010: when Night King meets Cialdini
how the offensive and defensive playbooks of persuasion can make or break nextgens
‘My fool of a son thought he was the hunter. He didn’t realize the leak was an elaborate ruse.’
‘Hasn’t his nightclub been a reliable source of alpha?’
‘Not this time. I suspect even the nightclub management was behind it. By this morning, the short squeeze was all over the news.’
‘Look on the bright side. You only had to pay a quarter’s worth of profit for a lesson your son will remember for the rest of his life.’1
Rarely do luxury items or expensive experiences land nextgens in financial ruin.
Wrongly betting the farm on a trade or a project, however, could put a meaningful dent in their portfolio.
All because they succumbed to the power of persuasion.
Having spent five years working for my family, I constantly parry persuasions that come my way while applying my own efforts towards my family.
It often boils down to Cialdini’s seven principles of persuasion.
Let’s explore how they work, how others use it for their benefit, and how we can too.
Reciprocity
How it works: We feel obliged to repay what we have received.
How others use it:
A fund manager provides exclusive access to a closed event for you, making it harder for you to say no to their next investment pitch.
How you can use it:
You behave towards your colleagues the way you wish your boss would treat you, so that your colleagues will gradually trust you as their future boss and be willing to work for you.
Commitment and consistency
How it works: We feel bound to our past words and actions, and behave based on commitments we have made.
How others use it:
A salesperson gets you to agree to a small, easy trial. Once you’ve started, you feel a psychological pressure to follow through with the full deal
Your dad asks you to come back and help out the family business for a month. Once you’ve publicly stepped into the role, it becomes harder to leave without hard feelings.
How you can use it:
You keep minutes of conversations with key stakeholders, especially family members who are on the investment committee. Their remarks can be resurfaced at critical junctures to drive towards a conclusion.
Social Proof
How it works: We feel secure in mirroring our peers.
How others use it:
A developer claims other major family offices are already in on the deal, creating FOMO.
How you can use it:
You keep track of which industry titans your family leaders look up to and monitor their views. One comment might be enough to engineer the aha moment on a new investment theme for your family.
Authority
How it works: We are more likely to comply with experts.
How others use it:
Advisors may inflate titles, drop names, or otherwise project themselves as someone of note when they’re not.
Your dad claims he has pattern recognition honed over decades of doing business that trumps your data-driven findings.
How you can use it:
You bring in a neutral, third-party expert to present your ideas to your family, leveraging on their authority.
You build a personal brand for yourself, notching public speaking opportunities or podcast appearances and gradually compound trust with your family.
Liking
How it works: We prefer people similar to us.
How others use it:
Some bankers use charm, access to rare events, or other methods (footrubs anyone?!) to assuage clients during seasons of underperformance.
How you can use it:
You bond with family members outside of the family business proactively. The earlier you build common ground, the easier you will get help when you need it.
Scarcity
How it works: We perceive things of limited availability as higher value.
How others use it:
Deal syndicators create artificial deadlines or limited allocations to force a quick decision, preventing you from performing proper due diligence.
How you can use it:
You learn from the most prolific family offices. They often reach the decision to invest in a co-invest long before the opportunity presents itself.
Unity
How it works: We yearn for a shared identity and a sense of belonging.
How others use it:
Private dealmaking clubs foster inner circles, in which inexperienced members co-invest more than they’d like, sometimes with undesirable financial consequences.
How you can use it:
You frame your new initiatives not as your own quest for legitimacy, but as your contribution to your family legacy.
Which principle of persuasion have you detected others using on you recently?
How about the principles of persuasion you have used on others, especially your family?
Go watch Night King if you haven’t already!