Chairman of JetBlue. Former CEO at Trammell Crow. Founder of Peterson Partners. Professor at Stanford Business School. Joel Peterson is a very impressive individual.
So when someone of his pedigree tells you that the most important ingredient in a business’s success is trust, you listen. In Joel’s words:
In firms where people trust their leaders and colleagues trust one another, there’s more innovation and better business outcomes. Mistrust and politics are expensive, time-consuming and dispiriting. When a company has a reputation for fair dealing, its costs drop: trust cuts the time spent second-guessing, worrying, and lawyering. Trust strengthens every part of any deal: its durability, its potential profitability, and its flexibility. Like most things, business works better when the energy spent on doubt, fear and suspicion are reduced.
A few years ago, Joel was in the process of buying a Manhattan condo. He and the other party agreed to the deal by handshake, but before the paperwork was signed, the other man went silent. Two weeks later he emerged, demanding that if Joel didn’t increase the offer by 20%, there was no deal.
This man, who is now one of the leading candidates for President of the United States, had spent the previous two weeks shopping the deal.
But in Joel’s opinion, this is an exception. He believes that the vast majority of people respond well to being trusted. Joel tells the story of how early in his career, he made a deal with a savvy and experienced investor.
As papers were being drawn up, I received a call from him. “I don’t think you meant to set things up the way you did,” he said, referring to a part of the deal that was in his favor. He proceeded to explain to me how the provision could have left my firm in a bind. He was right, and saved me from a bad mistake. From this, we went on to do over a hundred financings together over several decades. Our level of mutual trust became so great that he’d wire money before the papers were complete. Later, I had a chance to sort through some troubled assets for him to ensure that he recovered his investment capital. I didn’t need to, but I never forgot how he’d saved me as a young entrepreneur.
Building genuine trust is a long-term investment. Cutting corners may lead to quick victories in the interim, but organizations and individuals who do the right thing win in the long-term.
Take it from someone who’s served on the Board of 35 companies, acquired well over 100 more, and led some of the most successful companies of the last few decades.