Long Idea #3 - Believing People’s Actions
When entrepreneurs think about why companies fail, our minds go to the usual suspects. A tech startup runs out of money before the founders achieve product-market fit. A local mom-and-pop service business fails to change with the times and loses market share to a national competitor with better marketing. A recall, lawsuit, or publicity nightmare causes a once-beloved brand to fall from grace.
I think spotty judgment belongs right up there with those big business killers, and I’ll explain how I reached that conclusion.
In this case “judgment” means how we look past words and circumstances and make calls about other people’s character, intentions, and motivations.
When we’re young, we’re bound to hear some adult say, “Actions speak louder than words.” And being young, we’re prone to ignore that bit of homespun wisdom because it came from boring old people.
Later, even after a cheating ex breaks your heart and ruins the summer—should have seen that coming—or a self-centered business partner chooses the easy way over the high road—again—we realize that it’s not what people say but what they do that matters. The old people know something after all.
Forensic accountant Anthony Scilipoti, who predicted the Enron scandal and various other historic implosions, goes so far as to say,
“Business is judgment. People run companies; they don’t run themselves.”
I think he’s right. Our long-term results in business and life often hinge on our ability to see people as they really are and respond accordingly.
Oprah Winfrey would agree. I can’t remember exactly how I stumbled across the clip from 1997, but it presents an unusual scene for brilliant business advice: pajamas and a big brass bed. Oprah and Maya Angelou lounge side by side and discuss something the author had taught her years earlier:
“When people show you who they are, believe them the first time.”
About that lesson from Angelou, Oprah said, “Of all the lessons I've learned in my entire life, this may be at the very, very, very top of the list.” Considering the many famous and brilliant people she interviewed and hundreds of ideas and principles she must have heard, her show was the highest-rated talk show in American television history, and her many successes as a businesswoman, serious entrepreneurs ought to give the lesson serious attention.
The lesson is easy to understand and difficult to implement.
Or maybe it’s more accurate to say that acting on what people reveal about themselves can be very costly in the short-term.
One of my favorite stories illustrating this difficulty came from Bernie Marcus. After he and Arthur Blank got fired from Handy Dan, they were trying to raise $2 million to start what would become Home Depot. An investment banker named Ken Langone got them a meeting with Ross Perot. Everything went well until Perot and Bernie started discussing Bernie’s Cadillac.
“My people don’t drive Cadillacs,” Perot said. “My guys at EDS drive Chevrolets.”
Bernie explained to Perot that buying the Cadillac he already had leased would be cheaper than buying a new Chevrolet, and furthermore, he was a big man who needed a big car.
Perot wouldn’t budge: “My people don’t drive Cadillacs.”
Bernie and Ken stepped outside for a moment to talk, and Bernie foretold his own future: “If this guy is going to be bothered by what kind of car I’m driving, how much aggravation are we going to have when we have to make really big decisions?”
When people show you who they are, believe them the first time.
Bernie and Arthur walked away from the deal with no backup plan.
One of my old mentors, Ray, once shared the same lesson in slightly different packaging: "People show you who they are. They keep showing you who they are. You should let them."
Ray’s exact words lodged in my mind like a fishhook, and I can’t help but wonder why. I don’t aspire to build an empire like Oprah or Bernie. I like writing and making barbecue more than I like courting the Ross Perots of the world.
I think the reason is this: Even lifestyle entrepreneurs like me get burned, and we need a way to navigate new relationships and opportunities, collaborations and deals, obstacles and impasses—without repeating past mistakes in judgment.
How do I give new people the benefit of the doubt without becoming an easy target? How do I differentiate between “bad actor” and “decent person who made a mistake on me”? How do I exercise good judgment without expecting a bogeyman around every corner?
Parsing all that data would be overwhelming even if I didn’t have presets and blind spots. I grew up in a relatively healthy, stable, and safe family, and I tend to be an open, honest, generous, and trusting person. I brought naïveté with me into business and soon discovered that everyone wasn’t trustworthy.
I could regale you with stories about folks who said the right things to win my trust so that they could take advantage of my talent, mind, and network without reciprocating. It’s the oldest story in the business book: The client, mentor, or partner who offers to take the promising youngster under his wing and teach him everything he knows in exchange for [insert exciting but vague and ultimately empty promises here].
