From Salon.com
You would hope that the president would have a good intuition about this in advance.
Meanwhile, the Daily News says, the president is growing paranoid about the people around him, furious over leaks about the mood inside the White House but unsure which of his aides is spreading the stories. One “knowledgeable source” says: “He’s asking [friends] for opinions on who he can trust and who he can’t.”
1 CommentPenn
Penn and Teller are great magicians and comedians. I’ve seen them in person
three times: once at MIT, once at a theatre in my town, and once at a bookstore
within walking distance of my house. Penn’s recent movie “The Aristocrats”
is pretty over the top; see it if you love comedians and are not easily offended.
It was shot with some pretty primitive equipment and would probably look
better on DVD than it did on the big screen.
In Business Week this week, they have lessons from 30 successful people.
Penn’s lesson is perfect. He totally gets it.
This was the hardest thing to learn when I was 19. When we first started
doing Penn & Teller shows, I thought that if you had a contract, it was
enforced. I thought there were the contract police — so you’d sign a
contract that says you’re going to give me a million dollars, and if you
don’t have a million dollars, someone will step in and give me my million
anyway. Right.That’s one of the hardest lessons for a guy like me who has no interest in
business but now runs a multimillion-dollar enterprise. A contract is not
much of a legal document. It’s just an agreement that two people who trust
each other have made. You can’t enter into a contract with anyone that you
wouldn’t make a handshake deal with, because everything comes down to a
handshake deal.The more experience I got in showbiz, the less I read the contracts. Now I
don’t bother. If I can’t make the deal in a phone call, and have them
understand it, then it’s not a worthwhile deal. You’re making a deal with
the people, not with the contract. That’s a mistake that people make a lot:
“We’ve got it in writing now.” The contract is clarification, but it’s not
enforcement.Penn Jillette
Magician, author, and producer
Master Locks
I love locks. They are quite cool. In grad school, I lived with the son of a locksmith, and I live
across the street from one now. I love to hear about how the technology works, and what
the state of the art is. But most locks are a waste of money. Think of Master combination
locks, which many of us used in schools and in gymnasium locker rooms. They are insanely
easy to defeat.
Here is an excerpt from the Master Locks website. “We no longer provide lock cominations
in response to phone requests!” You’ve got to be kidding me. Until recently (I’m guessing
9/11), I could have just called up with a lock serial number and gotten the combination from
the company that made the lock. Wow, that’s secure.
Q. I’ve forgotten the combination to my standard dial combination lock. How do I
obtain the combination that I use for personal use?A. Due to increased security concerns nationwide, Master Lock recognizes the
heightened need for additional safety measures. We no longer provide lock
combinations in response to phone, fax, or email requests. Please follow the
procedure outlined below to obtain the combination to your lock and submit
your request to:Master Lock Warehouse
Attn: Lost Combination Request
1590 W. Calle Plata, Suite B
Mariposa Park
Nogales, AZ 85621
But not to worry, there are ways to physically open the lock using a shim made from a beer can.
Or my favorite method, which shows how to reduce the number of combinations dramatically, and open the lock by feel (I’ve done this many times and it works). Here’s another method.
These locks are good for keeping out really, really stupid people that don’t own a $10
set of bolt cutters, and who are dishonest. I own a few padlocks, but given their limitations,
I rarely use them. I am more likely to lock myself out by forgetting the combo than someone
who really wants to get it. 
Stolen radio
I’ve parked my cars in some pretty bad ass places. Some of the worst neighborhoods in
New York, Newark, Providence, Boston, Baltimore, Philly, DC and other cities. Many times
I wasn’t sure the car would still be there when I came back. I’ve also parked at hundreds
of garages and valet parking lots where some unsavory seeming characters had custody
of my car. But in 29 years of driving, there has only been trouble once … my car radio was
stolen out of my car right in front of my house! I live on a pretty mild mannered street,
and many people probably don’t even lock their cars. I had my car locked, and it was in
plain view of the bay window at the front of my house. And the houses on my street are
very close together, and the car was in plain view of not one, but two police officers’
front windows! That’s where the only theft or vandalism I have ever experienced has
occurred.
My point is not that the world is a safe place. It is not. My point is that people suck at
figuring out who or what is trustworthy, and what places are safe.
Crane
You may be deceived if you trust too much, but you will live in torment if you
don’t trust enough.
