trust. The offenders tend to see life only through their own eyes, ever disconnected and self-referencing. They’re blind to the linkage of events and relationships that become obvious when seeing life through a wide-angle lens. Positioning themselves at the center of their own universe condemns betrayers to seeing others as tools—mere enablers or obstacles to immediate objectives. In each of its forms, trust for them is subject to breach. Its apparent existence may even be used as a lure and a weapon.

The reassuring news remains that most professionals do in fact honor the trust granted by clients. Indeed, when it comes to representative or reciprocal trust, my own experience is that virtually all paid fiduciaries are trustworthy and faithful stewards on whom one can rely—in part because the downside of being untrustworthy is so high. And the vast majority of people honor their partners’ interests as their own.

Even so, nobody is invariably reliable or everlastingly trustworthy, be it for reasons of Character, Competence, or lack of Authority. Thus, one must go into trust relationships understanding what to do in the event of betrayal. A small fraction of those you think you can trust are con artists—proficient not at the tasks you hired them for but at justification, cover-up, and pretense. Others are inept or inadequately empowered to deliver on their promises. Even the good-hearted and capable may fail to deliver, whether under the weight of external factors or bad judgment or simply a lack of authority. We should all expect a breakdown in trust somewhere in our future. He who seems at first blush to be Warren Buffett may in reality be Bernie Madoff.

Because there are no guarantees, we need to know what to do if our trust turns out to have been ill placed after all. As indispensable as trust is as a catalyst for innovation, decision-making, and the durability of contracts, it can fail us. That said, the wariest among us, setting up elaborate policing mechanisms, risk a different kind of failure—of missed opportunity, of life never animated by the collaborative energy that comes from trust wisely granted.

The 10 Laws of Trust, if not followed or if implemented with scoundrels, are no guarantee against the risk of betrayal. But in the end, the odds of betrayal can be minimized, and its damage to one’s psyche overcome, if one understands seven realities:

1. Betrayal at some point is likely. Early in my real estate development career, I learned something about being insufficiently vigilant. Frank (not his real name) seemed a capable young associate. He enthusiastically recommended moving forward with a significant real estate project. At the same time, he secretly wrote his own confidential memo “to the file,” summarizing the project’s downside and recommending against doing the very project he’d just advised me to take on. Frank figured he had devised a shrewd plan to cover his bases no matter what happened. Based on his persuasive oral presentation (and obviously not on what he had opined in writing), I moved forward with the project. As it turned into a smashing success, my trust in Frank grew; my firm made him a partner and expanded his responsibilities.

Had I read Frank’s incongruous secret memo, I would have quickly reckoned that my trust had been misplaced and that Frank was not worthy of trust, much less a promotion. Trustworthy people don’t act as he did. Only Frank knew about both versions of the analysis he’d done. His slippery calculus turned on the fact that it would be more than four years before results of the real estate project came in. If they were good, as expected, he’d rightfully point to being instrumental in pushing the project along. By contrast, if results were poor, he’d have a memo in the file outlining his reservations—and maybe that would come in handy.

Years later, an assistant uncovered Frank’s contradictory memo, and I confronted him. Frank’s explanation was that he’d been raised in a culture that punished mistakes so severely that its members were reluctant ever to hazard a recommendation. When pressed, as he put it, “to put a stake in the ground,” his nature was to hedge his bet, just in case punishment loomed. Because of that, Frank instinctively betrayed a trust that would be hard to restore.

When Frank’s duplicity surfaced, one of my fellow partners commented, “Frank’s genius was wasted inside a partnership. His real talent was spin, doublespeak, and cover-up.” These might be considered de rigueur “skills” in low-trust contexts, but in a partnership or in a marriage—requiring supreme trust, where transparency is the bedrock of the relationship—they undermine its chief currency. It was impossible for me to fully trust Frank again without an effort on his part to restore trust. The breach of trust arising from his stealth memo, coupled with his failure to reconcile, made moving to a new career his next step.

