On this coming Monday or Tuesday, I'll be asking the Director of Sales and Marketing at one of the most prestigious local businesses for $100,000. I have all manner of charts, research, data, and numbers showing why this is an exceptionally good idea that will have a fantastic ROI - and it is a good deal. But still, it's mildly terrifying to present in that sphere.
Part of what I'm going to do is go in and ask for a considerable sum of money, but I'm trying to build a different sort of relationship than most people would think. If they choose my company, we'll be producing lots of good work for high pay - but I'm trying to build something other an exchange-based relationship.
What's an exchange-based relationship? Over the last 10 years or so, researchers have identified two kinds of ways trade and interact and cooperate. The first way would be through "market norms" - this is where two people clearly agree to make an exchange, and deliver what they agreed to exchange, and the deal is concluded. The second way is through "social norms" - where you're looking out for each other's best interests.
Let's go over quickly what market/exchange norms look like and how they push out social norms - then I'll have some ideas and guidelines for your own life.
Derek Sivers wrote an amazing review of Predictably Irrational, I highly recommend it. Excerpt:
==== THE COST OF SOCIAL NORMS:
We live simultaneously in two different worlds: one where social norms prevail, and one where market norms make the rules.
Social norms include friendly requests that people make of one another. "Could you help me move this couch?" Social norms are wrapped up in our social nature and our need for community. They are usually warm and fuzzy.
Instant paybacks are not required. Like moving a couch or opening a door, you are not expected to immediately reciprocate. Market norms have nothing warm and fuzzy. The exchanges are sharp-edged: wages, prices, rents, interest, costs-and-benefits.
AARP asked lawyers if they would offer less expensive services to needy retirees, at something like $30/hr. Overhwelmingly said no. They asked the lawyers if they would offer free services to needy retirees. Overwhelmingly said yes.
Similar when asking people to help move a couch: ask them to do it for free, and they'll say yes. Offer to pay them a dollar, and they say no.
LESSON : Once market norms enter our considerations, the social norms depart.
Market norms push out social norms. But I've started to wonder if this can be avoided by always leaving something on the table.
This means getting away from haggling, grinding up/down to the absolute final price someone would pay, and hard selling. For my work, I'm going to be looking to aiming to generate a 10x return on investment over the the next three years. Yes, that's 1000%. I think that's the first part - looking out for their interests and not grinding.
A lot of people don't understand good negotiating. They think it's about getting the best price - no, no, no. Good negotiation is about figuring out what you can offer that's worth more to the other person than you, and what they can offer that's worth more to you than them.
I have some friends that are very good at negotiating. My best friend just turned 30 - he started working at age 14 and became a self-made millionaire at age 24 by working really hard and saving/re-investing everything he got. He doesn't try to grind people to the highest/lowest price - he typically overpays for things a little bit, and sometimes tips on top of it - but then he asks for really exceptional service, and always gets it. When he joins in a deal, he looks to deliver 10 times or more what would be expected of him, and to be an absolute maniac for his client's cause.
I think the overall strategy of avoiding exchange-based relationships when doing business is to give such a great deal that the person doesn't feel like they're paying for a deal. If it's obviously a ridiculously amazingly good deal, it almost feels more like a favor than a transaction.
If you're selling, the deal or product you offer should seem like a fantastically good value, like your service existing is a favor to the person doing business with you. Companies like Amazon do a great job of this - they offer tons of free value with great reviews, charge lower prices than traditional bookstores, offer free shipping on medium-sized offers, and take good care of you if anything goes wrong. You get a warm fuzzy feeling with Amazon.
If you're buying, you want to be a dream customer. When I've contracted creative work in the past, I did it very wrong the first time, and right subsequently. The first-time I tried to micro-manage a process I didn't understand. This was 6 or 7 years ago, and we were a buying a high-end, 5 figure website. We were the classic scope creep client - in the end it came out alright, but man, what a hassle for our web designer. In retrospect, I feel bad. Since then, I've changed stripes - I say, "I'm hiring you because you're an expert and know more than me. I have loose guidance, but I want you do to this your way and 'll give you free reign to do your thing and express yourself."
