The importance of trust

(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at: lawrence@krubner.com

Taryn East writes:

Assuming Goodwill is about the decision to trust, because trust pays. It’s one of those common-sense things that we often forget, that people will live up to your expectations. Expect the worst and that’s what you’ll get, but expect great things and you’ll get the best. Seth talks about trust as it relates to, say, a restaurant trusting you to pay *after* you’ve eaten your meal… or Tiffany’s trusting you to try on their expensive jewels… but obviously this has application to the full breadth of life.

Trust is tough. We all hate to get burned. Yet a lot of research seems to indicate some advantage to having a slight bias towards trusting others. For instance, researchers using game theory have found that when people are asked to play multiple rounds of prisoner’s dilemma, the people who trust on the first round tend to do best overall:

Axelrod offered another piece of advice to advocates of cooperation: Encourage players to cooperate in the first round.

And, interestingly, those willing to trust most tend to be those with the highest IQs, possibly because it takes a high IQ to think about the long term consequences of a strategy of distrust:

One of the great questions in social science is “What causes trust and trustworthiness?” In modern economic research, most attempts to answer this question have focused on institutions, rules, rewards, and punishments. But there have been exceptions: Most famously, Axelrod, in The Evolution of Cooperation, summarized and extended the literature on which strategies could create cooperation in a repeated prisoner’s dilemma. And digging still deeper, Axelrod asked which underlying player traits would be most likely to create an environment of cooperation.

This paper continues Axelrod’s search for the player-level roots of cooperation. We report the results of ten-round prisoner’s dilemma experiments where the players are subsequently given standard tests of cognitive ability, patience, risk aversion, and personality traits. We find that cognitive ability, as measured by the Raven’s Progressive Matrices, is a reliable predictor of cooperation: but this is only true at the pair level, not at the individual level. Thus, smarter pairs
are more cooperative, smarter individuals are not. We explore the dynamics of this relationship below.

Other findings are also of note: risk tolerance is never a reliable predictor of cooperation, while the patience measures tend to predict pair cooperation even when controlling for a pair’s cognitive
ability. Thus, we find the first experimental evidence for Axelrod’s claim that pairs of players who extend the “shadow of the future” by being patient are more likely to cooperate.

The first paper to explore whether intelligence spurs cooperation among strangers in a repeated prisoner’s dilemma is Jones (2008). Drawing on Axelrod’s advice for creating cooperative groups, Jones argued that since intelligence is associated with patience, and since intelligent players are more likely to understand the rules of the game (and hence to see the likely futility of defection), high-IQ groups were more likely to cooperate.

Axelrod offered another piece of advice to advocates of cooperation: Encourage players to cooperate in the first round. Recent work had shown that intelligent players are likely to do just that: Burks et al. (2009) found that high-IQ truck driving students were more likely to trust in the first stage of a sequential, one-round prisoner’s dilemma; and Putterman et al. (2010) found that IQ predicts early cooperation in a public goods game. Thus, we can now say that high-IQ players are more likely to create a high-trust environment through at least three of Axelrod’s pro-cooperation channels: patience, perceptiveness (of rules) and pleasantness (in the first round). Perhaps highly intelligent individuals have other anti-cooperation traits that don’t nest neatly into Axelrod’s advice, but if so, they must countervail against these tendencies.

Source