Contrary to popular belief, many large financial transactions are based on verbal agreements. In a world where reputation is everything, your word is your bond because, as Lloyd Blankfein says, if you break it, "you'll never eat lunch in this town again."

In elite merchant banks, critical lending decisions are made based on informal conversations about hobbies like farming or horses, not business plans. This practice of 'indirect vetting' allows them to carefully scrutinize a person's character and integrity—the true collateral—before extending massive, often unsecured, loans.

View trust not as a soft virtue but as a tangible financial asset of immense value. Mission-driven organizations stockpile this asset, which powers their economic advantages. This value, however, also makes it a prime target for extraction by those with short-term, selfish interests.

The private equity demand for speed is counterproductive without a foundation of trust and alignment. Trying to move fast on a weak base leads to fragility: constant busyness, recurring problems, and disengagement. True, sustainable speed is an outcome of trust, not a standalone goal.

Merchant banks consciously limit their size and reject rigid corporate structures to maintain flexibility. This is a core competitive strategy against larger, slower institutions. Decisions are made through quiet, direct conversations between principals, not through committees or formal channels, enabling them to move with unparalleled speed and agility.

A merchant banker secured a £200,000 credit line for a ship owner in three minutes over the phone, without any contracts. This highlights their core advantage: leveraging long-term trust and reputation to provide rapid, personal service that large, bureaucratic banks cannot match. Their business runs on confidence, not collateral.

Companies are trapped by the dogma of creating 'bulletproof' contracts, a process driven by legal precedent and risk aversion ('nobody got fired for having the lawyers look at this'). This institutional inertia, codified in policies requiring standard terms, prevents the adoption of more flexible, relational contracts, which are often dismissed as 'fluffy' despite being 'radical common sense.'

The cattle business relies heavily on reputation and relationships. The vast majority of transactions, even those worth millions, are finalized over the phone or with a handshake. Formal legal contracts are rare, as bad actors are quickly pushed out of the industry.

Banker Philip Lehman rejected Ivar Kruger, who later masterminded a massive Ponzi scheme, with a simple rule: "If I cannot understand something by reading my notes on the subject, I won't buy it." This focus on radical simplicity acted as a powerful filter, protecting the firm from deals that were deliberately or unnecessarily complex.