2018-01-22 concepts

Spheres of exchange, the fallacy of mood affiliation, soft power

Hey all -

+ what I learned or rediscovered recently #

* Spheres of exchange

This is probably a familiar feeling: you ask a friend or acquaintance for a favor - say to help you move or tutor you in something - and then you feel obligated to repay the favor.

So you get them dinner, or a little gift, or write them a card.

But under no circumstances do you repay them in cold, hard cash. Why is that?

One reason is that the relationship you have with your friends falls into a different sphere of exchange than the relationship you have with strangers. Namely, exchange with friends falls into the “social sphere,” while exchange with strangers falls into the “market sphere.”

David Graeber, anthropologist and author of Debt: The First 5,000 Years, explains (p. 8-11):

With barter or commercial exchange, where both parties to the transaction are only interested in the goods, they may well—as economists insist—try to get as much as they can out of the deal. But, as anthropologists have long pointed out, when we are dealing with the exchange of gifts, that is, exchanges where the objects passing back and forth reflect on and rearrange relations between people, competition is likely to work the other way around, as a contest of generosity, of people showing off who can give more away.

The social sphere is imprecise, fluid and relationship-based. Exchanges are not one-off; rather, each builds upon the last and invites the next. Graeber calls this “tit-for-tat gift exchange.”

In contrast, the market sphere is transactional and quantifiable. The precisely calculated value of a good or service is captured in a single transaction: pay the full price, then move on. Relationships, trust, loyalty and honour are extraneous.

So what’s wrong with throwing your friend a $20 after she helps you move?

You turned the social sphere into the market sphere. You closed the tab, settled up, and tacitly signaled the end of the exchange. Which may not have been your intention if you wanted to stay in the social sphere.

A good rule of thumb is: try to avoid mixing the market and social spheres.

Admittedly, sometimes the real world demands that these spheres mix. Sometimes it’s just easier to settle things in cash, even among friends. But knowing why these situations are uncomfortable can help to better navigate them going forward.

* The fallacy of mood affiliation

Sometimes, we feel a certain way - maybe angry or optimistic or doubtful - and then arrive at reasoning which is consistent with that feeling.

For example, if we’re angry at someone for one thing, we’ll sometimes deliberately try to brainstorm additional reasons to justify and maintain our anger. Or, if we’re really optimistic about something (cryptocurrencies, anyone?), we will find any reasoning to rationalize that optimism.

Tyler Cowen calls this “the fallacy of mood affiliation”: you shouldn’t affiliate your reasoning with how you happen to feel right now. To me this really just sounds like “confirmation bias,” or: “you only see what you want to see.”

Regardless of the term, Cowen proposes a remedy[1]: pretend to be in a different mood. What would happen if I thought about the same situation, but instead, I was really happy? Or pessimistic? Or silly? Or skeptical? What reasons would I discover from each of those angles?

Easier said than done, but a good idea nonetheless.

* Soft power

You can get things done by telling people what to do (coercion), but you can also get things done by convincing them want to do it (co-opting). Both are forms of influence, but the latter - soft power - is often much more sustainable and effective.

In a recent article from The New Yorker about the rising eminence of China, Evan Osnos writes:

Joseph Nye, the Harvard political scientist who coined the term “soft power,” to describe the use of ideas and attraction rather than force, told me that China has improved its ability to persuade—up to a point. “American soft power comes heavily from our civil society, everything from Hollywood to Harvard and the Gates Foundation,” he said. “China still doesn’t understand that. They still haven’t opened that up. I think that is going to hurt them in the longer term.

“Hard power” is the short-sighted way of getting what you want. It’s convenient, it’s quick-and-dirty, but ultimately it’s not the best strategy if you’re optimizing for the long-term[2].

Osnos alludes to some cultural forms of soft power, but I’m more interested in the interpersonal ones: How do you lead by example? Or recruit instead of threaten? Or compromise when necessary? Or empathize to see how the other side sees things (i.e. their incentives)? Lots of food for thought here.

Thanks for reading,


[1] Cowen calls this “intertemporal substitution of moods” on his podcast episode with Patrick Collison (founder of Stripe).
[2] To be fair, sometimes we’re not optimizing for the long-term, in which case hard power can be useful.