Wednesday, January 28, 2015

Nuances of Fisco-emotional Gratitude

I had the privilege over the past few years of operating with a high degree of latitude over an inventory of stuff, spread across ten warehouses in several different regional economies, which gave me the opportunity to make gifts. Not little stuff, either, but stuff that would go on a retail shelf for between one and two grand, and which regularly and consistently did sell at that price during that time period.

Because of a wonderful little lack of oversight during those years, I was able to occasionally give product away. There weren't any adverse personal consequences as far as I was concerned--no one found out--and given the nature of my position at the time, there is absolutely zero conceivable chance that anyone who got something free from a warehouse would get in trouble for it. It's theoretically possible (though unlikely) that I would've gotten disciplined in some form, but that never, Never, never would've even been something a gifted person/customer would ever have gotten in trouble for themselves, let alone even found out about. To answer any potential objections in advance, understand that a hypothetical gifted person/customer would've never even imagined that there would've been any problem with receiving it. I.e., if you're at a restaurant, and the manager and three waitresses come over, thank you for coming, and tell you that because you're the 10,000th customer, your meal is free, so you smile, shake hands, take a picture, and walk out without paying the bill, while the entire kitchen staff claps for you. It would never occur to anyone that there was some kind of spooky catch to getting a free box out of one of the warehouses--no way, no how. So shelve that objection.

So, we get the scenario, right? I was able to give away free expensive product for no consequences. We're talking brand-less stuff, stuff that has no resale value (which was why I was willing and able to do what I did); but, stuff that's genuinely useful and arguably necessary for a whole lotta people. These products sold across the country, all the time, thousands or millions a year, for anywhere from one to several grand. And like a complete infant, I thought I would try out using my position to give things away to people. Not just to people who needed these products and couldn't afford them, but to people who could afford them, and maybe had already gotten older versions and would later buy newer versions, but who would find a moment of brightness in their day if someone helped them out and gave them a freebie (or a lowbie, whatever).

(And no, to further develop the point, these products were not controlled substances and/or medical procedures. This is a separate world.)

What did I find out? Well, Americans hate getting stuff for free. Someone could come into the place, look around, show interest in something, and then, if you offer to have it sent to their home, they balk, get weird, and quit. Ten days later, they've bought a different one, from a different warehouse.

Also to further develop the point: assume, hypothetically, that I knew what kind of product went into both the warehouse where they rejected a freebie, and the warehouse where they paid four grand for the exact same thing (or even a demonstrably lower-quality thing) a few days later. Cancel the hypothetically, because in this scenario, I did know that, and they did do that.

Not only did people hate being offered things for free, they also hated being offered a discount. I regularly saw people come in to see staff, talk about something, make a decision, and then walk when someone offered to knock off five hundred bucks. It's exactly the opposite of what game theory, economic science, pop-biology, and all the other mercantilist bullshit would suggest about human behavior (a more developed version of what I addressed in tiny-widget terms in Glamorous Pizza).

For some weird reason, people hated and feared free things even more than they feared a discount. Sometimes I'd take pity on someone I saw looking around, or just feel a human connection, and see someone looking at something with a sticker of a couple grand...and I'd go up, talk about the thing a while, and say, "I don't mind just having it delivered to you." And they chat merrily a little while, stroke the box forlornly, and then shake their head and walk off, empty-handed. Next month, they buy the same thing--the exact same thing--at full price. From me.

(More development of the point: assume that these products were light enough that they could be carried in one hand. They don't actually require delivery. They're nigh-instant set-up, about as simple as plugging in, and they're 100% recyclable, and they don't cost anything to use, they don't produce waste, and no one knows if you have one or don't have one. They don't need to be cleaned, they never break, and you can get rid of it whenever you want and nobody knows or cares. And they're not edible or used on the body in any way, so there is zero heebie-jeebies about "what's it got in it?")

One possible explanation would be that I'm some kind of spooky weirdo, so unpleasant that I give people bad vibes, such that they don't want to take something from my hand--but this duplicated itself with much-more-personable people than I. The same reports come my way: if people find out you're going to do something nice for them, they automatically lose their faith in whatever the product is.

More important than the fact that this phenomenon duplicated itself among the staff is that, during this exact same time period, when I didn't try to be nice to people, they loved me. I could spend weeks in a row unloading, say, flatscreen after flatscreen, cash in hand. And once things were all done and delivered, people would thank me, cry about how nice and perfect I'd been, inform me that I was going on their Christmas card list, ask if I was married or just pre-emptively suggest a single family member that might be good enough for me, etc. They'd tell me what a bargain it was and how spectacular this had all been.

The freebie people? Yeah, a few of them did accept product, over the years. How likely were they to say thanks? Less than fifty percent. How likely were they to say more than an embarrassed, mumbled "thanks" that lasted two seconds? Less than five percent. Whereas, the ones who paid sticker were at nearly a 90% thank-you rate (including getting misty-eyed, hugging me out of nowhere, heartfelt moments, giving me unnecessary gifts), and the ones who got a discount wavered down at about 50-60% for a mumbled thanks, and never hugged me or cried about how nice I was.