I explain the basics parameters and goals that I've already thought about beforehand, and then give them free run. I get the impression this is very rare, and contractors seem to have a blast working on projects with me.
If you want to stay away from exchange-based feelings, be very enjoyable work with. Figure out what your client or provider's highest level goals are, and help them get it. Pay well if you're buying, overdeliver to a ridiculous extent so it's clear you're above and beyond the call if you're selling. And make it enjoyable really enjoyable, so it doesn't seem like work.
I think you need to be aware and make everyone look good. A lot of times when someone is buying, yes they're concerned with what they get, but they also have other concerns that people ignore. You need to make everyone look good. Definitely aim to overdeliver and generate a 10x return, or to be a dream customer. But then make your contact feel very good about what you're doing, make them look good to the people they want to look good in front of, and raise morale and be very cool to anyone on their team.
That means always having fun and sharing little valuable things with your contact, but also I think reaching out to whoever they report to in a way that's tasteful and makes them look good. Like sending a report to the CEO once a month showing the results built and explaining how it was your contact that did such a great job to make all this happen. Maybe including a little note in there how lucky the CEO is to have such a great member on their team.
Those little details go a long, long ways. Does a guy getting his kitchen remodeled care more about the kind of countertop used, or how his wife thinks about him?
Make people look good to the people they really care about.
You want to be good to people's team, too. Judd Weiss at Park West had amazingly fast growth in valet parking in Los Angeles, sometimes unseating competitors who had run a location for years. Park West is more upscale, professional, and modern than many competitors - many of whom still have 1980's fonts and branding, while Park West has clean, modern black and orange colors and uniforms. They offer much better prices and take lower margins than competitors; companies know they're getting an amazing, ridiculously good deal hiring Park West. But then on top of it, Judd takes really good care of the people they work with. He goes and eats at the restaurants that his company does valet work for and tips very high and is very friendly, taking good care of the staff there. If the manager there recognizes him and comps him, Judd tips 100% or more of the price of food for the staff, making everyone look good and feel good.
Those details go a long ways. Looking out for people outside of the scope of the deal can help make it about more than just the deal.
A final thought - this post has been looking at it in the context of doing business, but this also applies in social settings. Notice how co-ops and community groups are rare and fail so often when people try to build them? I think these are good things, people working together to help each other.
I think if you want a co-op or community group to succeed, you need to "de-marketize" money, so people can pass it around in a healthy, non-neurotic way when it's appropriate.
Most co-ops/sharing/community group type places try to do away with money, but this leaves feelings of guilt or unfairness, and undermines the whole system. I'm pretty sure there'd be a way to jointly chip in different amounts to casually spread and move the money around, get it flowing within the group, so people can use to equalize a situation in the short term while still avoiding triggering the market norms. This might be difficult, but I think not impossible if done correctly.
Gifts are one way to trade value without triggering exchange/market norms, but I think it can be done with money too, so long as the money represents going for a specific purpose. For instance, let's say there's five families with kids who take turns babysitting. What if whenever one family took all the kids, whoever dropped off each left $5 or $10 or $20 along with it for gas money, activities, and food? You could make clear that the money is just a budget for the kids to play and have fun, but then whoever is watching the kids that day gets to save $10 or $20 in free food and activities. If the number was set right, this would reduce the guilt if one family couldn't babysit as much, and it would be a nice little bonus and flexibility for a family who babysat more often. But instead of being wages, the money is "for the kid's activities and costs" - money is exchanged without incurring the exchange-feelings. And it moves around a little, each family chipping in a little when it's not their turn to watch.
Maybe some other time I'll write my thoughts on avoiding the exchange dynamic in dating - exchange-based intimate relationships seem like building intimacy on quicksand to me, but that's a longer topic for another time. Also, it's okay to have pure exchanges sometimes, like if you're just buying something once. But if you can transcend that, move it beyond the exchange and into looking out for each other, that can be a beautiful thing.
