“Knowing whether the intentions of the other are good or bad is more important than knowing what the other can do.”
This quote by Tim Earle, an economic anthropologist, often appears on one of my slides whenever I talk about the behavioural science of #trust. Sometimes, when the audience is composed solely of investment managers, I quote the equally insightful Amanda Tepper: “Your performance doesn’t really matter.”
Both quotes capture the priorities in our decision to trust others who expose us to risk. We always judge whether the other’s #intentions towards us are good or bad before we make any judgement about their abilities. Consequently, we are unwilling to abandon relationships in which the other works hard to do what is best for us, even if their abilities are only average.
So, I was greatly surprise when one recent audience member claimed that this must be wrong. Their firm had lost an important longstanding client because, according to the client, they lacked competence. I suggested that perhaps the entire relationship was competence-based, that there was no genuine trust. Such relationships do tend to be more transactional, and so are inherently fragile. “No,” came the response, “our intentions towards the client were the best.”
Sadly, only the client can testify to whether they perceived the firm’s intentions as good because such judgements are wholly subjective. Still, assuming the audience member’s insistence was correct, was it possible for a shifting competence judgement alone to jeopardise a longstanding, genuinely high-trust relationship?
It is certainly possible for the client to have discovered innovative and rewarding investment products and strategies from a competitor firm and to wonder why the current provider had not proposed the same. If the reason was that the provider had no idea that such products and strategies existed, then this might result in a weakened perception of competence by comparison, even though the provider had changed nothing. If, however, the reason was that the provider knew of their existence but did not offer them because of the additional time and effort required to understand and to manage these products and strategies, this might undermine the client’s perception that the provider had their best interests at heart. The client would then doubt the firm’s good intentions.
I have no idea whether this is what played out. However, there is an easy way to discover which of the perceptions was damaged. One needs only to examine the client’s sentiment concerning the termination decision. If it was one of disappointment then competence was genuinely to blame. The sentiment typically evoked when one suddenly discovers that the other does not have good intentions is betrayal.