How to lock trust into your deal
You probably remember the Goldenballs programme, a gameshow hosted by Jasper Carrott a few years back. It was fun and an interesting insight into human behaviour. It was, of course, based on the game-theory construct of the Prisoner’s Dilemma, which is a very well studied construct, and they have even conducted academic analyses on Goldenballs itself.
There were some interesting findings, including:
On average players cooperated just over 50% of the time
People had a propensity towards reciprocity (ie, their likelihood of co-operation was dependent on the other person’s previous behaviour towards them)
Young men were less cooperative than young women but it was the other way around with older men and women
Contestants that promised to split were more likely to split
Contestants that initiated laughter were more likely to split
Perhaps surprisingly there was an inverse correlation between co-operation and physical contact (both the toucher and touchee were less likely to split).
Now, the Prisoner’s Dilemma is highly contextual and the show was set up to promote deceitfulness (after all, lying and trickery makes much better television), so we have to be careful with the conclusions we draw and how we might extrapolate from them. However, there was one particular episode that was especially interesting. I won’t tell you what happens because that would spoil the surprise(s) but you can watch it here, it’s a six minute clip.
I will tell you how he did it though – he changed the incentivisation structure of the other person. Initially, his counterpart was incentivised to steal but (by using a credible promise/threat) he changed this so he was able to trust his counterpart would split.
So the question is, then, can you change the incentivisation structures in your agreement to make sure you can trust the other person and get a good outcome?
A really simple example is payment on delivery. Now you know you can trust the other party to deliver (largely) because they won’t get paid unless they do so.
Another example is blockchain and smart contracts. The promise, at least, of blockchain is that trust is built into the technology so it is no longer a concern. Here is the definition of a smart contract from Investopedia:
“A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. The code controls the execution, and transactions are trackable and irreversible.”
The transaction is executed by code, it’s trackable and irreversible. You don’t have to worry if the other person will do what they promised, the technology will force them.
So think about the deal you’re involved in right now. Can you somehow structure it, through incentivisations or penalty clauses or timing or however, so you are able to trust the other person more? If you can, there’s probably a lot of value in doing so.