[00:02:54] Dr. Robert Cialdini: And I then went to my mailbox, knowing none of this, and found a legal sized envelope, and I opened it, and there was a single share of Berkshire A stock in there with a note from Charlie Munger, someone I had heard of course, and, but never had any contact with, and it’s, he said, In your book, Influence, your principle of reciprocity which is that we are obligated to give back to those who have first given us compensation in return.

[00:03:27] Dr. Robert Cialdini: That’s the way the world should work. Well, your book has made us so much money at Berkshire, you’re entitled to this in return. And it was a share of it was about 75, 000 at that time. Well, if you’re up on this morning’s stock market, you know that it’s over 600, 000 now. And yes, the best financial decision I’ve ever made is to hold onto that share.

[00:03:55] Clay Finck: I like to talk more about reciprocity there. Munger and Buffett had said that they had made so much money using this principle where other people feel obligated to pay back. It’s like they’re indebted when they’ve been given something. So, are there any examples that come to mind for you where Buffett and Munger, they’ve used this principle of reciprocity in order to, you know, benefit others, but also enrich themselves?

[00:04:20] Dr. Robert Cialdini: They do something you see that’s very rare in the business world, and that is they tell people, and they feel it that it’s their obligation to tell people how they made their money, the strategies they use, the approaches they use, the values that they adhere to in order to acquire this kind of wealth that they have achieved, and they give that first.

[00:04:46] Dr. Robert Cialdini: They give that out so often. What you find is people being very proprietary about the ways that they got to success. What Charlie always told me is that it’s the obligation of people who have done well to show others how to do well. That way we have a better functioning and a happier and a wealthier society because we spread the information of how to operate within that society in ways that benefit all concerned.

[00:05:17] Dr. Robert Cialdini: So I think that’s the thing that they’re talking about. Giving information, giving steps and procedures that have allowed them also what they do is to give information about mistakes that they’ve made. They tell us when they have made an error and how they have then acted to prevent that from occurring again.

[00:05:38] Dr. Robert Cialdini: I saw an article that showed that companies in their annual reports that describe a loss as something beyond their control. It was weather conditions or it was an unexpected strike at a manufacturing plant or something associated with supply line disruptions and so on. The COVID, you know, when they do those kinds of things versus those people who describe a negative outcome and attribute it to something inside the company that went wrong. We didn’t staff correctly. We didn’t properly think through this initiative that we started. Those companies that assign the problem to themselves have significantly higher stock prices a year later. Because observers say, oh, this is fixable.

[00:06:32] Dr. Robert Cialdini: This isn’t beyond their control and they’re on it. They’re working to create. This is what the people at Berkshire do. What Warren and Charlie do. They say we messed up here. That will never happen again because we will never do that again. We’ll never pay for an acquisition with our shares. No, we’re not going to do that anymore.

[00:06:52] Dr. Robert Cialdini: The other thing is that’s interesting is Warren does this. He likes making those admissions very early in his annual report, first or second page of what went wrong. That structures for the observer, for the reader, something else that’s a powerful principle of persuasion. These are credible sources of information.

[00:07:16] Dr. Robert Cialdini: If they will tell us honestly of what they did poorly, then I want to listen when they tell us what they did well. Because that’s going to be honest, too. They’re not pulling any blankets of positivity over our eyes when they tell us about good choices they made, because they’ve established themselves as honest sources of information by being willing to talk about their failures.

[00:07:42] Dr. Robert Cialdini: Now we believe them more. You know, there’s a wall of incredulity between a messenger, And a recipient of the message, right? To what extent should I believe this person, right? And one of the things that tears down that wall is trust, is evidence of trustworthiness and both Charlie and Warren have that in spades and they’re not only brilliant financial analysts and investors, they’re brilliant communicators about how good they are as financial investors. They make us register the truth of what they’re recommending by first showing us their credibility. I mean, it’s just brilliant and rare.

[00:08:33] Clay Finck: That’s right. I think you’re on the dot on the point of pointing out your mistakes, even decades later, you mentioned the point of issuing shares that brings us to mind Dexter [Inaudible]. I think it was 1992 where that investment definitely did not go well, but it’s been mentioned many times and it hasn’t faded away from his memory and he makes sure it hasn’t faded from the memory of his partners either and there’s something to that, that really builds trust. And I think it really develops something where.

[00:08:58] Clay Finck: When you see these guys, you know what you’re getting. They’re not trying to hide anything and exactly how they’re performing. They’re going to tell you how it is. And even in their best years, they’re very quick to point out their mistakes of the past. But I wanted to turn back to Charlie here. You’ve stated that Charlie was a capitalist to the bone, but he rarefied form, which was inclusive capitalism. I’m very curious to hear what this term, inclusive capitalism means to you.

[00:09:27] Dr. Robert Cialdini: It was another thing that impressed me to my core about him. He said to me once, the reason one major rationale for accumulating wealth is to have it available for those people who don’t have it in times of trouble. So it’s not self-aggrandizing, it’s not the idea of I accumulate wealth for my own purposes, for my own ego, whatever, it’s no, to have it available and to include others in those resources.

