The Power of Brutal Honesty

Matthias Rothmund left a surgical clamp inside a patient, which is the kind of thing you’d think would hurt a surgeon’s reputation. But he managed the opposite.

Rothmund blamed no one but himself, corrected the mistake, and asked his insurance company to offer the patient a quick settlement.

He hoped that was the end of it, but it wasn’t. The patient returned five years later, requesting Rothmund to perform an unrelated surgery.

“Rothmund was surprised,” Gerd Gigerenzer wrote in his book Risk Savvy. “The patient explained that he trusted Rothmund and his clinic precisely because Rothmund had immediately admitted his error and corrected it.”

This highlight’s two points:

I’m increasingly realizing that we haven’t fully grasped the decades-long shift away from industrial jobs where you made stuff toward service jobs where you make decisions.

For most of history the economy’s top product was labor. Grunt work. Brute force. It was impersonal and mindless, which is why 90% of it is now relegated to machines.

That’s not the case today. Now people sell services, which are basically short-term relationships. If you sell financial advice, or accounting, or design, or childcare, or nursing, your product is your ability to make good decisions, which rests entirely on customers’ willingness to trust you. It’s hard to grasp how important trust is, because for most of history businesses and employees could get away without much of it, since they weren’t selling it. But trust is becoming the global economy’s top product. “Honesty is the best policy” is viewed as a moral statement, but it’s not anymore. When your product is trust and your flaws will quickly be exposed it’s as practical a strategy as it gets.

Nike figured this out when it was a startup, competing against Puma and Adidas. Nike’s early shoes were seriously flawed. But it was brutally honest with customers, admitting its shortcomings and asking for feedback. That built trust, which was easy to discount but made all the difference to Nike’s real product: Its brand. Nike founder Phil Knight recalls in his book Shoe Dog how blown away he was with runners’ interest in Nike even when its samples were falling apart. One runner told him: “Everyone else bullshits, you guys always shoot straight. So if you say this new shoe, this Nike, is worth a shot, we believe.”

I’ve seen this with investment managers. Clients love when presentations emphasize investments that went poorly before mentioning successes. Few complain about the losers. They appreciate the honesty because – maybe without knowing it – what they’re buying is the investment manager’s trust. Bessemer Venture Partners publishes its “anti-portfolio,” a group of successful companies it passed on. “[Our] long and storied history has afforded our firm an unparalleled number of opportunities to completely screw up,” it writes. People love this, because it instantly builds trust.

Rothmund, Nike, and Bessemer Ventures have successes that vastly outnumber their screw ups. But it’s easy to overlook that success relies on your customers’ willingness to trust you, and trust means openly admitting that you’re not always successful. Trying to give the impression that you don’t make mistakes is interpreted as overoptimism at best, and more commonly what Nike’s first customers called “bullshit.” Customers, employees, and bosses can recover from occasional imperfection. But lack of trust is a non-starter.

An important point here is defining what brutal honesty means. A culture of honesty is usually seen as the ability to call out your co-workers – especially those below you – when they make a mistake. This is good, but can backfire if taken too far. Excessive criticism smashes morale, causes defensiveness, and is often rooted in your own insecurity. A smarter culture of honesty is when people feel comfortable revealing their own mistakes – especially managers and those at the top. Trickle-down honesty.

Something that took me a while to grasp but now seems obvious are simple points like:

Trust the investor who talks about his mistakes. Avoid the one who doesn’t, as his are likely larger.

Trust the news source that is constantly issuing corrections. Avoid the one who doesn’t, as its are likely larger.

Back the business that admits its future is uncertain. Avoid the one who doesn’t, as it truly has no idea what’s coming.

Trust the new employee who admits to being confused. Be skeptical of the one who doesn’t, as he likely has no idea what’s going on.

And as Rothmund might say, trust the surgeon who admits his errors, not the one who claims he doesn’t make any.


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