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Iris Bohnet on Trust and Risk

The inclination to trust or distrust is central to any kind of social interaction. Behavioral economist Iris Bohnet studies trust and betrayal aversion and how people's ability to trust-or not-affects the workings of governments, economies, and individual interactions. Bohnet is a professor of public policy and is the faculty chair of the Women and Public Policy Program.

Q: Why is trust a significant topic to consider when studying economic and governmental interactions?

Bohnet: There are basically two reasons to study trust in this context: one being academic, and one related to public policy. From the public policy perspective, trust clearly is hugely relevant for any society. It's hugely relevant for negotiation, a topic that I teach here at the Kennedy School. In order to be a successful negotiator, you have to know how to build trust, when to trust, how to work with people who have broken your trust. Only when you trust, can you share information and create value. So it's hugely relevant for negotiations; it's hugely relevant for economies, for any governments. After all, we have to trust our elected officials and we don't have any control over their actions. So trust is involved in almost all interactions so it's just a very important topic to better understand.

From an academic perspective, the economic model of human interaction assumes that people are rational and basically motivated by self interest. If you assume that, then you have to conclude that people cannot trust a stranger in a 'one-shot' interaction because they have no way of knowing how trustworthy that person is, and they have no way of sanctioning that person after the fact if they betray your trust. Within economics, the prediction is 'there is no trust' because there is no trustworthiness in anonymous interactions. Now, we all know that can't be true because our experience tells us there is trust. Through my research, I just wanted to find out: what is it that motivates people to trust, beyond self interest, beyond expectations of trustworthiness? This is the academic motivation that triggered my research.

Q: How do factors such as gender, age, race and religion affect a person's willingness to trust and to accept risk?

Bohnet: For the U.S., we found that men, whites, Protestants and older people were more averse to being betrayed than their respective counterparts. You could argue that these are the groups which are typically associated with having higher status in our society.

Q: What have you learned about trust and betrayal aversion in your research across different cultures?

Bohnet: Because people dislike being betrayed more than simply losing in a lottery, they take risks less willingly when the agent of uncertainty is another person rather than nature or chance. In joint research with Richard Zeckhauser, also a professor at the Kennedy School, we found that betrayal aversion is quite a robust phenomenon across very diverse countries. At the same time, betrayal aversion is more pronounced in certain parts of the world. For example, we ran our experimental studies in three Gulf countries: Kuwait, Oman and the United Arab Emirates. We found there that in fact people are more averse to being betrayed. What this means is that trust in these countries is less responsive to changes in the costs of betrayal than in Western countries. Rather, Emiratis, Kuwaitis and Omanis want the likelihood of trustworthiness to be very high before they are willing to trust.

That said, I want to be careful about drawing general conclusions because, after all, our research is based on experimental studies with a subset of the population. But still, if what we find is indeed generalizable, and applies to general populations in these Gulf countries that we studied, then that means that people basically only trust when there is almost a guarantee of trustworthiness. That implies that you trust the people who you know well and that you have a hard time trusting strangers, and clearly that has business implications. These economies have a much harder time opening up to the world and interacting in long-distance business transactions.

Q: In that case, how should we understand trust in the context of an increasingly interconnected, shrinking world? In seeking out successful negotiations and interactions across cultural boundaries, do concepts of what trust means change?

Bohnet: It is indeed crucial for the success of cross-cultural interactions and more generally cross-cultural negotiations to better understand the meaning of trust in different societies. Violations of trust are perceived very differently in different societies. For some, the breach of a contract or broken trust is just a matter of business. As long as they are compensated for losses, they just move on. For others, trust betrayal is irreparable, even when compensated. There are additional psychological costs involved in trust violations, and we have to take these into account to become successful negotiators across the world.