[00:10:07] Dr. Robert Cialdini: That’s a rationale for generating it in the first place that is so entirely morally responsible and commendable. You know, it’s a great indication of how Charlie thought about succeeding. He wanted to have the wherewithal to help others succeed in times of trouble when they were in a predicament.

[00:10:32] Clay Finck: Speaking of including others, it was brought to my attention that you were a house guest for Charlie and Nancy a number of times and Charlie had this way of, you know, not only sharing with the world at the Berkshire meeting and bringing in tens of thousands of people into this arena, but there’s many times I’ve seen pictures of, you know, he’d invite guests to his house to have dinner and, you know, have small gatherings and just share what he’s learned throughout his life.

[00:10:56] Clay Finck: And even just before his passing, I know he was doing this exact thing. Thing, you know, he was bringing people together and just surrounding himself by people he really liked. So maybe you could talk about some of those personal interactions you’ve had and maybe some of the things you’ve learned in those interactions.

[00:11:12] Dr. Robert Cialdini: In that particular situation, he was going to be giving a major address at Caltech and he invited me as his guest and asked me to come and spend the night before at his place. And I have to tell you, that was intimidating. Not the surrounding, it wasn’t some palatial mansion. It was a very wonderful and beautifully furnished, plenty of great artwork and so on around.

[00:11:38] Dr. Robert Cialdini: But it was intimidating because there I was on the home grounds of this. man who was a mentor to me, a hero to me. And so I was always walking on thin ice. I thought, you know, I had to do everything right to make every change. They had me stay in a beautiful guest room and I didn’t even want to ruffle the covers. I didn’t want to mess anything up. I’m trying to figure out how do I sleep without touching the sheets, you know? But so we then went to the address and we talked about things that we both recognize would be important in human behavior and making choices that lend themselves to final good decisions.

[00:12:26] Dr. Robert Cialdini: And we both hit upon, in a conversation on the drive over there, the importance of considering the opposite of what you are intending to achieve. That is, always think, now what would happen to us if this doesn’t work? What would be the damages? associated with that mistake and be sure you’ve recognized them because it might not work.

[00:12:52] Dr. Robert Cialdini: Nothing’s certain. This might not work and you have to think about not just what the enhancements are, would be if it did work to your life. What would be the problematic aspects that would apply if it didn’t? And sometimes if you haven’t thought about those, you’re making a judgment that is incomplete.

[00:13:14] Dr. Robert Cialdini: You haven’t really thought it completely through. And I remember that ride and that conversation as very important to me because he’s right. When I would make a choice, I would think mostly about the benefits, the advantages that would accrue if it was a successful, if it was a good choice, not about what the damages that might accrue.

[00:13:38] Dr. Robert Cialdini: If it was, if it went south, that was one thing. I remember another thing that he said he was talking in his afterwards, there was a Q and A, and he was talking, he kind of pointed to me and he said, you know, there’s this principle of commitment and consistency. And this is inherent in another mistake that we often see people make, when they have a favorite approach, a favorite way of doing things, or a particular tool that they want to advance.

[00:14:08] Dr. Robert Cialdini: And he said, you know, there’s this saying, when you’re committed to a hammer, the whole world looks like a nail, right? And he pointed to me and I said, yeah, and the more you’ve paid for that hammer. The more nail like the world appears, and that’s the first time I ever made him laugh out loud where he leaned back and roared, but I think what he’s recognizing is that we can get trapped by certain kinds of commitments that we make. And we really have to vet them fully before we go all in with those kinds of commitments.

[00:14:49] Clay Finck: Just to link this to sort of an example, what is a common kind of pitfall of this commitment and consistency bias that people fall prey to?

[00:14:58] Dr. Robert Cialdini: Yeah, it’s the idea that because you’ve put a lot of money into something, you don’t want to get out. Because that will be a loss, even though all the signs are you’re going to continue to lose unless you get out the fact that you have made that initial commitment causes you to try to make it work somehow or through wishful thinking. Try to conjure a way that you can make the, that the situation will improve.

[00:15:30] Dr. Robert Cialdini: That’s a really mistaken way of thinking of working through decision making. Yeah. You’ve got to disengage from that commitment when the evidence is clear that it is not going to rescue you down the line.

[00:15:47] Clay Finck: This reminds me of an example you included in your book on the chapter on commitment and consistency, and it was related to Amazon.

[00:15:55] Clay Finck: This was probably before they were presumably having issues with labor shortages in 2022. But Amazon used to have a pay to quit program for their employees. And they would actually gift their employees who decided to leave the company up to 5, 000. And the longer you stayed, the bigger the incentive bonus was.

[00:16:15] Clay Finck: And publicly, Amazon said that they wanted people to work at Amazon who actually wanted to be there and actually be doing the job they were put to do. So it was sort of a filtering mechanism, but you actually made the claim that the commitment and consistency bias was also at play in the pay to quit program. So could you talk more about that?

