Trust and Trustworthiness

[Opening remarks]

Rabbi Sacks:

Friends, it is an enormous pleasure, first of all, to be here to deliver a lecture and to convene this session on behalf of the Woolf Institute, one of the great, great interfaith institutes, one of the great forces for good between faiths in Britain and Europe. To pay tribute to Ed Kessler and his team for the fantastic job they do. To salute the person whose name the institute bears, to salute Lord and Lady Woolf, who honour us by their presence here today, and Lord and Lady Woolf, Harry and Marguerite, it is so wonderful of you to have given the authority of your name and your eminence to this. To welcome Father Philip from the Gregorian University, the Cardinal Bea Centre, old friends from our visit together with the Pope, Benedict, about a year and a half ago, and especially to say what a privilege it is to be sharing a platform with a beloved friend, Rowan. Rowan and I seem to have started a fashion, because I'm the first Chief Rabbi, I think, to take early retirement, you are the first Archbishop of Canterbury, His Holiness, so Rowan's telling me he's very worried about the Dalai Lama, so that's the one to watch.

And just finally to add the last footnote on the subject of optimism, and this is a true story actually, and this will show you what the Talmudic mind is actually like. We were discussing a few years ago with an eminent Rabbi from Israel, an eminent Talmudist, and we were talking about the situation, and we asked him, ‘Are you an optimist?’ And he gave the most rabbinical reply I have ever heard, he said, ‘I am not an optimist in the Leibniz sense, that this is the best of all possible worlds. Neither am I a pessimist in the Gnostic sense, that this is the worst of all possible worlds.’ So we said, ‘What are you then? What do you believe?’ He said, ‘I believe that this is the worst of all possible worlds, in which there is still hope.’ Now if you can figure that one out, you get rabbinical ordination immediately.

Friends, I will just say a few words about trust, and then we'll open it up for questions and for discussion. But there is a quote that I love from the sociologist Peter Berger, who says the following, “If we take our minds back many millennia, back into the dawn of history, we may imagine the appearance of the very first intellectual. After centuries, during which people did nothing but rhythmically bang away with stone implements and keep the fires from growing out, there was someone who interrupted these wholesome activities just long enough to have an idea, which he or she then proceeded to announce to the other members of the tribe. We can make a pretty good guess as to what the idea was. The tribe is in a state of crisis.”

So that is what intellectuals are supposed to say, and therefore, let me say, we are in a state of crisis.

I think when it comes to trust, that is probably not an exaggeration. In the United States, for instance, the 2011 CNN poll showed that only 15% of Americans trust the government to do what is right most of the time. 15%, down from 70% in the 1960s. Similar declines in all professions. In America, only 7% of employees trust their employers. Extraordinary, extraordinary figure.

In Britain, we have seen one group of people after another come into serious question, whether they be bankers, CEOs, parliamentarians, journalists, even the police, even religious leadership, media personalities, sports heroes. There's been scandal after scandal that has undermined trust in a way that is quite serious. It's morally serious, but it is also serious in every other way.

A financial crisis happens when banks, after 2008, when banks no longer trusted other banks, and therefore, the supply of credit froze. In other words, it reminded us just how fundamental things that we think of as very down-to-earth, physical, empirical activities like economics and politics, depend on these very spiritual, abstract, moral ideas. 

Credit comes from the Latin credo, to believe. Fiduciary responsibility comes from the Latin for faith. Trust is an almost religious word. It is a religious word, and yet it is that on which any economy, indeed, any institution, any society depends.

And therefore, at such times, when on both sides of the Atlantic there is an acknowledged crisis of trust, it's appropriate to ask ourselves fundamental questions. What is trust? Why is it important? What creates it and sustains it? What damages and destroys it? What happens when trust breaks down? Is it mere coincidence that it has happened in so many spheres at the same time? And does this have some kind of religious dimension? 

And I want to begin by telling a story. It is, to my mind, one of the most exciting of all intellectual adventures, and it took place over the 100 or so, 130 years between... well, we start with Adam Smith, but it very much accelerated in the 1970s and 1980s. And I find this a thrilling story. You may be familiar with it. Please forgive me if I just tell it, because I like hearing it. I like stories. 

So we begin with Adam Smith and “The Wealth of Nations” and the axiom on which the market economy depends. You remember that Adam Smith famously said, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves not to their humanity, but to their self-love.” 

This was the transforming idea of the 18th century, when Manneville had mentioned it, Montesquieu mentioned it, but it's most famously associated with Adam Smith, that it is the magic of the market that turns individual self-interest into collective gain. And indeed, he gave it an almost mystical, almost spiritual resonance, because he called it famously “the invisible hand,” as if Divine Providence was somehow taking our lesser inclinations and turning them into the collective good.