2. Betrayal stings. Breaches of fiduciary duty feel worse than breaches of contract. When we’re betrayed, we didn’t just have our car broken into or lose our mother’s heirloom ring. We were duped by someone we trusted. We turned over our trust to them, and they violated it. Even worse, somewhere in the deep recesses of our consciousness, we fear that the betrayal was made possible by a suspension of caution on our part. In other words, we enabled the betrayal in a sort of joint venture.

After Madoff was exposed in 2008 as the greatest Ponzi-scheme fraudster in American history, one money manager told me that he’d been pressured by several of his investors to get them into Madoff’s funds. They were in effect begging to be taken advantage of. After visiting Madoff’s office in Midtown Manhattan early on, my friend had remarked that Madoff could just be a guy with a printer and a creative accountant. As a result, to the chagrin of his well-heeled clients, my friend had declined to invest their capital. Much later, his investors called to thank him for not having been taken in.

In business and partnerships, as in friendships and marriages, there’s a natural tendency to accept things as they seem to be and as we want them to be. This is why con artists thrive—and why betrayal stings. Madoff’s investors look back on what happened and wonder how they could possibly have been so gullible. Their expected response might be to never trust again.

3. Betrayal isn’t always personal. Betrayal isn’t limited to partners or fiduciaries, or to spouses or uncles. The public’s trust can be breached. In one of the most notorious recent examples, cyclist Lance Armstrong finally admitted to chronic blood doping in pursuit of his seven Tour de France titles. Capping the astonishing downfall of an athlete once revered around the world, Armstrong did so only after years of vehement public denial. Even then, he seemed to rationalize that his victories were legitimate because, supposedly, everybody else did it and he was therefore just leveling the playing field. The perverse message: If everybody betrays, nobody betrays. So when it comes to evaluating trust, along with appreciating the importance of caution, remember this corollary: After the breach of trust come the rationalizations. The betrayer rarely comes clean. He equivocates, he prevaricates, he quibbles. Tap-dancing is his finest move; it might even impress you. You must then be doubly wary of the rationalization that follows the betrayal.

In Armstrong’s case, the betrayal had been so well hidden that it took years to strip down the bulwarks built by those who had a vested interest in shielding him. And it doesn’t take a cynic to realize that Armstrong’s deception could have carried on for years more. But ultimately his plunge was breathtaking and the wreckage colossal. The sports icon went from heroic cancer survivor to pariah. The public swiftly rejected Armstrong’s narrative in spite of all the good he had done.

Just as President Richard Nixon lost his place in history by lying about a “third-rate burglary” and President Bill Clinton stained his legacy by cavorting with “that intern,” Armstrong forfeited his own good name. Most of the time, trust is oneway sticky. One can destroy in a minute a trust that took years to build, and it might never be fully recovered. Might.

4. Reconciliation is possible, if difficult. Reconciliation means both parties squarely facing the breach of trust and agreeing to put it behind them. And, of course, the betrayer must apologize to the damaged party. Neither Armstrong nor Madoff, nor, for that matter, my work colleague Frank, attempted to reconcile with those they had betrayed—perhaps so much the better. Ordinarily it is a far better use of everyone’s energy to invest in forming bonds with those willing to pay the price to follow the laws of trust. In some cases, the discovery of a violation is a merciful trigger that exposes what was counterfeit in the first place. Many marriages end this way. The same happens in business partnerships.

There are several steps to take if one’s trust has been betrayed:

Accept some responsibility. While the blame lies with the betrayer, rarely did the betrayed not play a role in being duped. As painful as this realization is, it can be the first step to recovery.

Recognize you’re not alone. Accept that others no doubt have also been duped. You’re not alone.

Consider the seriousness of the breach. While the routine required for building trust in the first place is akin to getting in shape one workout at a time, recognize that restoring trust will be more like recovering from a car accident in which the body isn’t just out of shape—it’s shattered. As with the triage that any emergency room team must undertake with each victim, any chance at restoration begins with a diagnosis of the severity of the damage.