[00:16:34] Dr. Robert Cialdini: Yeah, so what it, in fact, Jeff Bezos even admitted to it, he said, we want to give these folks the opportunity to leave us, and even give them an incentive to, a considerable amount, but we don’t want them to leave. We want them to recognize that they don’t want to leave, even at that level.

[00:16:59] Dr. Robert Cialdini: Because that commits them to the job. The idea that no, this is what I’m choosing. And if you know the literature on organizational dynamics, people are more productive, the more committed they are to the work. So with this strategy, by the way, very few people ever took the deal. I mean, it’s like less than 5 percent ever do. So you get 95 percent of people making a choice that commits them more deeply to their work and as a consequence improves their productivity, that’s a good deal.

[00:17:40] Clay Finck: So you related this principle to investing. And for many people listening to our show, maybe they spend 10, 20, 40 hours researching a company before they end up putting a significant amount of money in.

[00:17:52] Clay Finck: And I’m curious to get your take on Psychologically, when we invest in a company, when we bet on a horse or put chips on red on the roulette wheel, whatever it is, psychologically, what is happening, you know, that makes us essentially everyone just sort of fall prey to this bias.

[00:18:11] Dr. Robert Cialdini: Yeah, it’s, it, what we’ve been talking about is essentially the sunk cost fallacy. The more you’ve put into something, the more reluctant you are to admit to the error that you made a bad choice, that you are a bad decision maker. People don’t want to believe that about themselves, and they don’t want the people around them to see them that way either. Okay, I took this big loss.

[00:18:36] Dr. Robert Cialdini: They’re more willing to hang on and hope that it will eventually succeed in ways that validate their decision making. And that sort of keeps them from pulling the trigger when all the evidence suggests, no, you need to get out of this. This isn’t a good choice now and it’s going to be a worse choice in the future.

[00:18:58] Clay Finck: You had mentioned earlier, you know, how these principles sort of tie into how Munger and Buffett operate. And I find this aspect just so, so interesting because what you see is really what you get. And the shareholders know that there are no surprises or big surprises coming at least. And if there are big surprises, they’re going to be well known to all of their partners.

[00:19:20] Clay Finck: And there’s just something to me about, this very ethical way of doing business that it’s almost amazing to me that it worked as well as it did, because, you know, I think about like a number of successful people. Obviously, there are nuances and everyone’s different, but you look at a number of successful people and especially a very successful salespeople, they’re pretty notorious for being the type of people you sometimes just want to run away from when you realize some of the tactics that they’re using.

[00:19:48] Clay Finck: But for Buffett and Munger, it’s very much the opposite where they’ve just attracted all these wonderful people around them. Many people in the audience, me included, go to Omaha and just absolutely love it. We’re surrounded by these likeminded people that just love tuning into what these two have had to say over many years.

[00:20:05] Clay Finck: So maybe you could talk more about how these principles of influence tie into, you know, applying these principles in a way that’s ethical.

[00:20:15] Dr. Robert Cialdini: Yeah, so in this, let’s first talk about the idea of the perception in the eyes of your prospects or colleagues or customers, clients, that you are ethical. It’s a remarkably positive lever for change in your direction.

[00:20:34] Dr. Robert Cialdini: In the direction of the recommendations or proposals that you’re making to people. I speak I do public speaking these days, often to business organizations. And I was at a group of real estate investors and salespeople, actually, some real estate salespeople. And I was talking about the importance of if you’re presenting a case to somebody.

[00:20:56] Dr. Robert Cialdini: You always have pros and cons, and the key, if you want to follow the lead of Buffett and Munger, is to mention those weaknesses, those shortcomings, in your case, early in your presentation, so that everything after that, is perceived in through the lens of, Oh, this person is a credible, trustworthy source of information.

[00:21:20] Dr. Robert Cialdini: I can believe the positive things this person is saying. So I was making that case and a hand goes up in the Q and A period. And somebody says, you know, I have competitors. They bury those negative things. They never speak about them at all. And if I’m the one who talks about them, and then, you know, I’ll accept your view that I can bridge to the positive ones, but by mentioning a negative one in the first place, I think I’m, I would be at a disadvantage.

[00:21:52] Dr. Robert Cialdini: So I said, well, look, if all the others are doing this and you’re not, think about the reputation you would generate as being the ethical one, being the honest one, being the trustworthy one that people can deal with. That’s gold. No, so it’s gold. Don’t fumble that away. If you can generate it, honestly.

[00:22:20] Clay Finck: It’s really short term versus long term thinking, right? If you’re, you know, hiding the cons, really, you’re just trying to make a short term sale. But if you’re trying to find that right customer that, like, truly needs that sort of product, then you can deliver value to them over a very long period of time, and that trust endures over time. And that’s what you see in a lot of companies that focus on that long term, like at Costco, like, Munger talked so often about.

