MI Rewind: Warren Buffett’s #3 & Charlie Munger’s #1 Business Book of All-Time w/ Robert Cialdini

30:49Here's the thing that I thought was most interesting. My book, Influence, has been called the Bible of electronic commerce, of digital commerce. When it was first written, there was no digital commerce. There was no internet. So what's crucial about these principles is that they work online too. Not that they work online in some other way. They work online too. And that was the thing that was most surprising to me. I expected to find some different configuration. Nope. Exactly what we find in face-to-face contact or typical marketing approaches shows up on digital sites as well. My next question isn't related directly to digital business, although it does impact many digital businesses, especially social media sites and some others.

31:51But it's something I struggle with personally, big time, and I know a lot of other people do. So I'd love to hear your thoughts on this idea. What is it about our cell phones that makes them so addicting that 84 % of people say they couldn't go a single day without their mobile device? They have two incredibly reinforcing features, your cell phones. they give you immediate access to desired information. When you go on your cell phone, you can go online, you can go on Amazon, Google, whatever you want. You can get the information you want. Sometimes it's information that comes from one of your network members, Facebook information.

32:37Sometimes it's an email. You get that right away. You don't have to call anybody. You don't have to make a phone call. You don't have to set an appointment with them. you get it right there. Desired information, immediate. And here's the other thing that's desirable that comes immediately, connection. You get immediate social connection. So those two things, information and social connection, are right there in your hand. And that's what makes it so difficult to be without them. How can we beat this? Well, I've heard people say they put themselves on a diet. They fast and they put their cell phone away for a while.

33:22I had a graduate student who was very productive. I remember that she got more work done than any other two of my graduate students combined. And I asked her about what did you do? And she said, I don't go to my email or my phone until three o 'clock in the afternoon. I don't allow myself to get distracted. I don't allow myself to get waylaid off into other directions. I know what's important. I start out with a list of what's most important for me to be doing. And I work on that list. And then at three o 'clock, I answer my phone or my email. It's tough. Yeah, it's so, so hard. I like to think I'm a pretty productive guy.

34:05And actually, a lot of people ask me for time management tips and strategies. And I think I do pretty well with but I know I can be better. And the reason I know that is because I know I spend so much time on my phone and I absolutely hate it. And it's something that I've tried to work on. I've turned off all notifications. I've done every other little hack that you could find on the internet. It just still hasn't worked for me. Just last week, I actually did something similar to what your grad student did. I always had set my phone on do not disturb when I sleep just so it doesn't wake me up.

34:33But usually I'd set it from 10 p.m. till 5 a.m. And so that didn't really help because it didn't wake me up at night, but at least when I woke up, the first thing I did was check it, so it didn't really solve anything. I just extended it from 5 a.m. to like, I forget if it's 8 or 9 a.m., but I extended it a bit, so at least now I'm not checking it first thing when I wake up, I'm at least checking it maybe mid-morning now. We'll see if it works for me, but I might have to extend it out to 3 p.m. like she did. There's some fascinating research on the difference between information that is important to know and urgent in its implications.

35:10And it's possible, and I wouldn't say not just possible, it's probable that a lot of the urgency of information has to do with things that are not important. Not as important as the ideas you structure for yourself at the outset of the day, these are the things I need to get accomplished. This other stuff comes and because it's urgent, sweeps us away from importance and into this domain of urgency. Even if it's unimportant, we find ourselves in the weeds. I know that I personally rely on reviews a ton when I'm shopping these days. I don't know how people bought things before there was online reviews, because I rely on them so, so much.

35:58I was surprised to see new content about this from you. How do we spot phony online reviews, and why is this even important? Very important, because those online reviews engage another fundamental principle of influence, the one we call social proof. the idea that if a lot of other people around me, like me, are having a particular experience with a product or service or anything, we're likely to have that same experience or something close to it. So again, we can use those individuals and their experience as a beta test for these products and services. We can see what they think about it, how they experienced it.

