# Experimenting with Trust

Written by Marc Cohen, Faculty Fellow and Professor of Management and Philosophy
May 12, 2021

How can managers create a culture of trust?

Trust is widely studied using an experiment in which two “players” send money back and forth: player one is given money; he or she can send some of the money to player two (or keep all of it); the experimenter triples any amount sent, and then player two can return some money to player one, or none at all. Both players know the rules and the starting point, how much player one is given, but the players do not ever interact or meet.

The experiment makes it possible to measure trust quantitatively: if player one sends all of his/her funds, then player one completely trusts player two. But if player one sends a small percentage, then player one’s level of trust is low.

The experiment is designed to capture three core intuitions. First, cooperation can make both players better off. If player one sends all of his/her money, the total amount to be shared is tripled. But—this is the second intuition—sending money makes player one vulnerable because player two can keep the money. So, third, cooperation depends on player one trusting player two and sending money, and it depends on player two acting in a trustworthy way, returning funds.

What would you—the reader—do as player two, if player one received \$20, chose to send all \$20, and so you received \$60? How much would you send back in this first condition?

Now, play again (with a different player one): what would you do if player one received \$2000 and chose to send \$20, so you again received \$60? How much would you send back in this second condition?

I recently published a paper in Social Psychology Quarterly studying this experiment, with these conditions, co-authored with my Seattle University colleague Matt Isaac. We had over 1000 subjects. In the first condition above, player one trusts player two and sends 100 percent of his/her original funds. And if you, the reader, are like our subjects, as player two in this first condition you would return just under half, about \$27 (on average). Notice that player one benefited by trusting: after the transfers, player one has \$27 instead of the original \$20; this is the first intuition mentioned earlier. But player one was vulnerable. A few subjects kept the entire \$60, leaving player one with \$0.

There are two important points for managers and for business decision-making in this experiment. First, when we think about trusting another person or another company, the decision turns on that other person’s or that company’s likely behavior. Is the job applicant trustworthy? Is the potential supplier one we can trust? But the findings described here, that player two responds differently in the two conditions, show that trustworthiness is not a stable trait or fixed disposition. Player two’s decision, how much to return to player one, depended on the way player one behaved. If player one trusted player two and sent all of his/her funds, then player two acted in a trustworthy way and returned significant amounts. Player two acted in a cooperative way. But if player one didn’t trust player two, and sent only a nominal amount, then player two acted in a way that punished player one—sending back little or nothing. In our experiment, 40% of subjects in the distrusted condition sent nothing back! This sort of response on player two’s part is called “negative reciprocity” in the academic literature.

So, if player one trusted player two, then player two acted in a trustworthy way. Academics sometimes say, trust begets trustworthiness. How, then, does a manager create a culture of trust? On the usual thinking, the manager would need to find trustworthy employees. But this experiment suggests something different, that managers can create a culture of trust by trusting others.

Among academics, there is considerable dispute about how to most accurately conceptualize trust. But, despite the ongoing disagreement, everyone agrees that trusting behavior creates vulnerability. When a manager trusts an employee to take on a new role or complete some task, that manager and the organization could be hurt if the employee fails. When a company trusts a supplier to deliver a product at a certain time, the company could be hurt if the supplier fails.

One reason we all hesitate to trust—despite the benefits for the persons involved and for organizations in business contexts—is that we are afraid to make ourselves vulnerable. One Harvard Business Review article notes, “When [organizational] pressures are great, many managers become focused on their own job security and respond by constricting control. This can lead to the type of thinking that focuses on only securing bottom-line outcomes, which often come at the expense of other priorities, like developing relationships and empowering employees to make independent decisions.”

But the findings just outlined should give us confidence, trusting others affects their thinking, it affects their actions in a positive way, so the vulnerability is much less than we think. In short, trust works.

Second—and related—distrust has negative consequences, distrust does not work. We see this clearly above in the second, distrusted condition. The effect in that condition was stronger. Subjects responded more strongly (in the negative direction) to being distrusted compared to the positive effect of being trusted. We asked our subjects “why did you return little or nothing?” They said they were responding directly to being distrusted and also to the unfairness involved. And it’s important to note here that we didn’t label the condition, the subjects saw that they were distrusted—because player one sent only \$20, only 1 percent of his/her funds—and reacted.  So, the manager who expresses distrust toward an employee—by, say, exercising surveillance or control over their behavior—will find that those employees will respond negatively.

What then is a manager to do? While there is an enormous literature telling managers how to trust, I find this literature to be confusing. Shouldn’t we know what to do? How can it be news to managers that they need to be trusting of their employees?

Those in search of how to create trusting environments might be inspired by the work on trust by Paul Zak:

• Publicly recognize excellence and celebrate employee successes
• Induce “challenge stress,” giving employees tasks that are difficult but achievable, with defined endpoints, which can improve focus and strengthen social connections among teammates
• Give employees autonomy and discretion in determining how to do their work
• Give employees choice in their work assignments
• Share information broadly; this reduces stress, which undermines trust and teamwork
• Help employees build social connections so that employees are not merely task-focused
• Focus on professional growth in employees
• Show vulnerability, “asking for help is the sign of a secure leader—one who engages everyone to reach goals.”

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