Sunday, March 30, 2003

How smart is it to be trusting?

Expect the best

By Rhonda Abrams
Gannett News Service

My theory of business, and life, has been "expect the best, and you're likely to get it." It's the basis of how I treat employees, customers, and others. I expect them to be honest and trustworthy. Overwhelmingly, my trust has been rewarded. Have I been wise or lucky? How smart is it to be nice?

This isn't a new question. Using game theory, researchers have examined the outcomes of different approaches. One of the classic ways to look at the issue is the "game" called the Prisoner's Dilemma:

Two criminals are captured by the police, immediately separated and interrogated. Neither can hear what the other says. The police don't have enough evidence to convict unless one confesses. Each prisoner is offered a deal: if he confesses and the other doesn't, he'll be set free and the other will get a very harsh sentence. If both confess, they'll both get convicted but with a lighter sentence. If neither confesses, however, they'll both be let go.

Consider long term

What's the smartest move for each prisoner?

Obviously, if each knew what the other would do, the best outcome would be for each to remain silent. But that risks a worse personal outcome (harsher punishment) if the other prisoner confesses.

This short-term, two-player game leads to the conclusion that the smartest outcome is to confess. Sure, you can't gain as much, but you cut your losses. In other words, the best strategy is to just look out for number one.

Not so fast!

In a landmark study, Robert Axelrod, University of Michigan professor and MacArthur "genius" prize winner, pitted different strategies of cooperation and self-interest against each other in computer-simulated games (The Evolution of Cooperation, Basic Books, 1985, $21).

Axelrod programmed numerous scenarios, with many more choices than in the Prisoners Dilemma. He compared various responses to betrayal - hit back harder, at the same level, not at all. He looked at how long to hold a grudge - one turn, two turns, forever, etc. Was it better to be the first to defect or the last? Or was continual cooperation, never defecting, best?

No matter how the game was played, the same strategy always won. This was "Tit for Tat" - cooperate on your first move, then cooperate or defect exactly as the other player does on just one preceding move. In other words, never be the first to defect, and make your response to defection equal and limited. In this way, all those who want to cooperate are rewarded, and all those who defect are punished. And the group has the greatest likelihood of achieving the maximum benefit.

What this means is that trusting others is a winning strategy.

Trust is everything

Here are some ways to increase the likelihood of positive outcomes:

• Select your "players" carefully: Don't get into situations with people who are likely to be uncooperative or untrustworthy.

• Make your expectations clear.

• Quickly correct misunderstandings.

One of my favorite quotes is "Hire people you trust and trust them."

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