Trust Can Be the Ultimate Competitive Advantage

I watched an interview with Mohnish Pabrai. He’s a successful hedge fund investor and protégé of Berkshire Hathaway leaders Warren Buffet and Charlie Munger. Mohnish shares lots of great nuggets in this interview, but his insight that being ethical is a competitive advantage especially stuck with me. This quote was quite powerful:

What people don’t realize is most things in life function on trust. They don’t function based on contracts. If you become very trustworthy it gives you a massive competitive advantage and leg up in life.

So, what is trust? Trust results from having a sense that the other person is driven by things other than their own gain.

Many believe that you must be hard-nosed, have sharp elbows, or only look out for your own interests to be successful. Monish believes otherwise and views being highly ethical as a competitive advantage because once people feel they can trust you, “the world is at your disposal.” Translation: you attract great people and opportunities to you when you’re not just looking out for yourself. The more high-quality people and opportunities you attract, the more money can be made (or, if that’s not your gauge of success, the more you can achieve whatever you seek).

Building trust isn’t an overnight exercise. It takes a long period of consistently operating ethically to build a reputation for trustworthiness. In today’s world of instant gratification and overnight success, this approach may not resonate with some. People who take this path may not find major success quickly, but they can string together a series of wins that continually compound and lead to a long career and outsize success. Warren Buffett and Charlie Munger are ninety-one and ninety-eight, respectively, and great examples of this.