[00:22:45] Dr. Robert Cialdini: Clay, have you ever dealt with somebody who tricked you into a decision, a purchase, or got you to buy something and then it was not at all what you wanted? was claimed by this person, right? They’ve ever been, you know, we all have.

[00:23:00] Clay Finck: Well, I had one example. I was going to mention, I was walking the streets in Miami and I had someone approach me and they asked me a question have you ever had a poor experience in a hospital?

[00:23:12] Clay Finck: And I said, well, of course. I mean, like who hasn’t, I mean, we all go to the hospital a number of times and eventually there’s something you might not like, or, you know, some sort of experience that’s outside of your control. And then. They proceeded to get me to donate to a hospital and, you know, donate to like a children’s hospital.

[00:23:30] Clay Finck: And it was like, oh, right after I made the donation, I had realized I was just persuaded to make a decision. I didn’t want to.

[00:23:37] Dr. Robert Cialdini: You’re tricked into it, right? Would you ever go back to interact with that guy? Would you ever partner with that person? Would you ever want to do business with them? So that’s the cost that comes, as you say, down the line.

[00:23:50] Dr. Robert Cialdini: There’s that short term hit, but you’ve alienated, you’ve poisoned the water for future interactions if you’re that guy. You know, you’re not the honest guy. You’re not the honest one. So, I won’t deal with him in the future. Yeah. And I think most of us are like that.

[00:24:08] Clay Finck: One really fascinating aspect of your book is that one can read it and try and internalize all of these concepts related to influence and persuasion, but we can still fall prey to them because these ideas are deeply ingrained in a part of who we are in these biases.

[00:24:26] Clay Finck: Can you talk more about that and how we can be more aware of these sort of tactics and not fall prey to these types of situations?

[00:24:36] Dr. Robert Cialdini: Right and this is really an important question. In fact, in my book, Influence, at the end of, you know, I have one principle of persuasion per chapter. I have, you know, seven of these universal principles of influence and I treat them.

[00:24:50] Dr. Robert Cialdini: And then at the end of each chapter, I say, how do you say no? When somebody uses this on you in an undue or unwelcome, unethical way, what do you do? So let’s take the principle of scarcity. The one that says people. want more of what they can have less of. That things that are unique or rare, dwindling in availability, become more attractive to us, and we want them more as a consequence.

[00:25:18] Dr. Robert Cialdini: Well, usually that works very well. Those things that are scarce, are leaving our possibility of obtaining something that’s valuable, it makes sense to want to get those unique advantages or benefits and so on. Okay, well, the problem is when somebody counterfeits that information, otherwise living up to a behavior pattern in which you seize those opportunities, where you’re dealing with truly credible individuals or people who have given to you first and so on.

[00:25:55] Dr. Robert Cialdini: And those things always make sense. They make for a better set of interactions with our partners, with our compatriots, our contemporaries, and so on, if we live up to seizing those opportunities that are there. And I’ll give you an example from scarcity. A while ago, I was in an appliance store, and I wasn’t really looking for a TV, but I noticed there was a big screen TV that was on sale, and I knew from reading consumers reports that this was a very highly approved and evaluated set.

[00:26:29] Dr. Robert Cialdini: So, I was over there and I was reading some of the material that was associated with it underneath this, on the table, and the salesman came up to me and he said, I see you’re interested in this set at this price. I can see why. This is a great deal, but I have to tell you, it’s our last one.

[00:26:47] Dr. Robert Cialdini: And already I was, well, it’s your last one. I started to get tense. And he said, yeah. And there was a woman who called a while ago who said, she might well come in this afternoon to buy it. Well, they call me the godfather of influence, right? The guru of influence. Twenty minutes later, I’m wheeling out of the store with that set in my cart.

[00:27:10] Dr. Robert Cialdini: Okay, because, and I knew that it was the principle of scarcity that was being used on me. But what I didn’t know was whether it was honest or not. I didn’t know if that was really the last one or whether there were a bunch more in the stock room and they would just use this tactic to get people to buy and then they just replenish the spot with another set.

[00:27:34] Dr. Robert Cialdini: But I bought it because, you know, I believe this guy. At least I thought, all right, this is a good enough deal. I want to seal the deal. But I wanted to know if it was true, so I went back the next day to see if there was another one of those models on the table. No, there wasn’t. It was a blank space.

[00:27:56] Dr. Robert Cialdini: So, I was happy that this man told me it was the last one. If he hadn’t told me, and I came back later that night to purchase, I went to think about it and I said, no, I really want this. And I came back and he said, oh, it’s gone. It was our last one. And a woman from Scottsdale just came down and bought it.

[00:28:18] Dr. Robert Cialdini: I would have been furious at him. What? It was the last one? And you didn’t tell me about its honest, genuine scarcity? What’s wrong with you, man? Right? So, the key is, I applaud people who use these principles on me. If they’re honest, if they truly are accurate and they are representing the truth of whether it’s truly scarce, whether it’s true authorities are recommending it, whatever the principle might be.

