A little give and take does no harm ...
Or does it ?
“Let not thine hand be stretched out to receive and drawn back when thou shouldest repay.” —Ecclesiasticus
Ever been to a restaurant or a store with no intention of buying anything, but you still land up swiping your card and taking something home? How many times has that happened because the person that spoke to you was really sweet or gracious or welcoming?
If you are struggling with this question, then let’s invert this. How many times did you decide not to buy something because you did not like the salesperson or the lady at the counter or the agent on the call?
As you may recollect these moments, you would realize that a person’s behavior or demeanor could have a bearing on your decision-making process. It’s very subtle, but it’s potent. It feels that you made an independent choice and of course thinking that way is natural for us. But it may not be the case.
My barber got married in July and I had helped him out with some funding to carry out his wedding in Pakistan. Recently, he was stuck in his hometown for 4 months and the flights to Dubai were very expensive for him. So I sent some funds to him so that he could get on a flight and start his job again. Yes, I did want to help in ways I could and of course, I’d like to see my fellow ex-pats succeed in their lives.
But at the core, it was the law of reciprocity at play. He has always been gracious to me and lively in his conversations. He has extended credit to me when I wasn’t carrying enough cash. He has kept his salon open even after the normal closing hours, only because I reached late to the shop. A complimentary head massage or a facial tip was always a pleasant gift from him. It didn’t cost him much but he was thoughtful enough about his clientele.
It was all these things that weighed on me to help him out in his time of need. He never asked me directly to assist him with funds but I knew he was struggling, either in his conversations with me or his colleagues shared with me when Arslan was in Pakistan.
The financial support extended to him wasn’t much in relation to my income, but it was much higher in proportion to the cost he incurred in serving me well. That’s the beauty of reciprocity. Though it facilitates an exchange, the quantum of exchange could be asymmetrical. And I may have shared with you a positive impact of this reciprocity at play, there also is a negative side to it.
“Apparently we have such an automatically positive reaction to compliments that we can fall victim to someone who uses them in an obvious attempt to win our favor.”
― Robert B. Cialdini
What if someone knew about this law and chose consciously to use this one to exploit people in an exchange of sorts. He may not have read books on Human Psychology nor developed this insight when a flash of lightning struck him. But he may have been trained by his Organization or External Sales Coach or Consultants whose services came highly recommended.
If that’s the case, then you will see a lot of examples around you that encourage some kind of an exchange to take place e.g. free samples, free test drives, free food tasting, 50% Sale, freemium newsletters, free 7 days trial period or some other factor that induces you to initiate an experience with them or their brand.
Though you may also feel that these are just trials and may have no impact on your decision-making or independent thinking process. A case could be also made that the trial period allows you to experience the product and make an evaluation of the same. But to a great extent, these surely have a bearing on your evaluation process.
Robert Cialdini has also stated in his book Influence - “So typical is it for indebtedness to accompany the receipt of such things that a phrase such as “much obliged” has become a synonym for “thank you” not only in the English language but in other languages as well. Future reach of the obligation is nicely connoted in a Japanese word for thank you, sumimasen, which, in its literal form, means “this will not end.”
“This will not end” - this is the most loaded part of Chapter 2 from the book ‘Influence’. And hence the prevalent use, or rather abuse of gifting perks, travels, holidays, Montblanc pens, luxury yacht rides and so much more. Even the smallest of gifts can hinder a person’s judgment and steer it towards the benefit of the one who gifted in the first place.
Ken’s piece on Danone published on 8th November was a shocking one. The pic above hints at the rot in the system, any system for that matter, especially when the institutional integrity is compromised by freebies of sorts. Sharing an excerpt from the article below -
Danone India whistleblower claims company flouted baby food rules
Danone had, according to the letter, sponsored overseas trips for doctors under the garb of an education grant, hosted liquor-fuelled parties for them, arranged for their transport, and even offered them financial inducements and gifts. If true, Danone would be in blatant contravention of India’s Infant Milk Substitutes (IMS) Act. The Act prohibits companies involved in manufacturing baby milk formula and food for babies up to two years of age from indulging in promotional activities.