36:44Very important way that we decide what to do. What are the people around like us doing? And those stars give us the chance to do that, especially on sites that will give us information about the reviewer, and we can tell how similar that person might be to us, and so on. And when phony reviews get entered into the system, they degrade the informativeness of that review process. We can't trust it anymore. So how do we tell what's a phony review versus a genuine review? And just like you, I've seen a lot of examples of that, bad language, people not being very grammatical inside the review, or not providing any commentary at all, just stars.

37:33These kinds of things make you worried a little bit if that's a real review, or one that was purchased, or one that was fabricated by the product manufacturer. But there was a study at Cornell University that found there were three things that I had never heard before that differentiated phony reviews from genuine ones. First of all, they're more general than specific. They talk in more general terms than in terms of specificity about the product and its features. Secondly, they use more first-person pronouns, I, me, than other kinds of pronouns. And thirdly, they use more verbs than nouns. Now, it seems to me we can explain all of those in terms of people who don't have much experience with the product or service itself.

38:33So, first of all, they're talking generally about it rather than specifically. Secondly, they're talking about themselves rather than the product or service, right? They're talking about their experiences and describing themselves in interaction with the product or service. And finally, they're talking about things that they're doing rather than features of it, like a noun would be. So how they're interacting with it. Again, it's all about them rather than the thing. So when you see reviews that are loaded like that, that's a tip off. It's likely to be, there's a greater chance that that would be a phony review.

39:31Well, I've got great news for you. We've got a handful of other shows for you to explore, from learning about Bitcoin to embracing a richer, wiser, happier lifestyle. Just go into your podcast app and type in We Study Billionaires to find our collection of shows. We Study Billionaires is our flagship podcast, and we've made a name for ourselves over the years by interviewing the best investors in the world, including Ray Dalio, Howard Marks, Joel Greenblatt, and many, many more. My colleagues, Stig Brodersen, Clay Fink, Kyle Grieve, Preston Pysh, and William Green each hosts their own We Study Billionaires episodes and bring their own unique perspectives.

40:07A whole new world of insights awaits you. Just go ahead and type in We Study Billionaires into your podcast app and see what you've been missing out on. Seriously, go ahead. I promise you'll like what you find. Bonus points if you show your support for our work by clicking follow. If something piques your interest, just start listening. No hard feelings. I'll be waiting for you back here. Just like everybody else, there was a time when I was a beginner investor, and I have to say, investing is particularly filled with jargon that can just make it so difficult for new investors to understand what is going on.

40:37But it's never too late to get smarter about stock investing from the ground up. At The Investors Podcast Network, we've made a habit of studying the world's best investors, and now I'm distilling those learnings into a simple course for you, or for anyone in your life who you might want to share the gift of knowledge with. With my How to Get Started with Stocks course, you can master the principles of excellent lifelong investing with valuable insights for both beginners and pros. The course covers 10 different sections, beginning with the basics of what a stock actually is and how the stock markets work, to strategies to optimize your retirement savings, how to pick great companies for the long term, what to look for in ETFs, and how to monitor your investments, plus so much more.

41:16To begin getting smarter about investing, just visit theinvestorspodcast.com slash get started with stocks. That's theinvestorspodcast.com slash get started with stocks. And for a limited time, you can use code stocks15 for a 15 % discount at checkout. Not to be cliche, but building a market-beating portfolio really doesn't have to be a mystery, at least with the right tools. If you've listened to our podcast for a while, then you know we spend a lot of time learning from savvy investors. So why not use the same tools we do? With TIP Finance, you can. Screening for great companies, calculating intrinsic value, keeping up with legendary investors' portfolios, and more are all not just possible, but easy to do.

42:02TIP Finance was created by investors for investors. It's quite literally the tools we wanted to use ourselves when researching investments in a simple to use interface. You can get started by creating an account for free. Who knows, maybe TIP Finance will help you find your next 100 to 1 investment. Between the screener and Legend Investment Portfolios to reference, I've gotten a ton of ideas from TIP Finance. What are you waiting for? Take the next step in your investment journey today with the right tools at your fingertips. Grab your device and type into your browser, theinvestorspodcast.com slash tip-finance to get started.