[00:28:52] Dr. Robert Cialdini: It’s the people who are deceiving us by counterfeiting that information. Those are the ones we have to watch out for. So that’s what I think we have to do, we have to look not just at the inf the information we have to see the extent to which the information, as best we can tell, is honest.

[00:29:15] Dr. Robert Cialdini: If we can’t tell before we buy, we can do what I did. We can then experience it. And then if it falls short, if it really isn’t what we expected or what we were told, then we can be aggressive and get online and review that place and that person negatively. We don’t have to be passive victims of this. We can counter punch and reduce the likelihood that this sort of thing happens without penalties associated for the people who use these principles unethically.

[00:29:56] Clay Finck: Right and it’s just a good reminder of how much is in our own heads, right? You know, someone tells you this is the last one on the shelf and there’s going to be no more after this. And. In your mind, it’s like, oh, the perceived value of it just increased and I can’t help but think of. When I was shopping for a house, oh, five or so years ago, and you know, you’re shopping around looking at different places and you kind of get interested in one and you’re like, okay, I’m not going to make a quick decision here.

[00:30:25] Clay Finck: I’m going to think about it. Consider if it’s something I really want. And then you get that text from your real estate agent says, oh, someone else is interested in placing an offer on that place. And it’s like, huh, I wonder if that was the honest deal. Cause he could be, you know, just trying to spark more interest because he makes a commission on the sale and the scarcity piece to me is just so fascinating because compared to decades ago, we just live in a world of abundance.

[00:30:51] Clay Finck: You know, if something isn’t available right now, we can oftentimes go across the street or you know, just maybe wait till the next day. It’s just, but it still seems to be so powerful.

[00:31:01] Dr. Robert Cialdini: Yes, and I think the way to counteract the idea that because there’s a lot of abundance, we don’t really have scarcity, is to recognize that within those available options, some are unique, some give us uncommon and rare advantages.

[00:31:20] Dr. Robert Cialdini: And those are still worth seizing, even though there’s plenty around, what we want is the ones that have scarce benefits for us to acquire if we make those choices, to think about the pattern of features, and it may not be that there’s any one feature that this thing has that nobody else has, but it might be that this one has a suite of features that nobody else has a combination of benefits that I can’t get anywhere else and that helps me make that decision to move forward based on the scarcity principle.

[00:32:03] Clay Finck: From your experience, are there any businesses that come to mind that seem to be one of the best at using this principle of scarcity?

[00:32:11] Dr. Robert Cialdini: You know, it’s the luxury products. It’s the ones that have very high prices and there aren’t very many available in the first place, or there are, when an automobile company has a, an exclusive model that is only available in a, for a certain time or for, in a certain number of them.

[00:32:37] Dr. Robert Cialdini: If you look at the research, it shows that customer appreciation of that model jumps up to the extent that it is not available. So Volvo did this a while ago with a special model and had that impact.

[00:32:52] Clay Finck: And Munger is also well known for popularizing the use of mental models and connecting the dots within these different disciplines and he’s also known for this term that ever since he started using this, it’s just really stuck with me.

[00:33:07] Clay Finck: It’s the Lollapalooza effect and this is when you combine a variety of forces and it creates an amplified result in the end. I’m curious to get your take on if the Lollapalooza effect applies in the context of the seven principles in your book in the way that Munger describes it.

[00:33:25] Dr. Robert Cialdini: It does when it’s possible to see more than one of the principles applying to an offer, that elevates it. So a while ago, I was doing some consulting for the Bose Acoustics Corporation, and they had a new product. It was called the Bose Wave Music System, and they Represented it in their ads as new, you’ll be able to gain new features and simplicity and elegance and so on.

[00:33:54] Dr. Robert Cialdini: And they weren’t happy with it with the advertising program, even though it was better than any of their rivals and they had priced it attractively. So they asked me to come in and change their ad, and I took a look at it and I said, no, this is a good ad for Bose purchasers. They want this information that you’re giving them.

[00:34:13] Dr. Robert Cialdini: They’re not spur of the moment, impulsive kind of buyers. But I am going to ask you to change something at the top of your ad. Previously it said new. Well, we know from the scarcity principle, that people are more motivated to avoid losing something that is something that they can’t get anymore.

[00:34:34] Dr. Robert Cialdini: It’s the ultimate form of scarcity. They’re more motivated to avoid losing something than gaining that same thing. So I would just like you to change the wording at the top of the ad from new to hear what you’ve been missing. So now, the idea is if you don’t get this, you’re missing something. You’re losing something, which Daniel Kahneman’s prospect theory showed is twice as effective as just telling people what they are getting.

[00:35:05] Dr. Robert Cialdini: We don’t want you to lose this. You don’t want to forego what this will provide and that increased purchases by 45%. That one change. Now, after that happened, the Bose marketing people asked me to come in and talk about what other principles there might be that I could tell them about besides scarcity.