Getting duped isn’t fun, but neither is being jaded. The whole apparatus of self-protection and especially the heavy armor of skepticism and suspicion is mentally and emotionally taxing. The entrepreneurs who wear it daily enjoy the journey less and burn out faster than those who don’t, and ironically, the people who trust the least come off as least trustworthy.
I’ve met certain individuals who had been burned a lot, and in our interactions I felt as though I were being subjected to a battery of covert character and reliability tests without my consent. While they remained closed off, controlling, and unpredictable for reasons known only to them, they expected me to be transparent and impeccably reliable to win a spot on a list of vetted allies. Rather than submit to that double standard and continue through an exhausting trial of proving myself, I simply opted out. Naw, I’m good. I have other options.
So what’s an entrepreneur to do if neither naïveté nor jadedness is best?
My friend Jerry gave me a clue. Jerry has endured a great deal of pain and betrayal, and he’s one of the most joyful, light-filled people I’ve ever met. He once told me that he keeps choosing trust because skeptical people get burned about as often as trusting people and trusting people get to go through life seeing the best in people. Over time, the math evens out. We benefit more by assuming positive intent than by assuming ill intent.
Okay, but what does that look like at a conference when I’m meeting new people? How can a startup founder embrace this actions speak idea when in a room of potential investors? How does a freelancer approach an exciting collaboration, one that could grow into a full partnership, with both optimism and realism?
A Russian history scholar named Suzanne Massie answers with these three words: “Trust, but verify.” Massie taught President Ronald Reagan the original Russian proverb, and Reagan relied on it during nuclear disarmament discussions with the Soviet Union.
In my own business meanderings I’ve found it helpful to make the proverb more concrete and actionable by turning into a rule, practice, and response:
- Rule. Lead with trust;
- Practice. Watch what people do;
- Response. Match their access with their actions.
Let me double-click on the rule for a moment.
Though Peter D. Kaufman is one of the more successful businessmen of our era, he has flown mostly under the radar. He doesn’t have a Wikipedia page, and unless you knew to look for “The Multidisciplinary Approach to Thinking,” a speech that he originally gave to some college students in 2018, you probably wouldn’t stumble across it.
In the speech Kaufman touches on “mirrored reciprocation.” In essence, we get what we give, and according to Kaufman, we get better results 98% of the time if we lead with trust: “You want to go positive. You want to go first.” And, “You have to be constant [in doing that].”
I also like the “opening bid” framing that Stanford business professor Bill Lazier used:
“You need to decide on your opening bid when you are establishing a relationship with someone when you’re interacting with the world. Is your opening bid to assume trust, to assume that someone is trustworthy, and to grant them the full benefits of that? That’s your opening bid and that trust can be lost, but the bid is trust. Or is your winning bid to not trust, but the trust can be earned? So many aspects of your life will be affected by which fork you take.”
I can look back on specific situations where my opening bid of trust, followed by close scrutiny of a person’s actions and a matched response, enabled me to sidestep misery.
Back during my startup days, a music industry veteran told my co-founder and me that he could help us scale Closeup.fm much faster. I’ll call this guy William, and we had enough mutual contacts to believe he might be able to deliver on that promise.
The relationship progressed, and eventually William asked us to make him interim CEO. He said he’d need that title and clout to set everything into motion.
When I passed this idea by our investors and advisors, they were unanimous in their advice: This is a bad idea. Interim CEOs communicate instability to investors, and this guy is untested. Offer to make him the Head of Business Development instead. He can still get the same equity without the title, but the equity will vest on a schedule with certain milestones. In effect, date before you get married.
When I went back to William, laid out the plan, and explained that the CEO title wasn’t on the table, he was furious. He cursed at me. He told me that our advisors were “idiots” and that he was the only one who could get us in the right rooms.
“Yes!” I thought. “This is the man I want leading Closeup into our exciting next chapter.”
Just kidding. After that call I knew that we didn’t want William involved in our company in any capacity.
Several days later, he sent me a copy of Venture Deals with a note inside about how he was disappointed about my lack of appreciation for value received. Yeah, because being bullied on the phone was so enriching. Please.
I appreciated the manipulative gift because it put an exclamation mark after our decision to have no further dealings with William.
As I close, it’s important for you to know that I haven’t always stuck to the rule, practice, and response I shared. This is my reminder as much for myself as you: Lead with trust. Watch what people do because actions speak louder than words. Believe people the first time, and match their access with their actions.