And that was the central dogma of market economics. However, and of course it was challenged by other systems - communism, socialism, but what is interesting is how three disciplines came together in the 19th and 20th centuries to throw doubt on this principle. 

And we begin with story one, which began in 1944.

There was a brilliant guy, John von Neumann, who was famous for developing computing, he was involved in the development of the atomic bomb, he was a nuclear physicist, and so on. But John von Neumann's father was a banker, and they used to talk business over the dinner table. So, yeah, they didn't have a rabbi there, they were supposed to talk about other things on the Sabbath, but never mind, they spoke about business.

Okay, so John von Neumann knew that economic theory, as it existed in those days, those supply and demand curves, and perfect competition, and all the rest of it, was radically inadequate to describe how people actually make financial decisions. Because the whole assumption of economics until then, which is that you can get perfect information and you can know what the supply and demand are going to be, and so on, actually ignored the central fact of all economic behaviour, which is that the results of what I do will depend on how you respond to what I do. And I cannot know that in advance. And that is the determinant. 

How can you act under conditions of uncertainty when you don't know how your partner, your competitor, or the market, will respond to what you do? And in order to create a theory that was more realistic, he created a new branch of mathematics known as Games Theory. And that was the 1944 chapter one in the story.

In 1951, somebody produced a little anomaly in Games Theory, which has become very famous since, called the Prisoner's Dilemma. You know the Prisoner's Dilemma. It says, the police arrest two people. (Honest, it wasn't me, sorry.) But the police arrest two people. They haven't got sufficient evidence to convict them of a crime. They only have minor evidence of a minor infraction. All they have to do depends on separating the two and putting pressure on each of them to inform on the other. And to do so, they propose a deal.

If you inform on the other person and the other person stays silent, he gets 10 years in jail, and you go free. If you both inform on one another, you both get five years. If you stay absolutely silent, then you will each only be convicted for a minor crime and you will be sentenced to one year each.

Now, what is interesting about the Prisoner's Dilemma is that it is very easy to see that for each prisoner, the best option is to inform on the other. That means that in the worst-case scenario, you only suffer five years in prison and in the best-case scenario, you walk free. Whereas if you stay silent, the risk is you get worst-case scenario, 10 years in prison and the best-case scenario, one year in prison.

So each has a reason to inform on the other. The end result is they both go to jail for five years, which is not the best outcome, because if they had both stayed silent, they would have got out four years earlier. 

Now, the interesting thing about the Prisoner's Dilemma is although it sounds just like a mathematical curiosity, what it was was as damaging to Adam Smith's economics as Einstein was to Newtonian physics.

It was a spanner in the works of market economics. Market economics depends on the idea that if we each pursue our own rational self-interest, the result is good for everyone. Whereas what the Prisoner's Dilemma shows is that if we each pursue our own self-interest, the result is bad for everyone. And this was the first fundamental refutation of Adam Smith's market economics. 

And of course, why did it happen? Because in that situation, the two prisoners don't trust one another. That is why it happens.

And that began to hint at the fact that in the absence of trust, the market economy will not produce results that are good for everyone and may produce results that are bad for everyone. The absence of trust demolishes the case for the market economy. So that was the next stage.

The next stage beyond that involved neo-Darwinians. Darwin was absolutely fascinated by one phenomenon that he observed that seemed to refute his theory of natural selection. Darwin couldn't work out how come there were still any altruists anymore.

Can you work this out? Natural selection should select against altruists. Because, as Darwin pointed out, if an individual risks his life for the sake of the group, that individual is likely to die younger than other individuals who play it safe and stand at the back of the room. And the end result is the altruist should die first and eventually die out.

And yet Darwin discovered that altruism was highly valued in every human society that anyone had ever come across. So how on earth was altruism possible on the theory of natural selection?  Darwin offered an answer but the matter remained indeterminate until the 1970s. When the 1970s came along, powerful computers were available for the first time.

And sociobiologists, neo-Darwinians, were able to test the answer to the Prisoner's Dilemma. The Prisoner's Dilemma says the following: that if these two criminals who got somehow persuaded to inform on one another, if they did this time after time after time, they would eventually learn that if they just both kept quiet, it would be better for both of them. In other words, if you have repeated instances in the iterated Prisoner's Dilemma, the two parties eventually learn to trust one another and act for their collective good, which turns out to be for each of their individual goods.

So, availability of large-scale computing allowed a political scientist, Robert Axelrod, to announce an international competition for the computer programme that would programme a species best able to survive repeated encounters with strangers whom you don't know how they're going to behave towards you. 