In other words, whiplash is one thing, a severed spinal cord quite another. Just as the quadriplegic has limited physical recovery options, so do relationships that have suffered certain breaches of trust. Getting a once-healthy relationship back to being functional may simply be a matter of clearing up misunderstandings. Or it may be that options are limited. If the latter is the diagnosis in a case of breached trust, we will ask if we ought to spend any time rebuilding it.

Fix quickly what can be fixed. When a betrayal can be explained as a one-off stumble, perhaps born of extenuating circumstances, it may well be worth giving the betrayer another chance. There’s plenty of room for redemption in these cases that will benefit both the forgiver and the forgiven. The other instance in which it may be worth fixing things is where the upside is great. In breaches of trust between partners in a marriage, especially when children are involved, it may pay to seek reconciliation simply because so much is at stake.

5. The steps toward restoration are demanding. Restoration means restitution—paying for economic and psychological damage so the parties can reprise their relationship. Just as there are principles for building trust in the first place, there are principles that govern restoring broken trust. While the odds of restoring trust to former levels are low—and even when an ultimate restoration is unachievable—it helps to follow these rules:

Be realistic about the potential. Start with no illusions: The process for restoring broken trust is different from building it. Recovering from betrayal is harder, more costly—and, worst of all, less likely to succeed—than securing trust at the outset. This clearly suggests that should there arise even a perceived breach of trust along the way to building a high-trust culture, it’s smart to address it before it metastasizes. Once broken, trust is Humpty-Dumptyian—hard to put back together again.

Forgive. Move on, unburdened by the weight of treachery. Forgiveness is key; even dime-store psychologists recognize that those who harbor bitterness damage themselves above all. Giving in to revenge is almost as if the betrayer takes a second, deeper cut out of us. We never get beyond the grievance; we ruminate to the point of distraction; we allow our own contentment to be measured by the amount of flesh we’ve extracted from an adversary. Even in betrayal, “love your enemies” works better than “an eye for an eye.” Forgiveness becomes easier when one realizes it will have no effect on the forgiven party—other than perhaps to confuse him. But forgiveness can give us our own lives back. So, for our own health, the key response to a betrayal must be forgiveness.

Don’t consider trying to get even. Vengeance is rarely sweet. The downside of retribution is that it leads to self-absorption, which is a self-diminishing response. The far more productive emotion is one of mourning the loss—after which there’s an opportunity to think through what happened to try to correct flaws, be they structural (bad hiring, bad oversight), or personal (your own inattention to trust’s fundamental requirement for Character, Competence, and Authority), or laziness (including just plain naïveté).

Years ago, I felt betrayed by someone whom I was certain I could never forgive. A good friend gave me a copy of The Count of Monte Cristo so that I could vicariously live what I thought I most wanted. Over a weekend, I devoured Alexandre Dumas’s classic novel, enjoying the payback designed by Edmond Dantès. But as subtext, I realized that Dantès’s deliciously complex scheme resulted not only in destroying the three men who had shattered his life but also in taking him to the brink of his own destruction, depriving him of joy, hollowing him out right along with the deserving objects of his contempt. He had “become them”—winning a battle but losing the war.

If restoration is possible, construct it carefully. In a few instances, forgiveness may plow a pathway to trust’s restoration. The three crucial preconditions to such a restoration are:

A genuine recognition on the part of the betrayer of the breach and of the damage caused from the perspective of the betrayed.

An earnest apology that acknowledges the violation of trust (without rationalizations or “buts”)—preferably sooner rather than later—and that takes responsibility instead of blaming external factors. As one of the young entrepreneurs with whom I work once taught me, “You’ve not apologized until the other party accepts your apology.” Restoring trust is a two-way process.

A willingness to fix things—to make restitution.

Accept the apology. There’s no exact formula for adequate remorse. A person’s apology may sound sincere, yet only be another con by a scoundrel who’s proven adroit at them. Some people make their livings as con men, creating “trust me” moments. I once worked with an individual who continually proclaimed that he “always put the interests of my family ahead of his own.” Looking back on it, he claimed virtue too often. (Hamlet’s mom was right: You can protest too much.) Predictably, my former colleague never apologized, sought reconciliation, or came close to the idea of restitution. My only option was to forgive and to move on. I could tell I’d forgiven when my focus turned to the future.

