A random chat with a friend over the weekend, led to an Instagram story post about how authorised dealers can sometimes act like buyers owe them something more than the retail price of a watch, simply for being allocated the watch. I figured we could talk about this in more detail, and consider how the reciprocation bias comes into play.

First, semantics… Both reciprocation and reciprocity refer to an act of return or requiting. When you reciprocate, you are responding to an action or a gesture by doing the same thing or something equivalent in form or value. These words stem from the Latin term reciprocus; the verb form, reciprocare, means “move or turn back,” “rise and fall,” or “come and go, move back and forth.” Reciprocation stems directly from Latin, while reciprocity is derived from the intermediate French term réciprocité.

So, the difference is that reciprocation connotes a more intimate, personal exchange, while reciprocity refers to a more formal situation, such as a political or social agreement or contract – here’s a simple comparison: When a person returns a favour, they engage in reciprocation; when two countries adhere to an agreement to exchange similar privileges or products, they are practicing reciprocity.

There are slavish souls who carry their appreciation for favours done them so far that they strangle themselves with the rope of gratitude.

Friedrich Nietzsche

Introduction

Most people feel a need, almost an obligation, to pay back a favour in kind. If a friend buys you a drink, you are almost certainly going to do the same. It feels like we were meant to do each other favours and, more importantly, return them. Why is that?

Archaeologist Richard Leakey believes reciprocation is the foundation upon which we have evolved: “We are human because our ancestors learned to share their food and their skills in an honoured network of obligation.”

The notion of ‘collective indebtedness’ created by reciprocation allows for the division of tasks, eases the exchange of goods and services, and helps create interdependencies that bind us into units that are more productive than each of us is on our own. Reciprocation allows one person to give something to another with the expectation that the favour will be returned and the giver will not be taken advantage of; not usually anyway!

Over the course of human history, reciprocation lowered the cost of transactions, since nearly everything begins with one person trusting another. In addition, reciprocation is not merely a human concept – it also exists in the physical world. Newton’s third law is that for every action there is an equal and opposite reaction!

Reciprocation has basically been imprinted into our subconscious. For example, we urge our kids to invite other kids they may not like to their birthday parties because they were invited to those kids’ parties. We also negatively label people who violate these ‘rules’ – untrustworthy, user, welsher etc… and because social sanctions can be tough on those who fail to cooperate, the rule of reciprocity often evokes guilt. Reciprocation also has a darker side, in that one of the most effective game-theory strategies is ‘tit for tat’ – so we might find ourselves inclined to pay back bad deeds just as much as good ones.

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.”

Charlie Munger

Love

Reciprocation is equally important in breeding love as it is in breeding hate. Andy Warhol says on the topic: Love affairs get too involved, and they’re not really worth it. But if, for some reason, you feel that they are, you should put in exactly as much time and energy as the other person. In other words, “I’ll pay you if you pay me.”

As human lovers, we promise loyalty to our partners and we expect it to be returned. We are encouraged to practice the virtues of relationships in front of not only our partners, but also society. These effects reinforcing each other can be thought of as the fabric of many of today’s relationships. Reciprocation not only holds us together, but can also bring us together in the first place. Displaying generosity can be a powerful way to advance a relationship by setting up implicit expectations of compliance from the other person.

Interestingly, women often report on the pressure they feel after receiving expensive gifts or dinners. In his book Influence: The Psychology of Persuasion, professor of psychology Robert Cialdini quotes the words of one of his (female) students: After learning the hard way, I no longer let a guy I meet in a club buy me a drink because I don’t want either of us to feel that I am obligated sexually.“

The key to genuine relationships is probably simple… each party being kind without expectations. Indeed, in most relationships like marriage, friendship, and the relationships with our children, ‘formal’ accounting is unnecessary, and if you think about it, you’ll see that it is hardly ever practiced. When it is, it is often a sign of trouble anyway. What is actually exchanged reciprocally is the willingness to provide what the other side needs, when it is needed. If you think about close friendships, any strong inequalities will eventually be noticed.

