The tendency of humans to reciprocate both favours and disfavours has both bright as well as dark sides
04-Sep-2015 •Mohammed Ekramul Haque
What is it? This is the tendency of humans to reciprocate both favours and disfavours. The reciprocation tendency has two sides: the bright side, where it brings people to cooperate together for their common benefit, and the dark side, because of which it has been the cause of wars, extreme hatred and injury. Says Munger, "For long stretches in many wars, no prisoners were taken; the only acceptable enemy being a dead one. And sometimes that was not enough, as in the case of Genghis Khan, who was not satisfied with corpses. He insisted on their being hacked into pieces."
Let's not forget that the reciprocation tendency also has a beautiful side - that of returning a favour with a favour. Munger gives a touching example of the reciprocation tendency in action, "Of course, the tendency to reciprocate favor for favor is also very intense, so much so that it occasionally reverses the course of reciprocated hostility. Weird pauses in fighting have sometimes occurred right in the middle of wars, triggered by some minor courtesy or favor on the part of one side, followed by favor reciprocation from the other side, and so on, until fighting stopped for a considerable period. This happened more than once in the trench warfare of World War I, over big stretches of the front and much to the dismay of the generals."
The reciprocation tendency, like other tendencies, is susceptible to abuse by conniving individuals. Such people make small concessions that tend to be reciprocated from the opposite side with a concession that is often larger than the original concession tendered. Charlie Munger puts it well, "The tendency (is) a strong force that can sometimes be used by some men to mislead others, which happens all the time. For instance, when an automobile salesman graciously steers you into a comfortable place to sit and gives you a cup of coffee, you are very likely being tricked, by this small courtesy alone, into parting with an extra five hundred dollars."
Often found in: Relationships, warring parties
In Life: Here's something that many of us indulge in. "The reciprocity-based, religion-boosting idea of obtaining help from God in reciprocation for good human behavior has probably been vastly constructive."
The reciprocation tendency plays a very important role in our lives: forming the basis of human relationships. Says Munger, "The very best part of human life probably lies in relationships of affection wherein parties are more interested in pleasing than being pleased - a not uncommon outcome in display of reciprocate-favor tendency."
There needn't be war for the dark side of the reciprocation tendency to exhibit itself. "Peacetime hostility can be pretty extreme, as in many modern cases of "road rage" or injury-producing temper tantrums on athletic fields.
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'," says Munger.
The reciprocation tendency also works in marriages. "Daily interchange in marriage is also assisted by the reciprocation tendency, without which marriage would lose much of its allure."
In corporations: The reciprocation tendency is all too common in the corporate world. One vendor, for instance, can do a favour to a purchasing manager and can get favours in return. Many contracts are sealed through the process of reciprocation - "you do this and I'll give the order to you."
Munger points how corporations tend to nullify the effects of reciprocation tendency. He says, "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 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."
In investing: Did you know that many companies shower analysts covering them with expensive gifts in their analyst meets? The reciprocation tendency at play here expects that the analysts taking home these gifts would write favourably about them.
You just read about one of the misjudgements people generally make while investing. Read 25 ways to (Not) make mistakes to get an account of Charlie Munger's twenty-five typical misjudgements, along with our commentary on how they fit into Indian businesses and Indian investments.