42:41That's theinvestorspodcast.com slash tip-finance. All right, back to the show. Another popular book I enjoy is called Giftology, and it talks about the art and science of using gifts in business. You talk about how a small gift more than doubled investment bankers' large donations to a charity, and why personalizing gifts increases the returns of gifts. Talk to us a bit about these ideas. Well, first of all, in that study that was done in London, there was an investment, a large international investment bank that had a London headquarters. And they had partnered with a pair of charities in the UK area, and they wanted their investment bankers to commit to giving a full day's salary during this period of giving that the bank was fostering.

43:41And when they got a letter saying, it's time to give, would you give a full day's salary? They only got about 5 % of the people willing to do that. That's a lot of money for an investment banker, a full day's salary, thousands sometimes. But if on their way into the bank on that day, where they could give. They were met by a solicitor from one of the charities who said, would you be willing to do this? And gave them a small packet of sweets. In addition to this letter, now they get a packet of sweets. And the number of people who comply jumps to 12%. So, you go from 5 % to 12 % because they had received something in the moment before they were asked to give.

44:35Amazing. Now, you asked about personalization. The more personalized you can make whatever you give to individuals, the more effective it will be in urging them to give back to you at the highest possible level. So, for example, there was a study done in restaurants where I was talking a little bit about it before. If a waiter put a mint on the tray at the end of the meal for each diner, he or she got a 3.3 % increase. If the waiter put two mints on the tray for each diner, the increase in tip went up 14%. But if the waiter said to them, for you nice people, because you are such good customers and gave them two mints, first one, and then came back to the table and saying, because you're such good customers, here's a second mint.

45:37Tips went up by 20 % now. So by personalizing, telling them, this is for you people. I don't do this for everybody. It's personalized to you. You get that kind of effect. So whenever you're thinking about giving a gift, if you can give something that is personalized to the preferences, to the needs or to the current challenges of the person who's receiving it, that person will want to give back to you at the highest possible levels when you ever make a request of them. We talk a lot about Warren Buffett here on the show, and it's widely known that he's a big investor in Coca-Cola. He's even talked about this next situation I'm going to ask you about from a business perspective, so I'd love to hear the psychology side of it.

46:27Which psychological principle did the Coca-Cola company miss that led to the disastrous marketing decision to replace its traditional Coke formula with the new Coke? They missed the principle of scarcity. If you remember back then, they didn't just add a new Coke to their product offerings along with the traditional Coke, they took away the taste of Coca-Cola, the traditional taste of Coca-Cola that people had grown up with. People get crazy when they lose opportunities that they have experienced in the past and feel that they are entitled to. Or when something is rare or scarce or dwindling in availability, they want it more than ever.

47:14And what Coca-Cola failed to recognize, even though they did taste tests, blind taste tests, where the majority of people who tasted the new Coke versus regular Coke preferred the new Coke, even though that was the case. When the old Coke was taken away, now there was a rebellion. People went nuts, demanding to get the old Coke back, which they did by causing Coca-Cola to capitulate and pull the new Coke eventually off the shelves and replace it with the new book. I remember reading news headlines a few years back about how Amazon pays its employees if they quit, but I didn't hear much about the psychology side of it.

48:01I just heard of it really from the business perspective. Which principle of influence explains why every year Amazon pays fulfillment employees up to$5 ,000 if they quit? It's the principle of commitment and consistency. People want to be consistent with what they have committed themselves actively to doing. If you read what Jeff Bezos says about this policy, this policy of inviting people to quit, he says in the memo that they get sent every year, we will give you$5 ,000 if you quit. If you want to quit right now, we'll give you$5 ,000. He says in the memo, but we hope you won't. We don't want you to quit.

48:48And in fact, that's exactly what happens. Almost none of these individuals will abandon this job for$5 ,000. It's a pretty good job in terms of pay and benefits and so on. It's not the greatest in in terms of the amount of effort that's involved. So they don't. But they go on record saying, I don't want to quit. And it's that act of making the commitment to staying that causes them to feel better about their employment because they've just witnessed themselves making a decision that pushes away$5 ,000 so they can stay there. And they have to say to themselves, I must really like it here. And that's what they find.

