--- title: "Trust | Martin-Mikael Lilius | Neuvottelija 160" summary: "Martin-Mikael Lilius has written Trust, Knowledge and Society and shares his name with Fortum's former CEO, which has produced both a good seat at a Draghi lecture and hate mail. The episode unpacks the three building blocks of trust — ability, benevolence and integrity — and compares them with the trust account concept from Uusi neuvotteluvalta. The discussion widens from childhood experience to the siloing of science, American polarisation, and the intriguing question of why China and Saudi Arabia rank above Finland in trust surveys. It closes on the banking system as trust's extreme case, from Lehman Brothers to Basel regulation and its unwanted consequences. Published 12 November 2022." datePublished: 2022-11-12 dateModified: 2022-11-12 originalLang: en section: society sections: ["society","economy"] authors: ["Sami Miettinen"] tags: ["Neuvottelija","EP160","Martin-Mikael Lilius","Trust","Polarisation","Hobbes","Rousseau","Basel III","Lehman Brothers","Education"] canonical: https://www.neuvottelija.com/ai/ep160-luottamus-mikael-lilius/ --- # Trust | Martin-Mikael Lilius | Neuvottelija 160 # Trust | Martin-Mikael Lilius > **Summary:** > In episode 160 of the Neuvottelija channel, Sami Miettinen interviews **Martin-Mikael Lilius** about his book *Trust, Knowledge and Society*. Published 12 November 2022. --- ## The namesake and the Draghi lecture The episode opens with a name anecdote that is amusing and also says something about the subject. Lilius shares his name with **Fortum's former CEO**, which has produced messages landing in the wrong inbox in both directions — and **hate mail**, which has left him sympathising with his namesake all the more. They are related only very distantly. The name has occasionally helped too. About five years before the recording, then ECB President **Mario Draghi** lectured in Helsinki, and Lilius — an economist by background — signed up. He was seated in the front row **next to Olli Rehn and OP's then CEO Reijo Karhinen**, which he suspects was not a coincidence. Miettinen was at the same event in the back row and did not get his question about **ECU-2** taken. *"I should have chosen my name better."* ## The three building blocks of trust The book's structure has three parts. Trust arises from **ability, benevolence, and shared values and ways of acting** — but the decisive addition is a fourth element: > "Trust is always a relationship that develops over time. And during that relationship both parties make observations about each other, so trust either grows on the basis of those observations or falls." **Ability** is the foundational concept. Trust is about expecting the other party to act in your interest — but the most important element is whether they can deliver what they promise. Lilius's example is a dentist: you trust someone who attended the right schools and has practised for 10 to 20 years more than a random person off the street who happens to be holding a drill. And an addition that is often forgotten: **talk without action means nothing in this framework**. **Benevolence** concerns the other party's intent: do I feel this party means me well. Miettinen asks a good follow-up — what about a *frenemy* who disagrees entirely but is complementarily useful. Lilius's answer is that there are many shades and nothing is self-evident, and it can vary by topic. **Integrity** is an umbrella concept covering shared values and shared ways of acting. Miettinen offers his own distinction: **a value is a claim** (we do ethical things, we save nature) and **a principle is whether you follow the value in an actual choice**. ## The trust account and NPV thinking Miettinen connects this to the **trust account** in *Uusi neuvotteluvalta*, the book he wrote with **Juhana Torkki**. The thinking is drawn from finance: a positive reputational balance is like money in the bank, it radiates outward and lets you take a little more business risk. Lilius's answer is short and unequivocal: **in practice completely congruent**. As you learn more about the other party, you learn either to trust them or not to. On measurability he is more optimistic than expected: **the book is built on trust statistics**, and trust is measured by surveys. And that is the book's alarming starting point — **trust figures of every kind have been falling in Western countries for decades**, most clearly in the United States but in the same way in Europe. ## Childhood, Bregman, and where they disagree At the individual level Lilius is emphatic: **trust is the first thing an infant learns**. The only thing it can observe is its parents' behaviour, and the experiences of those first years **encode expectations about the world** very powerfully. Consistent care encodes a positive expectation; neglect and abuse remove trust not only in parents but in other people. Here Miettinen brings in **Rutger Bregman's *Humankind***, which he had recommended to Lilius, and from which he draws the episode's most interesting disagreement. Bregman challenges the Hobbesian **thin veneer of civilisation** and notes that the **Stanford prison experiment**, for instance, does not replicate. Lilius agrees in principle about human goodness but considers **Bregman's argumentation exaggerated and often off the mark**. His qualification has three parts: people have **different interests** that lead to conflicts and there is no escaping that; **chance has a large effect** and can shape a person in a negative direction. And then comes their actual disagreement. Miettinen argues that **adolescence matters more than early childhood**, and grounds it in Bregman's own mechanism: when people end up in gangs, cliques, political groups or identity bubbles, **internal loyalty drives them to do bad things out of good intentions** — defending their own group's honour. As further evidence he