In other words, a lot of times playing the Game Theory and the Prisoner's Dilemma. And this was won by a Canadian called Anatole Rappaport and the winning programme was called “Tit for Tat,” which says as follows, if you meet a stranger, be nice to them. Then, do exactly what they do to you. 

So, if the stranger responds to your being nice, by being nice, you carry on being nice. If the stranger responds by being nasty, then be nasty, and eventually, the stranger will learn that it pays to be nice rather than nasty, because if he's nasty to you, you'll be nasty to him.

This is called, by biologists, reciprocal altruism. It's called measure for measure, and it is the principle of retributive justice. As you do to others, so shall it be done to you.

And the nice story about this is that in 1989, a Polish mathematician now at Harvard called Martin Nowak invented a programme that beats “Tit for Tat.” It's called “Generous.” And “Generous” beats “Tit for Tat” because you can work out that if you meet a really nasty person and they're nasty to you, you have to be nasty to them, and they get nastier to you, and you get caught up in a cycle of vengeance and retaliation of the kind that we know throughout the world.

So how do you break the cycle? 

And Martin Nowak worked out that you can break the cycle by programming the computer, regularly but randomly, to ignore the last move of the other person. In other words, you start being gratuitously nice, even when the person's been nasty to you. In other words, if you can train the computer, non-predictably but relatively often, to ignore a slight, if you can train the computer to forget, you get a programme that beats “Tit for Tat.”

And forgetting is the nearest a computer gets to forgiving. It's the computer equivalent of forgiving. 

So it turns out that as a result of the 1970s and 1980s studies of reciprocal altruism, it turns out that a computer came up with the answer that if you want a good set of arrangements between strangers who encounter one another in unpredictable ways, you need “Tit for Tat” and “Generous,” in other words, justice and mercy.

The basic principles of the Judeo-Christian ethic established by a computer which must, I think, relieve the Almighty. So there we are. It worked.

We now know, therefore, why altruism is actually a very effective thing, because altruists learn to get on with one another. And if you learn to get on with one another, you then take advantage of the following fact: that if it's a contest - we will not go into football teams here because, you know, I have support of a football team that is a permanent test of faith - so let's just talk about humans and lions.

One man versus one lion. Lion wins. 10 men versus lion, they then stand a chance. So if your way of responding to strangers allows you, through reciprocal altruism and forgiveness, to construct a good group relationship, you will stand a better chance of survival than otherwise. And that is the point that Darwin makes in his book “The Descent of Man.”

It is an argument currently being fought between E.O. Wilson of Harvard and Richard Dawkins of another place, whether natural selection works on the basis of group selection or individual selection, but the truth is that it's a fairly irrelevant point, because we hand on our genes as individuals, but we survive, and only survive, as members of groups. 

So therefore, when you have a high level of trust that emerges from repeated encounters between people who learn to live together without betraying one another's trust; if you have a high level of trust, then you have a group that will flourish, whereas if you have a high level of suspicion, fear, anxiety, corruption, and cynicism, then the group will not cohere and you will fail. 

We can therefore now establish, through the iterated Prisoner's Dilemma, through Axelrod and Marty Novak, the following formula, which Darwin fully understood, which is that arenas of competition - biology, natural selection, competition for scarce resources, or the market economy, competition for wealth, or liberal democratic politics, competition for power, there will only be human flourishing. There will only be human survival. If, as well as competition, there is also cooperation. And therefore, cooperation must be institutionalised in society and that depends on habits that induce trust.

That, however, raises the question, where in a liberal democratic society will you find the arenas that create cooperation, not just competition? 

And the short answer is that we need environments in which two things happen. Number one, we encounter one another repeatedly. You know, that is the reason why there is more crime and more incivility in cities than there is in little villages.

Because I am more likely to take advantage of you if I think I'm never going to see you again than if I have to meet you tomorrow in the local shop or in the pub. Iterated Prisoner's Dilemma means habits of trust only occur when there are repeated encounters between the same individuals. 

We can therefore now say why it is that families and communities and neighbourhoods, all the things that make up civil society, are the places where we learn trust.

Because they are the homes of the iterated Prisoner's Dilemma. In families, in communities, in neighbourhoods, among friends, that is where we have those repeated encounters which teach us not to be ruthless with one another, but to cooperate. Because ruthlessness with one another results in consequences that are bad for you and bad for me.

And those are the relationships to which in my Lambeth Lecture that Rowan mentioned, I called covenantal relationships as opposed to contractual ones. Contractual relationships in a contract, two or more individuals, each pursuing their own interest, come together to make an exchange for mutual benefit. 

