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Q&A: The anatomy of trust in family, business and community
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No Caption - photo by Eric Schulzke
Joel Peterson is currently chairman of Jet Blue and has been a board chairman and a leading private equity investor for major corporations over the past 40 years.

One key distinction the 69-year-old executive says he's learned through close observation of businesses that work and those that fail is that the former develop "high trust cultures" that work smoothly with less bureaucracy, legalism and friction.

"The cost of lacking trust," Peterson says, "is ever-present suspicion, double-riveted legal agreements, caution and caginess in personal dealings." Mistrust, he argues, "drive away innovation and slow things down."

But trust is fragile, he says: "It takes initiation, nurture, evaluation and repair."

Petersons new book is titled The 10 Laws of Trust: Building the Bonds That Make a Business Great. The Deseret News recently sat down with Peterson to talk about the critical role of trust in family, business and community relationships.

Peterson is the founder and chairman of Peterson Partners, a private equity group with over $1 billion under management, and a consulting professor of finance at the Stanford Graduate School of Business.

This interview has been edited for clarity and length.

You use a framework of force, fear, reward, duty, love for how organizations gain compliance. You say the level of trust rises the further you move along that line. Did you come up with that yourself?

Joel Peterson: No, I actually got that from a talk that (former LDS Church President) David O. McKay gave way back in the 1950s. He said there are five motivators in life, and you can force everything into one of these five. Ive found that you can explain almost any organization with those five motivators.

Machiavelli say it is better to be feared than to be loved if you cant have both.

In the political world, in a world of low trust, where power is the currency, I think fear is very effective. These are all very effective motivators. They all work. The difference is what happens when you take the gun away from the guy relying on force. That motivator is suddenly not very powerful. But the love motivator endures.

Now the other motivators are kind of always there on background, right? Isnt there always a bit of fear and force lingering in most organizations?

I think thats right. In the religious sense, I always think that a relationship with a loving God, you can also see force, and fear and duty. All of the motivators are present.

You have three factors in trust that determine whether or not someone is trustworthy. Could you sketch those for us?

The first is character. Someone of high character keeps their word. But that is not enough. They also have to be competent. Most people say they would trust their mom more than anyone else. But would you trust her to fly a 747? Shes not competent in that. Then you have to have authority, you have to be legally or organizationally empowered to deliver on a promise.

This sounds similar to the framework of one of the great scholars on the U.S. presidency, who argued that a presidents effectiveness hinges on his reputation on two fronts goodwill and skill.

Those two correspond to what I call character and competence. Trust is really about delivering on promises. Will you and can you deliver?

This is an interesting time when it comes to trust and the presidency.

I just wrote an article for Fortune on trust and the presidency. I noted that we have two candidates who are simply not trustworthy, the two least trustworthy candidates we have ever had, and politicians are already the least trustworthy of any profession, exceeding used car salesmen and lawyers. I think it derives from who we are, more than who they are. We are the clients. So we are buying this untrustworthy product.

What do you do with Ronald Reagans dictum about the Soviet Union, Trust but verify?

A lot of people think if you trust someone then you dont have to hold them accountable. I think that accountability and measurement are vital. I remember one of my associates years ago saying, We owe it to the accountants to do audits. Its a favor to them. High trust organizations do audits.

You also talk about transparency as being a vital feature of a trust-based organization.

People are smart. They figure out if you are spinning things. So I think you have to be lavish in communication. There are certain things that are not appropriate to say, and Ill say no comment. And people accept that. But then Im being transparent in my unwillingness to comment on a certain topic.

And this is true in families as well? When the kids reach a given age, shouldnt they know if the family is facing some kind of financial crisis, for example?

You have to be measuring that against their ability to process it. What does it look through their lens? I think that running a family and a business are very similar.

You talk about empowerment, allowing people to experiment and fail. You have an interesting story about that from your childhood.

My dad allowed me to back the car up and down the driveway when I was 14 or so, and once I forgot to put it in drive and backed the car up over a curb and onto a berm. We had to push the car back up. I had screwed up and was very embarrassed. I thought it would be the last time I ever drove. As my dad was walking back to the house, he tossed the keys to me and said, Dont forget to put it in drive, son.

Isnt trusting people dangerous?

Betrayal goes hand in hand with trust. Youll never be betrayed if you never trust. If you are wary about everyone you will never be betrayed. On the other hand, you wont accomplish much in your life. And you wont have a very happy life. You have to know how to deal with betrayal. And my first recommendation is catch it quickly and address it head on. A lot of people fear confrontation.

Would you in a business setting trust a known adulterer?

Thats my very first law. It starts at the top. You cant compartmentalize your life and are trustworthy in some situations but not in others. People are smart. They figure it out. So for me it would be very tough.

So you would move from a trust relationship to a contract approach with such a person? Or would you not do business at all?

We are forced to do business with a lot of people based on what I call pseudo-trust. We do that in contractual relationships, and it works as long as our interests are aligned. That is a form of trust.

As long as we have written a good contract and have a solid legal system.

Right, but if those break down then the relationship fails. Thats why I call it pseudo-trust. Its not built on an unshakeable foundation.