– Frank Crane
Don’t count the ATM money
When you take money out from an ATM, do you count it? You shouldn’t. You
should trust the bank. First of all, in 25 years, I cannot remember receiving
the wrong number of $20 bills, so errors are extremely rare. But let’s say
that in one transaction out of 1000, the bank shorts you $20. (I think that
the probability of your making a profit due to two $20 bills being stuck
together is probably higher than the probability of being burned by nothing
coming out, because of the way an ATM works.)
But let’s say that you always take out $200 at a time, and that one time out
of 100, you are shorted $20. This means that you get $199.80 per withdrawal
on the average.
Let’s say that you earn $24 per hour, or 40 cents per minute. So as long as
you can count the ATM cash in less than a half minute, the verification cost
is less than the lost amount that you hope to recover. And you should be able
to count the money in five seconds or less anyway. But wait, suppose that
the ATM does short you. You then need to go visit the bank or call them up,
and convince them that they shorted you by $20. This will probably take
a half hour if you have a bank like mine, so you are spending $12 of time
to recover $20.
So, for 100 withdrawls of $200 each, where the bank miscounts every hundredth
transaction, the customer who doesn’t count nets $19,980. The customer who does
count nets $20,000 minus $12 of time to recover, and $6.67 to count the money
assuming 10 seconds to count 10 bills. That’s $19,981..33, or almost the same.
If you are worried about the $1.33 difference, get a life. Instead of counting money
for ten seconds 100 times, go hug someone 100 times. You’ll probably get more than
$1.33 worth of benefit from that.
If you earn more than $24 per hour or you have a slow bank, then you really
shouldn’t be counting.
Plus, I’ll bet the error rate for ATMs is mighty low … ATMs on Answers.com
François
It is more shameful to distrust one’s friends than to be deceived by them.
– François, duc de la Rochefoucauld
A simple example
Let’s take a simple example to analyze.
Self serve stands are ubiquitous in certain places such as Martha’s Vineyard. There
are lemonade stands, flower stands, produce stands and pie stands where you can
just help yourself to the goods and leave money in a jar. Or you can just help
yourself to the goods and put nothing in the jar. Or … if you are really a weasel, you
can help yourself to the jar full of money!
Many people would be uncomfortable running such an operation. What if someone
stole lemonade, flowers, pie, or worse yet … cash? And over time, people probably
will steal those things, and maybe even vandalize the stand a bit. But the point of
running a business selling things is not to maximize sales, and it is not to minimize
loss. The purpose of running a business, according to microecomics anyway, is
to maximize profits. Remember that. This will be discussed to death in this blog.
The goal is to maximize profits.
How are profits computed? Profit = Total Revenue – Total Costs.
Total Revenue for the lemonade stand is pretty straightforward. Let’s imagine that
lemonade sells for 50 cents a cup, and that we can sell 10 cups per hour from 9 AM
to 5 PM.
Total Costs is more complicated. Let’s assume that it costs 10 cents per cup to
brew up the lemonade. It costs 5 cents each for the cups. Let’s assume that little
kids value their time at $2.00 an hour. Let’s assume that 5 cups per hour will
get stolen when no one is watching, and no cups will get stolen when someone
is watching.
So the revenue for a day is 50 cents times 10 cups times 8 hours per day, or
$40 per day. (The weather is always perfect at our lemonade stand.)
At the paranoid end of the continuum, we have a kid keeping an eye on things
for $2 an hour for 8 hours, or $16 labor cost for the day. Then the cost
for 80 cup fulls of lemonade is $8, and the cost for 80 paper cups is $4.
Our total cost for the day is $28, and our total profit is $12.
At the naive and completely trusting end of the continuum, we spend
nothing on labor, and now we need 120 cups of lemonade because those
bastards are stealing 40 cups a day in addition to what we sell. So
that’s $18 for lemonade and cups. But wait, that leaves $22 profit for
the day, which is far better than the case where the lemonade stand
is staffed. We just need to get over the fact that someone is stealing
from us, which might be easier to do while playing on the beach and
getting $70 a week richer than the kid who is baking out in the sun
all day.
Wait, I can hear the counter arguments brewing. What about the
hoodlum kids who steal the actual jar full of money? Let’s assume that
every fifth day, a kid steals everything out of the jar at noon. So that’s
$20 disappearing every fifth day, or a loss of 10% of the revenue over
time.