So there are commercial contracts that create the market, there is a social contract that creates the State.

A covenant is something different. In a covenant, two or more individuals, each respecting the dignity and the integrity of the other, come together in a bond of love and trust to share their interests, sometimes even to share their lives, by pledging faithfulness to one another, to do together what neither can do alone. 

A contract is a transaction. A covenant is a relationship. 

Or to put it slightly differently, a contract is about interests while a covenant is about identity. It's about you and me coming together to form an us. That is why contracts benefit but covenants transform. 

So economics and politics, the market and the State are about the logic of competition, but covenant is about the logic of cooperation, and cooperation is what creates trust. And that is why we need a strong civil society about which I mean which Professor Sennett - speedy your recovery but he’s just written a lovely book called “Together,” celebrating those contexts in which we do come together in covenantal relations in which neither is seeking wealth at the cost of the other or power at the cost of the other.

Now, once you define trust in this way then you see that this is the essential theme of the Hebrew Bible. It is certainly a central theme of the Judeo-Christian tradition, but I'm just talking for a moment as a Jew. It is absolutely central to the Hebrew Bible.

The real issue of the Hebrew Bible is how do you combine freedom, human freedom and order? You can have order without freedom and you can have freedom without order. How do you create them both? 

So Genesis begins with three stories in which God gives human beings freedom and they misuse that freedom.

Adam and Eve eat the forbidden fruit, Cain kills Abel, and immediately we find ourselves in the generation of the flood. Hobbes' state of nature, the war of all against all, the world filled with violence. So Genesis begins with freedom misused and the result is chaos. Freedom without order. Exodus begins in the exact opposite point of order without freedom. The Egypt of the Pharaohs, where order is secured at the cost of slavery. 

And the key institution that allows the coexistence of free human beings without any coercive force, a relationship built on trust… and the person who really saw this was Nietzsche in his book “The Genealogy of Morals” and also Hannah Arendt in her book “The Human Condition” - the key institution that combines freedom and order is the act of making a promise. 

When I make a promise, I freely place myself under an obligation on which you can rely and therefore I've created an order which I have freely embraced. So that act of promising that use of language as a performative utterance… God creates the natural world with words. We create the social world with words.

And those performative utterances making a promise and the act of mutual promise, where X promises Y and Y promises X is called in Hebrew “brit,” which is the Hebrew for covenant. And that is the defining moment in Judaism, that summit of the book of Exodus in Exodus 19 and 20, when God and the Israelites enter into a mutually binding pledge, a promise to act for one another and to stay loyal to one another. 

And the result is a covenantal society in which our trust in God and God's trust in us translates into a society in which trust is a collective property of the society in which I trust others and others are able to trust me.

The Hebrew word “emunah,” which we translate as faith, really means trust. Abraham had faith in God when He said, “You will have a child,” that means he trusted God to act on His promise. The Hebrew word “emet,” which means true, really has no connection with the word true in English. It means doing what you said you were going to do. You are truthful but you honour your promises. When we say God is true, when Jacob says “I am unworthy of all Your kindness and Your truth,” this means a God who keeps His promises.

Someone who is true is somebody who honours promises, i.e. someone who is trustworthy. 

Now, I have therefore argued for many many years that a market economy depends on virtues that are not themselves created by a market economy and may be undermined by the market economy. Because the market economy cannot deliver without trust, and trust is a property not of an economic relationship, a transaction, it's the result not of a contract but of a covenant.

Without trust, the market economy fails in the way that the Prisoner's Dilemma says it will fail and the end result will be bad for all of us. 

Now, this is a theoretical story of ideas that I find fascinating because it's not a religious story - it involves maths, biology and all the rest of it. It's a very very interesting story, but it actually works. And when that trust breaks down the result is tragic. And we surely all know this. 

I had the privilege of knowing a man, I won't name him but was widely seen as Britain's leading industrialist over a period of some 50 years.

I knew him in the last years of his life. He was not a religious man but he came to the synagogue on our Day of Atonement, that's a day of fasting and praying which usually makes you feel pious for a year so you don't have to come to the next Day of Atonement. But he was a wonderful man, deeply moral, who wept at our last conversation. He said ‘My successor is paying himself more than 10 times what I paid myself and he's destroying everything I built,’ and he did. That's what happens when trust is betrayed.

There's a wonderful story told by Lord Seiff - David Seiff I imagine - in his autobiography “Don't Ask the Price.” Marks and Spencers used to insist that their suppliers gave their employees good working conditions. There was one firm that supplied Marks and Spencers with textiles for years and years and years, and Marks and Spencers were not satisfied with the recreational and canteen facilities it had for its workers, and it said to the supplier, ‘You have to improve those facilities or we will cease to do business with you.’