The allegations against Danone are damning. However, with India accounting for nearly 20% of global childbirths annually, the baby food market is both lucrative and cut-throat, with competitors looking to gain market share by any means necessary. Indeed, between January 2019 and May 2021, the Ministry of Health and Family Welfare (MoHFW) received 33 complaints about violations of the IMS Act. That’s more than one complaint a month. The alleged offenders included baby food manufacturers such as Nestle, Abbott, Mead Johnson, Danone, and Amul, but also extended to Apollo Pharmacy, Amazon, and even YouTube.
Once an individual, even a highly educated and an intellectual professional like a ‘Doctor’, accepts a gift, it places him under an overwhelming burden to pay off the debt. It’s a corporate version of answering someone’s ‘Whatzupp’ by stating ‘Whatzupp’ as a revert. No need to answer the question, just greet back the same way. This reminds me of the Budweiser award-winning ad and I highly recommend you to watch it till the end.
When I was getting married in 2012, Usha and I had intended to have a small wedding with less than 100 guests, just close family, and friends. But that idea didn’t go down well with anyone in my family. I still remember my mom saying “We have attended so many people’s weddings, we have to call all of them.” And there was no way I could change this preference of hers and a few other really close family members.
On the wedding day, the 24th of April 2012, we had 700 people show up at the wedding. Many not known to me, many I had no memory of, many I had last seen them 98 years back and many I may never meet again. But we still had a full house of a wedding. I have very cherishable moments from those days but the outcome was a sheer result of give and take that goes on in our lives.
Reciprocity operates under the radar but has a place in our minds. It’s not in your face or brash in its conjecture, but it’s got you hook line and sinker and very likely will make you react or respond. Even if it’s not actual debt, it still feels like one that you have the responsibility to pay off.
The biggest damage is your inability to be independent anymore. And hence when you see someone being really nice to you and willing to extend favors to you, you owe yourself the duty to ask ‘What’s the long term cost for accepting his gifts?’. You will struggle to disappoint someone with your contrarian view, in case you are indebted to him. So why even carry the load.
If being biased in your decision-making is alright for you, then you will be played like a flute by everyone that understands human fallibility when tempted. Very few (very few) are principled enough to resist the urge to grab their share of quick profits, short cuts, cheap thrills, free stuff, or easy money. None realizing that the obligation has just begun and time to pay that debt will come.
"Like Warren, I had a considerable passion to get rich, not because I wanted Ferrari's – I wanted the independence. I desperately wanted it." - Charlie Munger
Taking on a gift (non-trivial ones) is lazy thinking and when you see someone doing it, it gives you a glimpse into someone’s thought process. If you hear about your Fund Manager accepting invites to glitzy parties of page 3 personalities, you may get an indication of what his priorities are and how that affects his ability to manage the portfolio. If you see your colleagues accepting invites for fancy dinners or treats, you owe it to your organization to steer clear of this demeanor so that you could hold onto your independence, in your thinking, and in execution.
Every exchange is a transfer of energy and every exchange has to complete a cycle. Hence be very prudent in the number of exchanges you get involved with. The lesser it is, the better for you. There is nothing better than a clear conscience and an independent mind. Both are no guarantee to treasure chests in life, but they sure are a tried and tested path to experiencing the joy that comes with being able to express what you’d like to and being able to do what you’d want to.
Recommendations for the week #
Josh Wolfe released his quarterly Investor Letter and it was a beautifully written piece on the current state of markets, pockets of value, and the exuberance reflected in few asset classes. The piece is laced with anecdotes, references, and case studies that would make you think better about your investment strategy going forward.
Jessica Livingstone on Think Different, Think Users - This article goes straight to the heart of a creators/entrepreneurs’ required game plan. Any deviation from the most fundamental priority at hand could be fatal. I write my posts on Substack and also have a podcast on Spotify, and hence could appreciate the context of the piece.
I just finished a book yesterday i.e. Ride of a Lifetime by Robert Iger, ex-CEO of Disney. This was an incredible read about how Disney morphed into the global media empire that it is today. It had lessons about vision, courage, authenticity, integrity, respect, communication, inner scorecard, humility, and decision making. I will struggle to express my takeaways in one paragraph, but if asked to recommend the Top 3 books I’ve read in the last 10 years, this definitely will be on the list. Loved it 👌
Beautifully written... The information is apt and crisp... In many ways challenging to move beyond primordial ways of barter, those still seems to inspire our financial decisions even now...