Making a concession

Aside from someone doing us a favour, there is a more subtle technique that can lure us into reciprocal and cooperative behaviour. Robert Cialdini recalls an incident that made him aware of the technique:

I was walking down the street when I was approached by an 11- or 12-year-old boy. He introduced himself and said he was selling tickets to the annual Boy Scouts Circus to be held on the upcoming Saturday night. He asked if I wished to buy any tickets at $5 apiece. Since one of the last places I wanted to spend Saturday evening was with the Boy Scouts, I declined. “Well,” he said, “if you don’t want to buy any tickets, how about buying some of our chocolate bars? They’re only $1 each.”

Influence by Robert Cialdini

He bought two chocolates, and realised immediately that something was wrong:

I knew that to be the case because (a) I do not like chocolate bars; (b) I do like dollars; (c) I was standing there with two of his chocolate bars; and (d) he was walking away with two of my dollars.

Influence by Robert Cialdini

Cialdini met with his research assistants and after conducting experiments with a similar setup on his students, arrived at a rule that explains this behaviour: The person who acts in a certain way toward us is entitled to a similar return action (in this case, the behaviour was a concession).

If you think about it, the Boy Scout had mastered the rule. The request to purchase the chocolates instead was introduced as a concession — a retreat from the original request that Cialdini buy the $5 tickets. So what happened here was that Cialdini moved from rejection to compliance (a concession on his own part) after the boy had moved from a larger to a smaller request. The noteworthy thing to take away here, is that Cialdini was not even interested in either of the things the boy had offered.

Both Cialdini and Munger believe that a subconscious reciprocation tendency was an important lever that allowed Watergate, one of the biggest political scandals in history, to occur.

There’s a fascinating story which you’ll probably be familiar with, and it provides an extreme example of how this reciprocation bias can have dangerous consequences. Operation Gemstone, in the context of the Watergate scandal was a plan that was conceived by G. Gordon Liddy, an aggressive subordinate with a questionable reputation. Liddy basically used the same trick on his superiors that the boy did on Cialdini above. The final $250,000 break-in plan was not the first that Liddy proposed – it was a significant concession from his previous two plans. The first of these plans, for $1 million, entailed a program that included a specially equipped “chase plane,” break-ins, kidnapping and mugging squads, and a yacht featuring “high-class call girls,” all meant to blackmail the Democratic politicians. The second plan was a little more modest, at half of the initial price and reductions in the program. After the two initial plans were rejected by his superiors, Liddy submitted the third, “bare bones” plan, which was a little less absurd and cost “a mere” quarter of the initial price. No surprise then, his superiors gave in, the plan was approved, and it started the snowball that caused Nixon to resign!

What does this have to do with watches?

I am sure you’ve worked out by now, that this is absolutely relevant for any watch collector. The hobby tends to flourish with good relationships, and seasoned collectors as well as brands, know this too well. Consider the friend you helped get a watch, and who returned the favour some years later. Consider the authorised dealer (AD) whose children’s birthdays you remember, and who receives Christmas gifts from you… and in turn, manages to allocate you desirable watches? Hell, even on Instagram, people who engage with your posts, get engagement in return. There is no end to the number of areas this principle applies to, but the reason I decided to write about it was due to a conversation I had over the weekend.

I was speaking to a friend in the US about his experience with an AD – and how they called him to offer a new watch, and while doing so were unusually dismissive and rude. Although he agreed to buy the watch at first, he subsequently sent the AD a text message asking whether everything was ok, since he felt they came across rudely, which seemed unusual given their long history. The AD responded to him saying “I am busy with clients, if you don’t want the watch let me know, as I have others waiting“. He decided to change his mind, decline the purchase, and inform them he would no longer be doing any business with them. Some might say, it is his loss; I would disagree, as I feel he prioritised his own dignity over watch.

It is quite possible that this story is similar to what many of us have dealt with over the last 2-3 years. Brands directly, as well as authorised dealers, have started to give off the impression that they are doing their buyers/clients ‘favours’ by simply allocating watches to them. I posted a story poll on Instagram a few days ago, and over 90% of the respondents said it was not justified behaviour. Now, I am not implying that the poll means anything, but offering that as a data point for the discussion.