The company thought that Marks and Spencers were bluffing. They had been their suppliers for decades, they wouldn't take their custom away. They didn't improve the facilities.

Marks and Spencers ceased to do business with them and they went bankrupt.

And that… and to take a very unobvious patron saint - well I'm sure I don't want to judge him harshly, but to take George Soros, not our obvious first candidate for sainthood - but George Soros has a very interesting story to tell about what happened to him initially, when he became an investment manager.

He says for the first two or three years my only job was establishing my character. People had to know that to do business with me, I was someone they could trust. He said that is not done anymore.

How is it done now? Get in the lawyers. Do these watertight contracts and, you know, you rely on the lawyers to make sure that if the guy is not honest, you will recover your losses. The whole concept of character and trust turned out to be central to British industrial giants, retail giants like Marks and Spencers, and even a very speculative activity like investment management… good business depends on that set of principles that allow people to trust one another. Principles like mutual benefit, honesty, integrity, fiduciary responsibility, accountability, transparency, equity, and so on.

And that constitutes an environment of trust without which companies will fail, banks will fail, the economy will fail, and society will spin apart. But that depends on understanding the logic of the Prisoner's Dilemma.

If we think - as we have been told so often for a half-century and more - that the only thing that really matters is self-interest - does it work for you? Is it good for you? Are you worth it?

If that is the only force driving the economy and politics, and that there is no area of culture that is dedicated to covenantal relationships, then the pursuit of self-interest will in the long run be adverse, hostile to self-interest. 

You cannot build a society on the basis of a political and economic structure alone. You need families, communities, congregations, civil societies, which run on the basis of the logic of cooperation rather than competition. And those are the environments in which trust is born. Absent that and we are in trouble.

So let me end just with two quotes. One, from the political philosopher Michael Walzer, who puts it very bluntly. He says, “We are perhaps the most individualist society that ever existed in human history. Compared certainly to earlier and old world societies, we are radically liberated all of us, free to plot our own course, to plan our own lives, to choose a career, to choose a partner or a succession of partners, to choose a religion or no religion, to choose a politics or an anti-politics, to choose a lifestyle, any style. Free to do our own thing. And this freedom, energising and exciting as it is, is also profoundly disintegrative, making it very difficult for individuals to find any stable communal support, very difficult for any community to count on the responsible participation of its individual members. It opens solitary men and women to the impact of the lowest common denominator, commercial culture. It works against commitment to the larger democratic union, and also against the solidarity of all cultural groups that constitute our multiculturalism.” 

So this individualism comes at a price, and it is ultimately the breakdown of the relationship which means the loss of trust. And the person who said it most bluntly - and this is one of my favourite quotes of all - was Bertrand Russell. Bertrand Russell… for Bertrand Russell, the great heights of western civilisation were classical Greece and Renaissance Italy, but he writes the following in the introduction to his “History of Western Philosophy.”

He says, “What happened in the great age of Greece happened again in Renaissance Italy. Traditional moral restraints disappeared because they were seen to be associated with superstition. The liberation from fetters made individuals energetic and creative, producing a rare fluorescence of genius, but the anarchy and treachery which inevitably resulted from the decay of morals, made Italians collectively impotent and they fell, like the Greeks, under the domination of nations less civilised than themselves but not so destitute of social cohesion.”

Lose social cohesion, lose trust on which it's built, you lose everything. In short, a culture of individualism and self-interest cannot be a culture of trust and it cannot be the viable basis of society.

I've tried to put forward a very minimalist argument. I haven't said that religion understands business ethics better than business people. I haven't said you're going to be honest because if you believe that God's watching you fiddling the books. I haven't said you'll be honest because religion alone has moral certainty. I haven't echoed Max Weber and said it was the Protestant ethic that gave birth to capitalism, or Michael Novak who wrote a book called “The Catholic Ethic and the Spirit of Capitalism,” and I certainly didn't mention Werner Sombart, who blamed it all on the Jews. 

So just a minimalist thing, which is that communities of faith are places that are guardians of what we call social capital of trust, because they're there to support families and communities and charities to work together for the common good, not individual good.

And therefore, religious groups, together with other groups and other modes of solidarity, must work to restore our badly depleted store of trust. I think Jews, Christians, Muslims, and people of all other faiths and of none, should join forces to bring morals back to markets, trust back to institutions. 

And I know that my own tradition, the great Jewish tradition, has always believed that business is and the economy is a moral enterprise. Let us renew our sources of moral energy by rebuilding relationships of trust.

Thank you very much indeed.