Latticework of Mental Models: Reciprocation Tendency

Few months back I was watching a bollywood action crime drama movie called ‘Badlapur’. The movie portrays the human emotion of ‘revenge’ and how far someone can go to seek it. The protagonist in the movie patiently waits 15 years to avenge his wife’s and son’s murder.

The urge to take revenge can manifest in smallest of things. Someone cuts you off in the traffic and the first thought that comes to mind is to get back at him and settle the account. In fact people getting shot dead in road rage incidents isn’t uncommon these days.

So what could be the reason for this strong force, a need to reciprocate the wrongdoing, in human behaviour?

Is it just the anger? Or is it the resentment for receiving an unfair treatment?

Let’s use the inversion mental model and turn the question around. If humans can have such a strong need to reciprocate to an injustice, can they also have a similar need to reciprocate a favour?

To answer that question in a truly multidisciplinary way, let’s explore the field of Psychology.

Robert Cialdini, a professor of Psychology and author of wildly popular book Influence: The Psychology of Persuasion, has done extensive research on human behaviour. One of the human biases that he talks about in his book is Reciprocity Bias. According to Cialdini – the rule for reciprocation is one of the most potent weapons of influence around us.

The rule says that we should try to repay, in kind, what another person has provided us. We are obligated (not by some external force but an internal urge) to the future repayment of favors, gifts, invitations, and the like. This rule is deeply implanted in us by the process of socialization that homo sapiens has undergone over thousands of years.

Each one of us has been taught to live up to the rule, says Cialdini “and each of us knows about the social sanctions and derision applied to anyone who violates it.” So there is a strong social stigma attached to the act of not returning a favour.

Not just that, the force of reciprocity is not only extremely strong but very subtle too.

Cialdini compares the psychological force of reciprocity to a martial arts form called jujitsu. In jujitsu the key is to use the force and energy of the opponent against him. It exploits and manipulates the naturally present principles of gravity, leverage, momentum, and inertia. A skilled jujitsu artist can defeat an opponent without exerting much personal force. Surprisingly, to the onlookers (including the opponent), the manipulation is almost invisible.

Cialdini writes …

One of the reasons reciprocation can be used so effectively as a device for gaining another’s compliance is its power. The rule possesses awesome strength, often producing a “yes” response to a request that, except for an existing feeling of indebtedness, would have surely been refused.

Cialdini cites interesting examples of Hare Krishna Society and Amway Corporation to prove that reciprocity works.

By the way, here is another reason why you shouldn’t miss this book – Charlie Munger was so impressed with Cialdini’s work that he gifted a Class A share of BRK (which was worth more than USD 100,000 at the time) to him.

So it wouldn’t be an overstatement that your Latticework of Mental Models is incomplete without this book. So do yourself a favour (no pun intended) and buy the book.

The rule of reciprocation is so strong that it simply overwhelms the influence of other normal factors that affect the decision making. This makes it a powerful weapon of influence. People who we usually dislike, including pushy salesmen, can make us acquiesce to their requests if they provide us a small (even unwanted) favour beforehand.

Remember those free samples in the supermarket cookie shop? Or those welcome beverages offered to you and your wife in a jewelry store?

Well I am not debating your prowess for judging the quality of precious jewels but your jeweller knows something more. He knows how to play a mental jujitsu and subconsciously trigger the rule of reciprocation.

It’s fascinating how the rule of reciprocation can be deployed by some clever salespeople in an indirect way without actually doing any favour.

I remember meeting a financial expert, a salesman in disguise, who first offered me a premium credit card with loads of features including elite club memberships and access to 5 star lounges at the international airports (ironically to a guy who had never been on an airplane till then).

I had to refuse but not without feeling guilty for having wasted his time on me. Then he took out another colourful brochure and showed me the benefits of lifetime free credit cards.

Did I take that? Of course! It didn’t matter that I had no need for credit card. He had done me a favour by offering concession on his product. I had to comply under the excruciatingly heavy weight of reciprocation.

Cialdini dubs this flavour of reciprocity as rejection-then-retreat (RTR) technique. The idea is to first make a larger request, one that will most likely be rejected followed by retreating to a smaller request which you were really interested in all along.