[00:35:28] Dr. Robert Cialdini: And when I got to the principle on authority, people want to follow the lead of legitimate, credible, experts on the situation. I saw lights going on over the heads of these folks because by then they had several testimonials. from experts, from true authorities in the area of audio technology praising this new product.

[00:35:55] Dr. Robert Cialdini: So what we did was to generate yet a third generation of the ad. This one said, hear what you’ve been missing at the top, but also had a column of quotes from widely respected experts in audio technology, and that increased purchases by 60 percent compared to the first generation ad. So you can put these together and produce Lollapalooza effects when there’s a confluence of factors that all apply.

[00:36:31] Dr. Robert Cialdini: I’m a great one from believing that, of believing that. When you see a big effect, a very large scale sea change kind of effect, it’s almost never due to one thing. It’s due to a conjoint unification of several things at the same time that are pushing in the same direction and that accounts for the mushrooming kind of effects that you see in Lollapalooza’s.

[00:36:59] Clay Finck: Yeah, that’s a very good point. And now, whenever I visit some sort of sales page, I just can’t help but point out, Oh, there’s that principle, there’s that principle. And I also can’t help but stay on the Charlie Munger path here. One of my very favorite quotes of his is, to get what you want, you need to deserve what you want. I’m curious on your thoughts on how this might tie into reciprocity in this quote here.

[00:37:24] Dr. Robert Cialdini: The key for implementing reciprocity is that you have to go first. You have to provide something to another which causes them to want to give you what you deserve in return, right? So, I think that’s what he’s saying.

[00:37:38] Dr. Robert Cialdini: You have to go first. Really, you have to go first, provide gifts, favors, services, information to people, not designed to improve your, the likelihood that they will see your offering as better. Just that they will feel grateful for being the recipient of something that’s designed to improve their outcomes, not buy your product just in a general way.

[00:38:04] Dr. Robert Cialdini: And so there was a lovely study done by McDonald’s. that showed that if, for one week, every family that came into the McDonald’s location received a balloon for each of the kids. So, half of them got the balloon as they were leaving as a gracious thank you for coming, frequenting our restaurant, right? The other half got the balloons.

[00:38:30] Dr. Robert Cialdini: As they came in, they got the balloons first. Those parents bought 25 percent more food because they had received. So this is the, I think the essence of you have to go first to trigger the benefits of the reciprocity rule and what Charlie’s quote specified is exactly that. You have to have deserved what you’ve gotten, you know, by the action.

[00:39:00] Clay Finck: It’s a great reminder when you have something you want in life, it’s like, okay, invert it. Use that inversion principle among us. What can I do first to sort of maybe lead to that outcome? So to have a good spouse, be a good spouse, to have a good partner. Be a good partner. You know, you should lead to try and bring that outcome. You know, if you’re intending to try and bring that outcome on the back end.

[00:39:24] Dr. Robert Cialdini: That’s right. There’s so much wisdom there. And it’s a reason why in every human culture, we are trained from childhood in this rule. You must not take without giving in return.

[00:39:38] Dr. Robert Cialdini: You must not take. We have very nasty names for people who take without giving in return, who we then avoid. We call them moochers, or takers, or ingrates. So we don’t want to deal with those people as a consequence, because it’s so beneficial to the larger community, to the larger society, to have people cooperating and exchanging goods and favors and services with one another.

[00:40:04] Clay Finck: And one of the sort of aha moments for me in reading this chapter in your book is that this tactic can be really tricky when other people are using it because you don’t control two things. So the first thing you don’t control is what people are giving you. And then the second thing you can’t control is what they’re potentially asking from you later.

[00:40:24] Clay Finck: So you’re receiving a gift. You’re like, oh, now I have to, you know, you feel indebted to them and you have to give on to them.

[00:40:31] Dr. Robert Cialdini: And so that’s another one of those things that we talk about at the end. So if you see that this was designed as a device, it was an artifice. It wasn’t a true gift. It was designed to get you to do this thing.

[00:40:43] Dr. Robert Cialdini: Like the situation you described where somebody says, have you ever been in a hospital where you wanted a better service? I can’t remember exactly what it was, but it’s designed to get you to do something, it’s not based on the merits of the thing. And so that’s the key is make sure that you make a differentiation between these things that people give you just to get you obligated to them versus people who are just open hearted and want to give you things because they like you or they’re that kind of person.

[00:41:16] Dr. Robert Cialdini: They’re nice people. And there’s a, another thing I talk about in the section on what not to do with reciprocity. And that’s when we have given something to someone and they’re very grateful and they reply, So I really appreciate this. And I used to do something where it was a big mistake.

[00:41:34] Dr. Robert Cialdini: I would, I’d say, oh, don’t think anything of it. No big deal. Just, you know, it wasn’t a problem at all. Don’t worry about it. Even if I went above and beyond to make sure they got this thing, I did this favor for them, and then I dismissed it? I just slapped it out the window with the back of my hand.

