Let's Shake on It

The handshake deal embodies the best of our culture. Unfortunately, it can leave open the door for the worst.

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1. A Cautionary Tale

Marvin Windows and Doors, in Minnesota, is a family-run enterprise that describes itself as the largest custom manufacturer of such products in the world. Despite its remarkable growth, the company has striven to maintain an air of informality and trust -- its website says, "At Marvin...a handshake is as good as a signature." Several years ago this policy was put to the test. Bill Marvin, then CEO, had a friend who was a sales representative for PPG (formerly Pittsburgh Plate Glass), with whom he did a lot of business. One weekend morning, in a front-lawn conversation, he agreed to buy quantities, some $2 million worth, of a PPG wood preservative product.

The handshake deal went through. But shortly thereafter, windows treated with the preservative began to rot. This was a major embarrassment, and the Marvin company made good on the windows to its customers (at a cost of tens of millions). Then it turned to PPG for help in covering the bill. PPG said, No thanks, that's your problem. Marvin sued PPG for fraud, among other things. With no written agreement binding the deal, a judge granted PPG a summary dismissal. PPG's lawyer, interviewed later, added insult to injury by pointing out that "experienced merchants should use contracts to outline who's responsible for what if the product they are buying doesn't work properly. Marvin didn't do that."

Marvin subsequently appealed, however, and was allowed to bring one count, breach of warranty, to trial. In 2002, a jury found in the company's favor and awarded $136 million in damages. Marvin has not yet seen any of the money, since PPG has appealed in turn.

Interested in the place of trust in business, I asked Bill Marvin's daughter, Susan, who currently serves as the company's president, about her own philosophy in the light of this long legal saga. "This experience with PPG has not changed the fundamental way in which we do business," she said. "We still believe that a person's character and integrity trumps any documents or contracts. The lesson we took away is that it's who you trust -- not if you trust."

This multimillion-dollar misunderstanding represents two fundamentally different ways of looking at business. You might call them "contractual" and "communal" -- the one enforced by the law, the other by conscience and personal relationship.

There's little doubt which one most of us prefer. We want to live in a world where you look people in the eye, give your word, "shake on it," and make good if something goes wrong. Small business is the bastion of the communal ethic, which thrives in tight-knit societies with ongoing relationships. The problem is that we sometimes suspect, with reason, that not everyone plays by the same rules.

2. These Are the Good Old Days

I remember the father of a friend of mine who came home from work one night and said: "The trouble with the world is that nobody wants to be honest for the sake of being honest anymore." I remember because he stood for everyone's father -- decent men who sometimes found a way to let us know that it was "a jungle out there," and always with the implication that people somehow used to be better. The moment that I describe happened decades ago. But it could have happened to someone else just yesterday.

It is the condition of nostalgia that a better world has always just passed by -- in this case, a world of honor. "Mazal and bracha," they say in New York City's Diamond District: luck and blessings. The incantation, with a handshake, closes a deal. Little stones and big sums of money traditionally change hands here on the basis of trust. But lately there's been a shift. The traders, drawn largely from the Orthodox Jewish community, now include outsiders, but mostly the problem is that not all the trading is face-to-face: The Internet has come into play. I spoke the other day to a second-generation trader named Allen Dubinsky who mourns the old days. "If you created a problem just once your name was mud," he said. "It doesn't work anymore. No sale is final until the check clears."

The Internet is just the latest interloper, with its eBay scammers and the vigilantes who chase them, and its identity-thieving phishers. All around us we seem to feel a loss of the communal sense of trust. If it's any comfort, this is a feeling we Americans have been experiencing for a long time -- in fact, virtually from the beginnings of the Republic.

3. A Short History of Sincerity in Business

In her excellent little book Confidence Men and Painted Women, Karen Halttunen takes us back to the watershed decade of the 1830s, when the country was going through as much social turmoil and dislocation as it ever has since. In the space of a generation we changed from an agrarian to a mercantile culture, from a stay-at-home society to one on the move. For many, appalled by the sudden change, it was as if the nation was reenacting Adam's fall from grace.

A representative figure of the time was the naive young man from the provinces: "The raw country youth entering the city to seek his fortune was coming to symbolize the American-on-the-make." His opposite number was the fellow out to fleece him, the confidence man, who represented all the perils and uncertainties of a fluid society, a world of strangers, a world of hypocrisy.

Halttunen draws much of her cultural data from the myriad advice books written by scores of literary preachers who tried to shore up the character of American youth. Be steady, hold to your principles. Be sincere. Only unshakable, transparent honesty could save you from the temptation of the con man. There was a rub, though. The perfectly open and honest fellow was the perfect mark.

By midcentury America had developed what the author calls "a cult of sincerity." A "premodern" sense of character (soul) was yielding to the modern meaning of character as personality. It was not enough to be honest -- what mattered was to develop those manners and that style that made you seem honest. Enter the clean shirt and the shoeshine, the firm handshake and the clear-eyed gaze. In short, one had to develop some of the wiles of the confidence man. One had to dabble in hypocrisy to demonstrate one's honesty. It is a spiritual problem from which we have not fully escaped.

We get sentimental over flinty integrity because we have all felt corruption's equined allure.

In a book just published, Freedom Just Around the Corner, the Pulitzer Prize-winning historian Walter A. McDougall gives the confidence man an even more central stage in our history. McDougall chronicles, indeed celebrates, the American people's "penchant for hustling." The various scoundrels of American business may be deplorable, but he argues that they are also perverse emblems of what has made us such a successful nation -- emblems, that is, of freedom and resourcefulness.

The New York Times reviewer of McDougall's book praised the historian's insight while noting that he failed to account for the genuine strain of idealism in American life. But it may be that our chicanery and our high-mindedness are but two sides of the same coin, curiously dependent on one another -- a tension built into our character. This is yet another one of the many ways in which we are riven as a culture, and all of us share to one degree or another in the conflict. We get sentimental over flinty integrity in part because we have all felt corruption's sequined allure.

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