Tuesday, January 29, 2008

Robert Cialdini

I am a big fan of Robert Cialdini's work on social influence and persuasion:
Research reveals that there are six basic principles that governs how one person might influence another. Those principles can be labeled as: liking, reciprocity, consistency, scarcity, social validation, and authority.
There is two great articles here and here that covers everything you really need to know about these concepts. (I highly recommend them- they are well worth the time) Essentially though, the principles which Cialdini identifies have an effect on the decisions we make. Some examples:
If you like someone, you are more likely to do something for them.
If you perceive something as scarce, you will assign to it a greater value.
If you are speaking to someone with authority, (say, a police officer) you are more likely to comply with what they say.
And so on. Unfortunately, people can manipulate these principles to their advantage, as the articles above describe. And, if you combine a few of these principles together, you get a 'lollapalooza' effect, as Munger would call it, where people can be convinced to do some real strange things. Over summer I quit working at a financial planning firm after three days because I quickly realized that they were abusing a lot of these tools. (To great success, I may add. Supposedly they are the fastest growing financial planning firm in the country) My job at the firm was based on commission, and my goal was to call up all my friends and relatives and set up a two hour meeting consisting of me, a senior employee, and the prospective client. This brought multiple principles into effect: The liking between me and my friends; the authority from a "senior" employee; consistency for saying they would help me out; commitment for the two hours already spent on the meeting; and reciprocity because the clients felt we were doing them a service.

In reality, the company was offering a terrible proposition. The annual commissions/fees on the mutual funds they sold were about 3.5%, plus there was an upfront commission. This, to invest in a stock market which over the long run generates 12% a year. This means the company was taking nearly one-third of their clients' future annual returns and seriously crippling their compounding of wealth. I felt bad for many of the new workers there, who were probably unaware of what a great disservice they were actually doing to their friends and family.

But these tools are not only meant to deceive. What I found real interesting was when I started asking, "how can I as a person genuinely benefit from these principles in my daily life- how could I be a 'lollapalooza' ?" This is what I came up with:

To benefit from liking, be kind and likable.
To benefit from reciprocity, always try to be helpful.
To benefit from consistency, always speak the truth.
To benefit from scarcity, always be doing something.
To benefit from social validation, treat everyone as a friend.
To benefit from authority, speak with power and conviction.

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