Ever have an experience getting beyond exchange-based relationships when doing business? Please feel very welcome to comment with your success stories and horror stories along these lines. See you in the comments.
I ask people who I meet what they’re working on and try to lend them a small hand. I find a lot of people can’t handle this, actually – I think it’s because they don’t think they’re worthy? I don’t know…
I am one of those people who could become suspicious at that, and very easily so. People are just not generally that nice! It's a poor heuritstic, but useful. I have been working on making it more useful, as in less error-prone.
A second reason (I am not sure if I am right on this) why people might reject such an offer is because favours create expectations of reciprocity: Even if you don't expect anything in return, I will feel bad if I don't reciprocate, and others might see me as bad if they find out I didn't. And do I want that problem?
Very interesting post. Relationships via social norms seem to have such wonderful qualities. Any thoughts as to the downsides? I can think of two immediatly.
One is that relationships based on social norms are implicit, there's no explicit agreement or introspection --- the participants are expected to know the norms and what's expected, but it can be hard, and if there's a mismatch between the parties' expectations, the relationship can go sour very quickly, and what's worse, there's very little recourse. If you agreed to an exchange, you can always say "hey, the exchange didn't happen" or "you didn't pay" --- but in a social norm-based relationship, you can't do that. And I am not even talking about malice, just a mismatch of expectations.
One thing that could guard against this is introspection, talking about the relationship, but that takes away the warm fuzzies, and they are kinda the point.
The second downside is that it might be harder to criticize, because it's a personal relationship. People tend to take things personally even in purely exchange-based relationships, and doubly so in a personal one, since, in a social-norm relationship, *they are doing you a favour*, even if you have "paid" for it previously. I think this is the upside of exchange-based relationships, it's not a favour, and people don't feel as bad when it's rejected/criticized.
Finally, do social-norm-based relationships have fewer defenses against freeloaders and abusers (malice)? And if yes, do you have any thoughts on how big of a problem that would pose?
First off, quick refresher - what is negotiation?
Good negotiation is about discovering things you value a low amount that the other party values a high amount, finding things they value a low amount that you value highly, and exchanging. I wrote about this in "How to Avoid Exchange-Based Relationships" -
A lot of people don’t understand good negotiating. They think it’s about getting the best price – no, no, no. Good negotiation is about figuring out what you can offer that’s worth more to the other person than you, and what they can offer that’s worth more to you than them.
it’s okay to have pure exchanges sometimes, like if you’re just buying something once. But if you can transcend that, move it beyond the exchange and into looking out for each other, that can be a beautiful thing.
It’s vacation time! Your plane tickets have been purchased, bags packed and the camera fully charged. There’s just one thing left to handle before you embark on your adventure…money. Figuring out how to get and spend money when it’s in U.S. dollars is easy, but figuring out money issues in a foreign country can be a challenge even for experienced travelers. Here are a few dos and don’ts to make exchanging foreign currency as simple as 1, 2, 3!
Do: Know The Country’s Currency And Exchange Rate
Sometimes we get so caught up in the excitement of planning that we forget about what we’ll need when we get there. Make sure you know the local currency for the country you’ll be visiting and check the exchange rates before you go. Checking out sites like xe.com will help you find the most accurate foreign exchange rates around and give you an idea of how much or how little spending money you will need in order to plan better and avoid over spending.
Knowing a country’s currency and exchange rate is also good during the planning stages of a trip and can help you decide which countries will give you the most bang for your travel buck. For example, Europe is an extremely popular travel destination, but the exchange rate for most countries, especially those using Euros, is not budget friendly. One U.S. dollar equals 0.752688 Euros which means you actually lose money in the conversion. In contrast, Asian countries like Japan or Thailand give you more for the U.S. dollar with one dollar equaling 82.8929 Yen and 30.8189 Baht, respectively.
Don’t: Use Currency Exchange Companies