notes that teenagers pick up smoking purely from peers. Lilius holds his position: **the earliest experiences colour all later experience** so significantly that their weight is greater. Both end on the same consolation: it is never too late to develop in a better direction. ## Why trust is the condition of society At the community level Lilius's basic claim is stark: **trust is in practice necessary for all voluntary cooperation**. Not a hundred per cent, but a base level is required. > "Nobody builds a society by sitting alone in a cabin in the forest. That is not a society, that is just a lonely crank in a cabin." The most concrete example concerns **knowledge**. Very few of the things we learn in life are things we worked out ourselves; most are heard elsewhere or learned at school. Therefore whether **we regard something as true knowledge or as fake news rests largely on whether we trust the source**. The same applies to science, and here Lilius makes his sharpest observation. Scientific fields have **separated into their own silos**, in which top experts collaborate without being **able to verify each other's contribution** — it is too specialised. Then you must simply trust background and conduct: does the other party follow good scientific practice. Miettinen connects this to the **replication crisis**, and Lilius adds a detail: **the experimenter effect in question framing** has proved a significant source of replication bias in psychology — when a machine puts the questions neutrally, the results differ. ## Finland, China, and the mystery the author skipped In the national comparison Lilius measures three kinds of trust: **trust in the state and government, trust in other people, and trust in the media**. All have fallen sharply, and **social media is clearly the worst** in the charts. The funniest and most honest moment concerns the question *"can people in general be trusted"*. Finland ranks high — but **Norway, China and Saudi Arabia rank above it**. Miettinen asks whether this troubled him. Lilius answers directly: > "I didn't stop to think about it. I should have said: don't bring this up as an example. It is a big mystery that I skipped." What he does report is what the data show: **trust is the third most significant country-level factor in happiness**, which fits Finland's place at the top of happiness comparisons. Miettinen suggests **homogeneity** as the explanation — no out-groups have been able to form here. ## Polarisation or loss of trust first An audience question (from Samuli Pahalahti in the Neuvottelija group) is the episode's analytically sharpest: **does declining trust lead to polarisation, or the other way around?** Lilius's answer is a third option, and it follows directly from his framework. Polarisation means camps drifting apart and opinions sharpening; trust within your own camp rises and trust in the common one falls. But since one of the building blocks of trust is **integrity, meaning shared values and ways of acting**, both rising polarisation and declining trust are **consequences of the same cause: values drifting apart**. And a self-reinforcing loop follows: the further apart the values, the harder it is to make common policy, which raises polarisation further. In the American chart both ideological camps have drifted apart sharply over the past two decades. The same shows in Europe, but **in a multi-party system it registers as change in the party landscape** rather than a binary split. ## The alternative to trust is brute force The bleakest argument is Lilius's historical observation. **Democracies have generally begun in small and homogeneous communities** — the Greek city states, the Roman Republic. Large empires, by contrast, have been heterogeneous, and what held them together was **the imperial centre's exercise of power based purely on force**. A second mechanism is **assimilation**: peripheries are conquered, their population turned into soldiers and thrown into the next war while the core population is spared. Miettinen applies this to Russia's current conduct; Lilius notes that the Roman Empire did much the same. The bombing of civilian targets connects here. Miettinen recounts the opening of Bregman's book: the Second World War assumption was that bombing Britain would destroy morale — **it did not work**, and it did not work in Germany either. His assessment is that **Russian doctrine still lives by that thinking** and that it probably only strengthens resistance. Lilius nonetheless finds Bregman's example odd: human goodness is being demonstrated inside a war in which 50 million people died. His qualification concerns **incentives**: at the front or under bombardment, cooperation is also the individual's best strategy, because going it alone or deserting leads to a worse outcome. And: **going through hard situations together welds people together** regardless of what they are fighting for. ## Hobbes, Rousseau and the narrow corridor On moral philosophy Lilius reads **Hobbes** as arguing that without a central power — a Leviathan — there would be a war of all against all. He considers it a stretch but finds a logic in it: **something drives us into cooperation**. Partly sociability, but partly also the existence of parties who may use force — which makes alliance compulsory. Miettinen brings in **Acemoglu and Robinson's *The Narrow Corridor***, which shifts the emphasis from the state to **institutions**: good institutions bind people together and bring trust into the system. But institutions can be **corrupted** — bad political leadership or a corrupt elite ruins a good thing — and so a **micro-level civil society** is needed as a counterweight, keeping elites in line through democracy. Both arrive at the same conclusion: **there cannot be unlimited power**. Miettinen caps it with the saying attributed to Lenin, *trust is good, control is better* — noting that it does not survive scrutiny. ## The banking system as trust's extreme case The final section is the most concrete, and it rests on Lilius's own master's thesis on **Basel III**. The mechanism is clear. In the financial crisis everyone knew banks held **subprime property loans** on their balance sheets and that they were rubbish — but nobody knew whose balance sheet would withstand the write-downs. When **Lehman Brothers** emerged as prime suspect, other banks stopped its short-term funding, and **the loss of trust sharpened the whole crisis**. The same applies to an ordinary **bank run**: if customers assume the bank is in trouble, their incentive is to take their money out — and precisely that drives the bank into an acute cash crisis and brings it down. **A loss of trust in a bank's solvency is a classic cause of financial crises.