[00:41:53] Dr. Robert Cialdini: No, the world works better when people who give get something for it, otherwise they stop giving. So what I recommend is that if somebody gives you a generously a phrase, thank you, I appreciate this so much so on, this sort of thing. We put it on the map. We don’t dismiss it or diminish it or define it away as something else.

[00:42:18] Dr. Robert Cialdini: So I would say, if it’s somebody inside your organization, what you say is, oh, I was glad to do it. It’s what we do here for one another. So you just set the norm that this is what we do. And don’t forget the addendum for one another. So that person is now readied, if you need something, this is what we do here for one another.

[00:42:39] Dr. Robert Cialdini: If it’s somebody outside of your organization, what I recommend saying is, Oh, of course. I was glad to do it. I know that if the situation were ever reversed, you’d do the same for me, right? And everybody says, right. So now they’re waiting to have a chance to repay because you’ve put it on the map. You haven’t claimed that it’s nothing to worry about.

[00:43:01] Dr. Robert Cialdini: Oh, no problem. No problem. You’ve heard that so many times. So often it isn’t true and we have to stay close to reality. What’s true?

[00:43:12] Clay Finck: I also came to this realization. I had stated earlier, if you’re using reciprocity to get what you want, but I think another aspect that’s really interesting that Buffett and Munger have done is just give and expect nothing.

[00:43:26] Clay Finck: And there’s something to that where one, who doesn’t like being surrounded by people that just love helping you in whatever way possible and just giving, and also it attracts all these wonderful people into their lives as a byproduct of that.

[00:43:41] Dr. Robert Cialdini: Yes, that’s right. And so often that’s the key. Those return favors, sometimes larger than the one you gave, right? That’s a downstream effect. Side effect of giving. It’s not the intent. That’s just something that flows from, naturally, from it. Nobody loses under those circumstances.

[00:44:05] Clay Finck: I also wanted to mention the liking bias. As an investing podcast, it’s commonly known that We’re likely to buy into a company if we like the CEO or the face of the organization.

[00:44:20] Clay Finck: And even in sales as well, we may be offered an inferior product or service, but we want to buy from the person we like. And this could be with a real estate agent. It could be with a financial advisor. It could be really with anything. The problem is that it might not be in our best interest to make that purchase or invest in that company.

[00:44:37] Clay Finck: And especially with as investors, we see these. The face of these organizations on an interviews on TV or they’re on YouTube or doing a presentation. These people just generally tend to be really likable people because they rose up the ranks and because they’re likable, they rose up to be in that position.

[00:44:54] Clay Finck: You know, just because someone is very likable doesn’t mean it’s a good investment for us. So when we’re listening to someone like this, that’s a public CEO, maybe you could talk about what is it about people That makes us like them in the first place.

[00:45:10] Dr. Robert Cialdini: You know, there are two people in national politics who were defined as Teflon. That is, they couldn’t do anything wrong in the eyes of people because they were so likable. One was Ronald Reagan. The other was Bill Clinton, right? They just had this. charismatic, kind of engaging personality that came across for one of the for them, and they’re completely different in terms of their political orientations, but they did have this commonality.

[00:45:43] Dr. Robert Cialdini: And if you look at the way that they talked to people, it revealed the key. They liked the people around them. They were people, persons, they like you. You got the feeling, even in an audience, this person likes me, likes people like me. Well, I’ve been in a lot of sales training programs and they tell us the number one rule of sales is to get your customer to like you.

[00:46:17] Dr. Robert Cialdini: Well, that’s very important. I think that’s true that it’s we, that works. I don’t think it’s the number one rule. I think the number one rule is come to like your customer, come to like your prospect, come to like your client. And when they see that, when they see that you like them, all kinds of barriers to decision making come down.

[00:46:40] Dr. Robert Cialdini: So what Reagan and Clinton had was the ability to project onto others. They like people. They like people. If you’re in, either of them will like you, if you had a chance to meet them. That, I think, was the key for me in what those charismatic and uniformly amiable and likable people do. They project their liking onto you, rather than trying to pull it out of you. Both of those work, but I would take the first of those over the others.

[00:47:19] Clay Finck: And I think there’s another interesting dynamic here where with these very well-known people, we’re like a lot of times we’re just watching them on TV, so they can’t personalize their message to you.

[00:47:29] Clay Finck: So is there a difference between, you know, someone just being out in public where they’re speaking to a general audience? versus they’re just interacting with you one on one. Is there anything different when they’re speaking in that public sort of format?

[00:47:43] Dr. Robert Cialdini: Well, I mean, they try to infuse evidence that they are open and approving of you. This is the sort of things that, you know, they use humor. That’s a very humanizing kind of thing. You see that they tell stories about themselves, self-deprecating stories about themselves. Do you know of Guy Kawasaki who was the communications guru for Apple under Steve Jobs. He was the chief evangelist for Apple.

[00:48:13] Dr. Robert Cialdini: And as I said, I do public speaking and we were on the same dais with one another. We were speakers on the same conference. It was an international conference. It was in Bucharest, Romania. And he had a problem, which was that in his presentation, he had to be very self-promoted, or seemingly self-promoting.