The unstaffed lemonade stand then becomes $36-18=$18 a day profit,
which is still 50% higher than the non-trusting entrepreneurs make.
This is a clear case where extending trust yields the most profits.
Beatles
And in the end … the love you take is equal to the love you make.
— John Lennon/Paul McCartney, Abbey Road
The Framework
So here’s the framework for analyzing a situation. I am sure this will be refined
over time. That’s why this is a blog and not a book.
– How much does it cost to monitor what you don’t trust in this situation?
– Is the monitoring truly able to prevent the thing you are afraid of happening?
– Who is motivated to steal or deceive you in this is situation and why?
– What good things get blocked if you put monitoring in place?
– What is the true cost of what is being taken from you?
– If trust is violated, can you retaliate?
– Do you really know who can and cannot be trusted?
– Are there potential future benefits to trusting now?
– Are there other ways to make people trustworthy in this situation without controls?
The Honor System
Several weeks after we met, the woman who would become my wife moved to Florida
to work at a job that she had accepted just before we met. While getting settled into
her new town, she applied for a local bank account, and asked for an ATM card. The
bank employee explained to her that “if you need cash after hours, we’re on the honor
system here,” My future wife, a seasoned New York banker, rolled her eyes and
thought about how naive these small town bankers are. She envisioned a wicker
basket full of cash in the lobby after hours (kind of like on Halloween when people go
out trick or treating themselves and leave the candy on the steps with the “take only
one please” note). It turns out that the ATM network in that part of the country was
called “The Honor System”, which is kind of an odd name in my opinion.
I think we can all be certain that a bank that puts stacks of cash in the lobby would be
out of business soon. However, this blog is aimed at showing that maximizing profits
in business, or maximizing benefit as a consumer and most importantly, maximizing
happiness in one’s life, often involves increasing the amount of trust extended to
other entities … without extending it too far. As mentioned in the first post, this blog
is not about being trustworthy. Plenty is already written about that, and I think it is
self evident that there is value to that in most situations. The often neglected
converse of that is that taking risk and extending trust to others can be as important
as being trustworthy.
I will explain a framework which I believe helps analyze situations to determine what
the value would be of extending trust. There are some fundamental questions to be
asked in every situation. I can summarize my entire manifesto in one awkward
sentence: “It often costs more to not trust than to trust; you usually cannot figure
out a priori who is trustworthy; in most situations people are to be trusted anyway,
even if not for altruistic reasons; and when someone does burn you, the loss is often
not that large; and you often have the power to prevent them from doing it again.”
You should read that sentence again. It important. I run large parts of my life based
on this philosophy, and hang with others who do also. Once in a while, I have to
seriously question whether it is the right way to live, and always conclude that it is.
The Continuum
Think of a continuum which deals with trust. Not how trustworthy someone
or something is: that continuum would be Weasely < -> Trustworthy. I am talking
about the continuum that is: Paranoid < -> Naive. At one end are people and
governments and corporations that trust nothing. At the other end are people and
governments and corporations that trust everything. We all live at a certain point
on this continuum, and I am particularly fond of my place on it and the tools that I
use there. I am sure that this will sound like pontification to some, but I have spent
an inordinate amount of time thinking about this stuff, and it is time to open
up a discussion about it.
Welcome, Bienvenue and all that
Dudes and Dudettes,
There are two sides to trust … the entity which needs to be trusted and the entity
who needs to do the trusting. People give alot of thought to the former, and most
realize the value of trustworthiness (even if they choose to not be trustworthy
themselves). I think that people do not think often enough, formally enough or
rationally enough about how and when trust should be extended to others. That’s
what this blog is about.
I have carried around a paper manuscript called “The Trust Manifesto” for about
five years. I envisioned it as a book. On September 11th, 2001, I felt like tearing it
up because I imagined that it had instantly become obsolete. In the days after that,
I thought about my message and realized that it had actually become far more
relevant than before.
The paper manuscript is in bad condition. I can’t remember the password to the
Word document that contains it (nor the reason why I protected it.) I decided that
maybe it would make a better blog than a book, because it is the kind of topic that
needs dialog to cover completely.
One thing about blogs is that they do not lend themselves well to stories with a start
and finish that need to be told in chronological order. I read about 10 blogs on a
regular basis and they all lack those three properties. But I think the advantages of
a blog far outweigh the constraints of telling the story in this post-post-modern way.