At the end of the day, in gauging another’s attempt to make amends, all you can do is use your best judgment. You’ll probably know contrition when you see it. If you make the call that it pays to resume the relationship, then embrace it and focus on the future. In the case of the betrayal that so affected me, after choosing to forgive, I determined to correct the deficiencies in my own analysis of trust that cost me so dearly. I then closed the chapter by deciding never again to do business with the self-centered, the defensive, or the remorseless.

6. Institutions and companies betray—and can recover, too. On occasion, companies facing crises that are defined by a breach of trust emerge stronger as a result. Consider JetBlue. In February 2007, an ice storm pummeled the East Coast, resulting in widespread aviation delays and cancellations. As the largest carrier out of John F. Kennedy International in New York City, where all takeoffs had been halted, JetBlue was hit hardest. The airline’s communications and reservations technology didn’t allow it to deal adequately with passengers stranded in the terminal and on runways. Many other airlines suffered as well during what became known as the “Valentine’s Day Massacre.”

JetBlue’s response was aggressive and apologetic at the same time. Founder and CEO David Neeleman went on all the TV networks to own up. In a voice a reporter described as “cracking,” Neeleman told the New York Times he was “humiliated and mortified.” And well before Congress took action against the entire industry, JetBlue quickly issued a Customer Bill of Rights, offering compensation for overbooking and a range of delays. It cost the company a lot of money, and I initially told Neeleman he might have been too remorseful and apologetic. After all, we had an excellent reputation and had built up much goodwill with consumers. Could we not just have apologized without making specific financial concessions? As it turned out, Neeleman was right and I was wrong. We totally recovered from the debacle, in part because our apology was not only sincere but also included voluntary efforts at restitution.

You can think of relationships—in the marketplace and in your personal life—as a set of deposits and withdrawals. At JetBlue, devotion over the years to being people-friendly was a major deposit. The Valentine’s Day Massacre was a big withdrawal. Expressing a genuine, heartfelt apology, offering compensation, and creating the Customer Bill of Rights were new deposits that helped the company recoup public confidence.

7. Trust is worth the risk. In all human relationships, the virtue of trust is undeniable. But it is not without peril. People are human; temptations abound; trust can take a beating. Trusting others carries a contingent price. However, not trusting others carries an even higher current levy. The bonds created in high-trust relationships are the ones that give life meaning. If you’re too wary, too worried, you’ll wind up with fewer opportunities and fewer human connections. You’ll spend your life calculating, protecting yourself, expecting the worst, and trying to secure the power and position that will serve what you think will bring you happiness, wealth, or fame. Instead, you’ll either live a stunted life, or you will condemn those who work with you to smaller lives than they deserve.

OVER THE COURSE OF more than four decades in business, in the context of more than twenty-three hundred different investments—involving startups, turnarounds, and rapid-growth companies—I’ve worked with hundreds of investors and partners all over the world, and thousands of employees in scores of companies across multiple industries. And I’ve taught thousands of young people destined to be tomorrow’s leaders. I’m delighted to report that the mindset of Frank, my former partner, has been rare.

Almost all my partners and virtually all the paid professionals I’ve retained have taken their obligations seriously. In my experience, the small set of exceptions stand out as object lessons among otherwise high-trust relationships. Having been betrayed—as has most anyone who has been in business as long as I have—I still opt for trust over mistrust, reliance over flying solo, and applying the 10 Laws of Trust over the protections of the paranoid. Now, however, I take more care to be certain that Character, Competence, and Authority are all present in every trust relationship. I pay more careful attention to my choice of partners and representatives, and to the need for accountability.

After many years in business, in a family, in a community—in short, in living a fortunate life—I’ve concluded that carefully managed trust is well worth the risk. Indeed, living life without deeply trusting others is even riskier, a whole lot less satisfying, and much less likely to result in maximizing potential. To all who must necessarily trust in order to lead and to be led by others, I offer my life experience as proof of the extraordinary power of trust and the ennobling adventure of working in high-trust environments.