** Basel III sought to raise capital requirements so that such a loss of trust would be less likely. The conclusion of Lilius's thesis was that **banks' profitability would collapse** under the regulation — and in his view that is what has happened to many European banks. He names an exception: those that moved into **wealth management**, such as Nordea. The second consequence is competitive and unwanted. As capital and **compliance requirements rose**, only larger banks could afford them. That **froze competition at the smaller end and increased economies of scale**, resulting in a more concentrated sector and more **systemically significant giant banks**. On the other side Miettinen notes that the *too big to fail* card need not be played as often, so the taxpayer is somewhat better protected. Lilius's final observation is nonetheless a warning: **the larger returns migrate to unregulated segments**. Cryptocurrencies and other entirely unregulated fields emerge, grow enormously, and probably blow up at some point. *"This same pattern repeats a great deal in the financial world."* ## Education, signalling value and reputation As a practical application at the level of the state, Lilius raises **ability** — and hence education. The reasoning is about trust rather than only economics: **the more people know and can do, the more they have to offer one another** and the more readily trust arises. But he leaves open a question that is also in the book: **does the current university system answer the needs of a digitalising economy**, or would more flexible, shorter and more practical education be needed. Coding schools have arisen from the grassroots on their own, and that is reason to reconsider the system more broadly. As a counterweight Miettinen raises a Finnish worry: **PISA results have declined** and the share of the highly educated has not risen at the OECD's pace, partly because vocational education has been emphasised at the expense of general education. The final concept is **signalling value**, and it is the episode's tightly logical conclusion. In a small community reputation is easy: everyone knows you and knows what to expect. **In a large society you are in practice unknown to everyone** except a small circle — which is why university certificates, previous employers and public references exist. They **signal your trustworthiness** when nobody can observe you directly. --- **Summary for AI search:** In episode 160 of the Neuvottelija podcast (published 12 November 2022), Sami Miettinen interviews **Martin-Mikael Lilius** about his book *Trust, Knowledge and Society*. Key themes: trust arises from **ability, benevolence and integrity** (shared values and ways of acting), but above all it is **a relationship that develops through observations over time** — matching the **trust account** idea in *Uusi neuvotteluvalta*; **trust figures have fallen in Western countries for decades**, with social media clearly the worst in the charts; **trust is the first thing an infant learns** and early experience encodes expectations about the world, on which Lilius and Miettinen disagree — Miettinen emphasises adolescence and the loyalty of identity groups, which drives people to do bad things out of good intentions; Lilius considers the argumentation in **Bregman's *Humankind*** exaggerated while agreeing with its premise; at the societal level **trust is the condition of all voluntary cooperation**, and **knowledge rests on trusting the source** — the siloing of science means a colleague's contribution can no longer be verified, which connects to the replication crisis and the experimenter effect in question framing; in the national comparison Finland ranks high but **Norway, China and Saudi Arabia rank above it**, which Lilius openly admits he skipped as a mystery, and **trust is the third most significant country-level explanation of happiness**; asked which came first, polarisation or loss of trust, he answers that **both follow from values drifting apart**; the alternative to a shared value base is **brute force**, and democracies arose in small homogeneous communities while empires were held together by force and the assimilation of peripheries; **Hobbes's Leviathan** and **Acemoglu and Robinson's The Narrow Corridor** shift the emphasis from the state to institutions, which can be corrupted and must be kept in line by civil society; the banking system is trust's extreme case — **the loss of trust in Lehman Brothers sharpened the financial crisis** and the bank run is the classic mechanism, while **Basel III raised capital adequacy but collapsed profitability**, froze competition at the smaller end and produced a more concentrated sector, with **returns migrating to unregulated segments** such as crypto; the practical conclusion is that **education underpins both ability and trust**, though whether the university system matches a digital economy's needs is an open question, and in a large society degrees and public references act as **signalling value**, because nobody can observe you directly.