A Seamless Web of Deserved Trust
Trust is earned over many years. Seamless trust requires decades.
“The highest form which civilization can reach is a seamless web of deserved trust. Not much procedure, just totally reliable people correctly trusting one another.”
Charlie Munger and Warren Buffett met in 1959 at a dinner party hosted by a mutual friend. They hit it off immediately and talked for several hours. That dinner launched one of the most famous business partnerships in history and, more importantly, a personal friendship that lasted for over six decades.
Many of us have experienced the thrill of hitting it off with someone immediately, whether in a business context, a friendship, or a romantic relationship. While that initial encounter is always exciting, such relationships often fizzle out over time. Either the individuals involved find that they do not have all that much in common after all or something happens to create an unrecoverable breach of trust.
The truth is that deep and lasting trust takes many years to build and can be destroyed very quickly. Trust is fragile at first and strengthens over time, as positive experiences build up like compound interest. At first, even with a high rate of “compounding”, the absolute level of trust remains relatively low. Slowly, it builds over time until trust is simply assumed in all contexts and you approach the idealized “seamless web of deserved trust” that Charlie Munger often spoke about.
Charlie Munger officially joined Berkshire Hathaway as Vice Chairman in 1978, almost two decades after he met Warren Buffett. However, they started participating in deals together in the 1960s. I suspect that a deep level of trust built up over time.
This line from Charlie Munger always got a big laugh:
“Warren, you’ll end up agreeing with me because you’re smart and I am right.”
— Charlie Munger
On the surface, this is an extremely arrogant statement. But if it is said by someone who you implicitly trust, and maybe if it is said with a wink, you know that the person is sincere and means well. I picture Charlie Munger pulling Warren Buffett aside during the negotiations for See’s Candies and using some variation of this line.
The purchase of See’s Candies by Blue Chip Stamps in 1972 was not the first deal Warren Buffett and Charlie Munger invested in together but it might have been the point at which the two men developed a truly seamless web of deserved trust.1 Mr. Munger is widely credited with convincing Mr. Buffett to pay more than he was comfortable paying for See’s. There is no doubt that trust played a big role in getting the See’s deal to the finish line. Of course, it has been a spectacular success story and changed the trajectory of Berkshire Hathaway over the subsequent half century.
Studying how others developed a seamless web of deserved trust is more than an intellectual exercise. Most of us would like to have such relationships in our own lives, both in a business and personal context. Unfortunately, I think that very few of us ever get to the level of trust that Warren Buffett and Charlie Munger had for each other. That level of trust is extremely rare. How can we improve our odds if this is the goal?
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I am writing this article on New Year’s Eve, a day when many people are thinking of setting goals that they hope will fundamentally change their lives. Rather than adopting a resolution that will quickly be discarded, it might be better to consider how you can build a seamless web of deserved trust in your life. I’ll focus on how this might be done in a business or professional context.
It is very important to start young. Too many people in their 20s and 30s are hyper-focused on career advancement and making money. There is nothing necessarily wrong with this focus, but it is a mistake to ignore the need to start forming enduring business relationships that could last a lifetime.
Those who are working for people who have no integrity and are unworthy of respect should consider what the ultimate outcome is likely to be. If you are working for someone who is unethical with customers, suppliers, and other employees, why would you be immune to becoming their victim in the future?
One of two things is likely to happen: you will eventually find yourself on the wrong side of your employer and become a victim or, even worse, you will adopt the unethical behavior of your employer in a desperate effort to survive.
I am a firm believer that people almost invariably come to resemble those who they spend the most time with. If you spend time with toxic people, you will eventually either become a toxic person yourself or you will become a victim. There is no possibility of forming any level of trust in such a situation. There’s only a mutual sense of distrust with everyone being on guard against attacks. This is no way to reach your full human potential and it is also a very unpleasant way to live.
One of the hallmarks of toxic people is that they are manipulative and trap victims in a cycle of dependency. The pay could be somewhat above market levels or there could be perquisites, much like the many benefits that Gordon Gekko showered on the hapless Bud Fox in Wall Street. Ideally, the toxic boss wants his or her employees to become totally dependent and accustomed to the pay and benefits to the point where escaping becomes difficult or impossible. The “ideal” situation is for the employee to have an enormous mortgage, a spouse at home, and several kids in private schools.
Obviously, a seamless web of deserved trust cannot develop in such an environment. No matter how painful, it is important to extricate yourself. That does not mean that it is always prudent to do so tomorrow, but there should be a plan to somehow get out, even if doing so is painful. There will never be an ideal time to act.
Building a six decade relationship grounded in a seamless web of deserved trust means that you have to start in your twenties or early thirties, but all is not lost if you failed to recognize this as a young person. If Warren Buffett and Charlie Munger reached this level of trust by the time they partnered to buy See’s Candies thirteen years after first meeting, the same should still be possible for most of us.
Happy New Year!
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Needless to say, I have no way of knowing precisely when Warren Buffett and Charlie Munger achieved “seamless trust” for each other. It could have been much earlier than 1972, but I think that it is clear that such trust surely existed by 1972 at the latest.