Sure, most will argue they’re selling you something you can make a profit on immediately; Now whether that “profit” is realised or not is up to the buyer, and if you’re buying the watch to wear it, then you don’t profit at all, do you? That is debatable, as I have argued that social status is part of watch collecting too. You may well claim to be one of the few who happens to like a ‘hyped’ watch, and also has no friends to show it to, meaning you don’t gain any ‘status’ from wearing it either… but if you make this claim then you’re full of sh*t! 🙂

The point I am making, and many people responded to my story post saying the same thing, is that any authorised dealer is probably doing you a favour when allocating you a hyped watch. The very fact that these watches trade for multiples above the retail price, proves the demand exceeds supply – this means when you got the call for a hyped watch, several others were also waiting for a call, and didn’t get one. While there is often an assessment of spend history, and other new criteria from bigger AD chains such as ‘spend history in the last 12 months with brand X’ … there are also smaller ADs who habitually call their favourite clients, and I know for a fact these guys aren’t the biggest spenders in these stores. This must be seen as a favour, at least given the fact I have in front of me.

Having said all of that… is it justified, that the watch sellers behave any differently towards buyers because they are (or believe they are) doing watch buyers a favour? In my opinion, no.

While the (current) market dynamics may lead to more people selling a watch they would otherwise keep and enjoy, the seller’s job is to vet potential buyers before making an allocation. After they call a buyer to offer them a watch, they are officially declaring that they feel this person is a ‘worthy’ buyer. In this context, they should be treating the buyer like any other buyer of non-essential, luxury goods. The due respect, fanfare and rolling out of the proverbial red carpet should not simply be overlooked because ADs believe they are doing the buyer a favour – this is not only short-sighted, but also devalues the brand.

More often than not, a luxury purchase like a watch is ‘an occasion’ for the buyer… even collectors who own 100’s of watches look forward to collecting a new watch much like a kid looks forward to opening their Christmas presents… ADs and their attitudes should not sully the experience because they feel like the buyer ‘owes them one’.

Conclusion

Ultimately, buyers owe the AD nothing more than the retail price of the watch, and basic respect. On the topic of reciprocation, however, the game being played with ADs becomes more obvious. It is because the AD is doing you a favour by allocating a hot watch, and because of the principle of reciprocation, that all the memes about watch allocation exist! In one of our collector WhatsApp group chats, we call one guy K “the world champion deep throat practitioner” because he manages to get almost every steel sports Rolex in the catalogue … he doesn’t spend obscene amounts of money with the AD, but he just has a good, friendly relationship with them. As I understand it, he knows the salesperson’s children’s names and maybe even birthdays too, and uses this information to remain on good terms with the salesperson – none of this is ‘costly’ intel, it is just about connecting with another human selling the watches.

Another example is an Italian friend of mine who not only gets every hyped steel Rolex, but also other brands like Vacheron, Patek and AP. He’s an extremely likeable and respectful guy, sends the ADs a bottle of good booze on holidays, and pops in to see them on a whim when he has time.

Isn’t this basically how every relationship in life works? Not only in watches, but everywhere. You get what you put in, and all humans appreciate being appreciated, and being seen – especially salespeople in the world of luxury goods where many clients act entitled and are unnecessarily rude.

Personally, I don’t play the game – I barely manage to stay in touch with my immediate family let alone worry about ADs. For me, the level of a** kissing required to make this game worthwhile, isn’t something I am prepared to do… as my friend N often says, “the juice isn’t worth the squeeze” – for ME. That doesn’t make it wrong… and I think the people who know how the game works and play it well, absolutely deserve all the hype watches they get allocated – they have ‘earned’ them.

I want to conclude with one final opinion… and many might disagree with this one; Playing the game costs you something: dignity. As covered in the story above, this is a personal choice, and you will observe many people in the hobby who you’d think have never even heard of dignity, based on how openly and generously they kiss a** to get popular watches. Power to them; After all, it wins them favour with ADs and brands, and they tend to get what they want.

To conclude … dignity is what I believe is being traded in return for the favour of being allocated a watch, and this trade isn’t worth it to me. I am not against others doing this, as it is their own decision to make, and their own dignity to trade. Finally, this is just a personal reflection on the subject; everyone’s different, and many won’t even agree that they’re sacrificing dignity at all… and that’s ok too!

-F