As they say in the vernacular, what the hell, right? What would make people be that way? I'm talking primarily about eastern Canadians, Americans, American/Israeli dual citizens, and a handful of British, here, so pretty near to ground zero for finance as far as that goes.

When you're thinking about this, you have to eliminate all of the possible details explaining why this particular set of products might be unlikable or unnecessary. You have to trust me that this was how it went. The only real variable to almost everyone was how nice I was willing to be, and how extremely distrustful (not rudely; just quietly averse) they were about the very idea that something valuable would be given to them by another human being. Being offered it for free spoiled the experience.

It isn't the concept of "free" by itself that bothered them. People take free crap all the time. Free lollipop, free candy bar, free pamphlet, etc. Hilariously, maddeningly, consistently, I saw them do the exact opposite with stuff that held actual value. Stuff that other people would spend, sometimes, hundreds of thousands of dollars on. And it wasn't that they thought I was pitiful and couldn't afford to give them charity, either, because they didn't think the product was "mine," and they knew I could get it to them without any cost to me personally, and they knew I wasn't getting a commission, or anything, based on moving product at or near sticker.

Why? One of the sickening features which game theory, economic science, pop-bio, all that stuff, refuses to take into account (when presented to proles, because of course the nobility understands how and why their theories as expressed in private actually work) is individualized emotional variables. There are hardly any real-life economic/genetic actors out there who even approach the level of "rational actor" hypothesized by the publicized versions of elite competition-style theories, and the majority of people make decisions based on what will make things worse for them, rather than better.

Our markets have taught people to be suspicious of good intentions themselves. Not "good intentions with creepy warning signs," but just good intentions. We know that test groups will rate the exact same food as "more visually appealing" and "better tasting" when they believe it is more expensive, but my association in this regard showed me that things went beyond that. No more tests, no more questioning the overall presentation of the thing--I had a direct view of people, sometimes very savvy people, choosing to pay a lot of money for something that they knew was the exact same thing, instead of taking it for free with no strings attached. Ultimately, I gave up, and decided that the best way to be good to people was to let them blow a wad. Surely enough, everyone else was much, much happier. During my little time simultaneously selling and giving stuff away, I witnessed how people were not only happier about the process of making themselves less wealthy, they were grateful to tears over it. (Seriously, brah, I even got tips from people who paid sticker. And this is an industry where there just aren't tips.)

The most important lesson from this story, for me, was the way gratitude related to the two kinds of exchange--the way the act of someone thanking me was more likely to occur when the situation was an arms-length financial transaction, rather than a gift. There are all sorts of conceivable emotional reasons why people would feel vindicated for paying for something, even if they know it's identical to something else. There's a rush of feeling important after laying down a stack of Benjamins; there's more of a fetish in the product they receive. That gratitude angle was really wacky. People were more likely to thank you for giving them that rush, that "ability to spend," than they were for freely giving them what they theoretically came there to acquire anyway. There's an element of Stockholm Syndrome in there--the idea that we should thank our marketers--and even worse, it goes along with the reduced ability to thank those who have actually been nice to you, as opposed to those who've conducted an approved transaction-ritual with you.

This thing we've created here--it goes way beyond "product" and "acquisition."


  1. I think this theory is wrong, because there is a simpler, just as successful one:

    In general, the instinct for reciprocity is pretty hard-wired in humans - if somebody does something nice for us, for the most part we just can't help it and feel obliged to reciprocate somehow. So if you get something for free, yeah, that's nice, but then you have this new psychic burden of indebtness, no matter what anyone says.

    So then it becomes hugely important WHOM are you indebted to? It is one thing to be indebted to family or community members - usually a good thing that maintains and recreates social relationships, and a totally different thing to be indebted to some capitalist henchmen in a warehouse you would normally not want to have anything to do with.

    1. Good point; that could've definitely affected some of the PIQ ("people in question"--today I'm trying to hasten the downfall of civilization by augmenting sloth-based internet jargon. Feel free to begin using PIQ in your personal correspondence).

      Counter-argument: presume that when this stuff would happen, staff would be desperately trying to make commissions, and that customers could frequently tell when it was very important that a staff member (or, hypothetically, me) made a sale. And assume that, despite this state of affairs, these people were more likely to buy something when the staff member held fast to standard price-point, rather than when the salesperson almost beggingly began throwing in discounts.

      Reciprocity would predict that discounting would produce higher sales, when in fact, it produced lower. And discounting would've benefited staff, since the customers knew they got a commission. Ergo offering a discount should've incentivized buyers to purchase in order to allow the selling agent to earn a commission (but it didn't; it did the opposite).

      For some of the people with me, customer-worry about feeling an obligation was probably there, but for the majority of the situations I'm thinking about, the customer wouldn't have perceived one.

      Further detail: presume that, prior to these interactions, many of the customers had parked their junkers next to a new-model Maserati outside, and assumed that the Maserati was mine, based on the layout of the place and our automotive discussions during the greeting process. Assume there were a lot of other visual class cues present as well, at various times. Does that make them more likely to worry about being obliged to me, or more ready to accept charity? Judging from appearances, it had no effect. People in new S500s and people in 1987 Tercels had the same gratitudinal and financial response rate to me-originated generosity.