By John Keisler and Harry Saltzgaver
“Trust is one of the greatest economic forces on Earth.” — Charlie Munger
Charlie Munger (1924–2023) was an American investor, businessman, attorney, and philanthropist who became famous as Warren Buffett’s longtime partner and vice chairman of Berkshire Hathaway.
It may be surprising to some to hear that some of the most successful investors in American history believed that trust was at the heart of their success in business. It makes more sense, however, when you consider that risk is priced into everything we do on a daily basis —mortgages, car loans, and insurance premiums — so reducing uncertainty and risk can actually lower the cost of doing business and lead to more investment in our economy!
Valuable Trait
How much is trust worth? How about a value of $1 Trillion, and about $700,000 a share? According to the latest available quotes, Berkshire Hathaway’s market value is about $1.03 trillion, and its Class A stock (BRK.A) is around $718,231 per share.
Trust is core to the Ukleja Center for Ethical Leadership and its vision of integrating ethics andcore values like trust into the curriculum throughout California State University, Long Beach. A look through the recipients of the annual Nell and John Wooden Ethics in Leadership Award given by the Ukleja Center shows how trust is a bedrock principle to those who make a difference – starting with Coach Wooden himself.
A Transparent Approach
“Do you solemnly swear to tell the truth, the whole truth and nothing but the truth?”
That bit of courtroom formality is a noble pledge. It’s also something that is not as easy as it sounds.
In the courtroom, the pledge is enforced with the threat of perjury. In business and society, there is seldom a legal punishment for not telling the whole truth. But that’s exactly why full transparency is especially valued. It is how trust is generated.
We ask our government leaders to be transparent about how and why they make decisions – to tell the truth, the whole truth and nothing but the truth. When they avoid that request, or find ways around complete transparency, consequences from losing elections to public scandal can result.
Telling the whole truth can go a long way toward successful negotiations, successful planning and successful living. That’s especially true when all parties are being transparent.
Facts Are Facts
There are several levels where this approach plays out. First, there are the facts. If I tell you all ofthe facts relevant to our discussion that I know, and you tell me all of the facts that you know, we now have a solid basis for decision-making.
It’s also important to be transparent about the facts you do not know. There’s a difference between a fact and something that you want to be true, or think it might be true. Something that isn’t certain likely is something to resolve before deciding whether to proceed or not.
Proceeding as though uncertain information is fact is not only unethical, but it can be illegal. Elizabeth Holmes built Theranos on the belief that her scientists could find a way to run hundreds of critical blood tests from just a finger prick’s worth of blood. Internally, engineers warned that the device produced inaccurate results, but Holmes shut them down – it wasn’t what she wanted to be true.
You know the result. Jail time, the collapse of a company, and hundreds of millions of dollars lost. And it’s a near certainty that no one will be willing to trust Holmes enough to do business with her again.
Admitting there are unknowns could delay projects or agreements – sometimes even to the point of losing a contract. But doing so maintains your credibility for future negotiations. It builds trust.
Different Motivations
A key to successful negotiations, projects and governance is understanding what motivates the parties involved. If you don’t understand what motivates your customer, what goals that potential partner has, what would make the community you want to lead a better place, your argument stands little chance of success.
If you want to understand your counterpart’s motivations, you must be able to understand your own motivations and be willing to explain them. That is a basis for an honest dialog. We sometimes call it laying our cards on the table – you show what you have with no attempt to hold back.
That can be a difficult approach. Telling the whole truth and nothing but the truth when it comes to reasons why you want something can make you feel vulnerable. It is that very vulnerability that encourages the other side of the negotiation or discussion to be transparent about their motivation – and builds trust in each other.
Tear The Bandage Off
To be fully transparent, we must talk about not only what is good about whatever the topic might be, but also about what is bad, negative or a potential roadblock. If you hide the pain points of the project or report, that only guarantees a more extreme reaction when they are revealed – and engenders a sense of mistrust that is virtually impossible to overcome.
Leaving problems unsaid means leaving problems unsolved. Jeopardizing the entire project for the sake of sparing some initial discomfort is anything but ethical. When done deliberately, it is an underhanded way to get what you want with no regard for consequences to the other person.
Take this approach just once, and it doesn’t take long for word to get around that you tend to operate in this way – that you are unworthy of trust. Here’s another quote, commonly attributed to Abraham Lincoln – “Reputation is like fine china: once broken, it’s very hard to repair.”
Admit There Will Be Pain
It is also important to be honest about the potential downside of a project or policy. When it is clear there will be winners and losers as a result of contemplated actions, exploring those issues transparently avoid surprises – and unpleasant surprises tend to upset people.
Transparency is important in one-on-one negotiations, and the same principles apply with public policy. Government leaders must be aware of this approach to be successful when creating policy. Consider this economic development plan conundrum.
In order to build a healthy economy for a municipality, attracting outside industries to create more jobs is key. But a scattershot approach to recruiting businesses is far less successful than a targeted campaign to attract specific industries, creating a cluster of like cultures.
That targeted campaign will, by definition, leave some sectors by the wayside. In Long Beach, the decision was made to emphasize aerospace technology instead of warehousing retail goods.That decision had to be made clear.
From the very beginning in the redevelopment planning for former airplane manufacturing property, city officials engaged Boeing to focus on high tech manufacturing (and its high-paying jobs). The city updated zoning in the area by creating a new Specific Plan (at its own cost),signaling to space-oriented companies that the city was open for business. The result increased the value of the property for both Boeing and the community.
Explaining the policy was an ethical decision, and it enhanced the city’s reputation for honesty, increasing its credibility and building trust.
Bottom line, transparency and honest communication are essential pieces of ethical business practice. They develop trust.
That’s worth a lot – $1 Trillion or more! That’s also why the Ukleja Center for Ethical Leadership is an essential institution. Learn more about it here.
JOHN KEISLER is currently the CEO & Managing Partner for Sunstone Investment Group, Inc. and a member of the Ukleja Center’s Governing Council. Previous to Sunstone, John spent more than 20 years in public service, most recently as the Economic Development Director for the City of Long Beach. He earned a Master’s Degree in Public Administration from the prestigious USC Price School of Public Policy.
With 45 years of experience as a journalist, editor, and civic advocate, HARRY SALTZGAVER has long used storytelling to illuminate issues of justice, reconciliation, and community resilience. During his 31-year tenure as Executive Editor of the Grunion Gazette, Harry published in-depth coverage of restorative justice programs, youth leadership initiatives, and interfaith healing efforts across Long Beach and Los Angeles County.