In Business and Investing

Because of the subconscious effect of reciprocity, the corporate code of conduct laid out by big organizations often prohibit its employees from taking any favours from their vendors/suppliers or customers. They understand that under the subconscious influence of reciprocity, people can unknowingly end up giving unfair advantage to people who they are dealing with.

Here’s an excerpt from Poor Charlie’s Almanack –

Wise employers, therefore, try to oppose reciprocate-favor tendencies of employees engaged in purchasing. The simplest antidote works best: Don’t let them accept any favors from vendors. Sam Walton [founder of Wal-Mart] agreed with this idea of absolute prohibition. He wouldn’t let purchasing agents accept so much as a hot dog from a vendor. Given the subconscious level at which much Reciprocation Tendency operates, this policy of Walton’s was profoundly correct.

Reciprocity, especially RTR, is an important negotiation tool. Labor negotiations often begin with extreme demands (to a reasonable limit) that they don’t actually expect to win but from which they can retreat in a series of seeming concessions designed to draw real concessions from the opposing side. Perhaps that gives an edge to the first mover in negotiations.

So next time when you see a positive analyst report for a seemingly dud business, it’s likely that the analyst was treated well with good food and expensive drinks in the company’s investor presentation meeting.

And when you attend the next AGM, think twice before accepting any freebies or free lunch from the management. Whoever said – there are no free lunches – was probably thinking about rule of reciprocation.

How to Fight Reciprocity

The first problem in countering the reciprocity bias is that you can’t know beforehand whether the offer is an honest or whether it is the initial step in an exploitation attempt. You might end up rejecting the legitimate favours coming from individuals who had no ulterior motives.

Cialdini suggests –

As long as we perceive and define his [person offering a favor] action as a compliance device instead of a favor, he no longer has the reciprocation rule as an ally.

If you find yourself in a possible reciprocity-situation with the realization that the primary motive is to sell you something, all you need is a mental act of redefinition. Look at the favour not as gift but as a sales device.

So the trick is to be alert and cultivate a habit of catching yourself in such situation. Being aware of it can diminish the force exerted by the rule of reciprocation.

Here’s Charlie Munger’s suggestion to save yourself from this bias –

The standard antidote to one’s overactive hostility is to train oneself to defer reaction. As my smart friend Tom Murphy so frequently says, “You can always tell the man off tomorrow if it is such a good idea.”

The Positive Side of Reciprocity

In his book, The Education of A Value Investor, Guy Spier writes …

I decided that I would write three letters per working day, or 15 per week. I began to thank people for giving a great speech, for sending me their investor letter, for providing a great meal in their restaurant, for inviting me to their conference…At first, my letter-writing experiment was quite calculated, since I did it with an explicit desire to improve my business…But it started to feel really good…

This small action of writing hundreds of letters a year was transformational for me…this habit of writing letters is an incredibly effective way of compounding goodwill and relationships instead of merely compounding money…

My letter-writing crusade had begun as a way of marketing my fund, but it ended up giving me a richness of life that I could hardly have imagined. Rather than becoming a good salesperson, I found myself starting to care about the people I was writing to and to think about how I could help them. The paradox is that, as I became more authentic and discarded my agenda, people became more interested in investing in the fund.

As a corollary to the rule of reciprocation, let me dispense a free but not-be-taken-as-a-favour advice here.

In life and in business, focus on seeking those who you can help instead of who can help you. And then let reciprocity weave its magic.

Conclusion

We started this post with an intention to explore the psychology of revenge. Revenge, as it turns out, is the ugly side of reciprocity. Revenge breeds counter-revenge and you soon find yourself in a full-scale war.

Confucius said , “Before you embark on a journey of revenge, dig two graves.” Mahatma Gandhi seemed to agree with him when he said, “An eye for eye only ends up making the whole world blind.”

So if you do want to get even with people, do so with those who have helped you. At the same time be careful while accepting any favours, for the subconscious force of positive reciprocity can make you take decisions which aren’t always in your best interest.

Perhaps Salman Khan says it best.

(Rough translation: Do me a favour, that don’t do me any favours!)

To that, I have nothing to add 🙂

Take care and keep learning.