[00:48:35] Dr. Robert Cialdini: That is, he had to talk about how he and Jobs came up with brilliant ideas. I mean, seismic changes in producing the success that Apple had. And that causes people to sort of move away from you. If they see you as a braggart, always being a broker of information, positive information about yourself, you start to lose credibility in their eyes.

[00:49:01] Dr. Robert Cialdini: Well, he did something at the outset of his talk that punctured that sense of self-aggrandizement, right? He did some, he did a piece of self-deprecatory humor. He was saying to the audience. So I was on the phone to my wife last night and telling her about this conference and how I’m on this, the same dais as people like Cialdini and people like Harari, you know, and he said, did you ever in your wildest dreams?

[00:49:36] Dr. Robert Cialdini: Picture me in the same places as those guys, and he said, she said to me, Guy, you’re not in my wildest dreams, so everybody laughed, and they said, and now he was able to go on and present positive information about himself and what he had done at Apple without getting the reputation as a self-aggrandizer. No, he started out by puncturing himself you know, his ego. That was brilliant.

[00:50:08] Clay Finck: And I think in trying to overcome something like this, we want to simply look at the facts and look at, you know, what it is we’re actually trying to get, you know, an example of an investment. We want to look at the company for what they’ve actually done and how great of a company they actually are rather than how much we like the CEO. Is there anything else to overcoming the liking bias?

[00:50:30] Dr. Robert Cialdini: Yeah, I think first of all, by the way, that’s not just for the CEO and investor. It turns out there was a study done in India that auditors who like the CEO, give them a freer ride in the audits. If you’re of this from the same region of India or the same religion.

[00:50:53] Dr. Robert Cialdini: They get softer audits because of those factors associated with liking. So for me, the general rule is, let’s say you’re buying a car and you really come to like this salesperson and after half an hour, 40 minutes, you’re ready to buy the car. You have to ask yourself, do I like this person more than is justified for being with him for 40 minutes?

[00:51:25] Dr. Robert Cialdini: Is that real or is it the fact that he gave me a soft drink? That he told me that he was born in the same area as my wife grew up? that he complimented the car that I made my trade in and the good choice of the upholstery and colors and so on. Whatever. You have to separate the salesperson from the thing he or she is selling and focus on the merits of the thing rather than the communicator who delivered those things. That liking shouldn’t be part of that decision because you’re driving the automobile off the lot, not the salesperson. He or she is staying there. You’re getting the car. So that’s the strategy I would use to step back from that situation and separate those two elements.

[00:52:20] Clay Finck: Wonderful. Well, Dr. Cialdini, I really appreciate you joining me on the show. I want to give you a chance to give a handoff to the audience to how they can get connected with you. And it was brought to my attention. You recently launched the Cialdini Institute. So, please talk a little bit about that as well.

[00:52:36] Dr. Robert Cialdini: Well, it’s an online on demand educational program that informs people of how to be successful and ethical in persuading others in their direction. Anybody who is interested in it can just go to cialdini.com and you’ll come to our website and see what the program is like, what the various options are for interacting with us.

[00:53:00] Dr. Robert Cialdini: And yeah, so we have four pillars in that. Everything we say has to be research based. Everything we say has to be ethically commendable. Everything we have to say has to be applicable, so we don’t just provide a college course, but we, how do you apply this knowledge about ethical influence now that you know it?

[00:53:22] Dr. Robert Cialdini: And then finally, we have something new called the small, big, how to be efficient in applying this. What are the smallest changes you can make to your persuasive approach? that produce the biggest impact on your persuasive success. So those are the elements that we try to build into all our programs.

[00:53:45] Clay Finck: Wonderful. Of all the books on my shelf, your book is definitely one of my favorites. I continually revisit and occasionally have it by my bedside and check it out before I lay to rest and it’s no wonder on the front cover, there’s a Charlie Munger quote. It says, this is the book that I give most often as a present and is my top recommendation.

[00:54:03] Clay Finck: So, if that’s not enough of an endorsement, I don’t know what is. I also wanted to mention that many people in our audience will be in Omaha. So I’m curious if you could share if you’ll be attending and what that might look like, because to my knowledge, there’s some sort of association with you and Berkshire Hathaway.

[00:54:22] Dr. Robert Cialdini: Yes, we go every year and there’s a bookstore there in the auditorium and you have to be accepted. You have to be nominated by Charlie or Warren, and we’ll be there again. So if people would like to say hello, we’ll be at the Berkey bookstore.

[00:54:42] Clay Finck: Wonderful. Well, thank you so much again, Robert. I really appreciate the opportunity.

[00:54:46] Dr. Robert Cialdini: I enjoyed it.

[00:54:48] Outro: Thank you for listening to TIP. Make sure to follow We Study Billionaires on your favorite podcast app and never miss out on episodes. To access our show notes, transcripts or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.