49:32Do you think understanding psychology is a big differentiator between successful business leaders like Jeff Bezos, for example, and those who are less successful? Absolutely. Warren Buffett and Charlie Munger frequently endorse the book Influence. And I wonder why is it that they are so effective, not just in knowing how the world works within the finance and investment domain, but how people work in terms of wanting to purchase their shares. And I think it's because they read behavioral science. They read about psychological theories and psychological experiments that have been done, which allows them to then do better at predicting the markets and urging people to come on board with Berkshire Hathaway.

50:32I don't think we've ever talked about this, Robert, but several years ago, quite a few years ago, I went to my mailbox one day and found an envelope. I opened it to find a share of Berkshire Hathaway A stock with a note from Charlie Munger. And he said, you know, your book Influence has helped us so much that by your principle of reciprocation, you're owed something in return. Because we've made such profits understanding human behavior. You're entitled to something. And at the time, the share was worth, it was between$70 ,000 and$75 ,000, which was amazing to me at that time. Of course, now it's worth something like$380 ,000, not just because Warren Buffett and Charlie Munger are such brilliant financial experts.

51:33They're also brilliant psychological communicators about how brilliant they are as investors. in the shareholders letter, the annual report that Warren Buffett sends every year, I now get it because I've got this share of stock. And I see that that man really understands human psychology. And I think that accounts for a lot of his success. That is an incredible story. And I have to ask, have you held the share ever since you were gifted it? Absolutely. Because as I said, what this showed me when I now receive those annual shareholder letters every year is, wow, this guy really understands not just the psychology of investment, but the psychology of communicating about investment to make people want to hold their shares and buy more of them.

52:32He's brilliant at it. They've also both talked about, and I've read about it in some of their books or books about them, that they have been able to purchase businesses solely based on how they've gone about the transaction. They were not always the highest bidder. There was a lot of cases where they weren't even close to being the highest bidder, but for whatever reason, that person still sold their business to them. And I think a lot of it has to do with psychology. And if I had to guess, Charlie and Warren probably have your book to thank for that? Well, Charlie rates it the number one business book he's ever read, and Warren rates it number three.

53:08That must feel incredible. I can't tell you how great that feels. And every year at the Berkshire Hathaway meetings, they sell the book in what's called the Berkey bookstore, and they also will often refer to it in their comments. And I always get the Berkshire Hathaway a spike in sales of the book as a consequence. Yeah, I've actually been out to the meeting in Omaha. And I believe I remember actually seeing the book there now that I think back to it, because I've been to that bookstore that you're referencing. I've actually recently left the corporate world and I hope that I don't have to go back.

53:45But when I was in the corporate world and I was interviewing for different jobs as I was climbing the corporate ladder and advancing my career, the hardest part for me was always coming up with questions to ask during an interview. I was always pretty good at the risk, but not really at asking questions, which is actually kind of ironic now that I host a predominantly interview-based podcast. But for those listening who may have an interview in the future and they struggle with the same thing I did, what question can job candidates ask at the start of an interview to increase their chance of success.

54:18So at the very start of the interview, of course, you want to say, I'm so glad to be here and I want to answer all of your questions fully. But before we begin, I wonder if you could answer a question of mine. What was it about my resume? What was it about my credentials that spurred you to invite me here today? And what you will hear is the various people in that room telling you of all the things. They will be saying out loud all the things that were positive about you and your qualifications and experience. In other words, they will make a public, active commitment to your strengths. And by the principle of commitment and consistency, they will then conduct the rest of the interview in a way that is consistent with those positive features that they see of you.

55:16Without you ever having to make the case for your strengths, they will have done it for you. And they'll do it for one another. One person might say, well, I really like your experience. The other person might say, I really like the way your education allowed you to be a good candidate for the job. And there'll be cross-talk where they'll be pumping you up because you've asked them to simply identify those things about your resume that they found resonating with the job descriptions. Not only does that give you great information to then pursue within the rest of the interview, it puts them in a position of having made a commitment to your candidacy.

55:57I have an acquaintance who told me about this strategy. He says he swears he's gotten three better jobs in a row using it. When in the interview process would you recommend using this? Typically in my experience, You get a phone interview first and then an in-person one if you make it through to that step. Do we use it in the phone interview part or do we use it in our first live interview? Your first live interview, unless there's only going to be a phone interview. Because at the stage of the phone interview, they haven't really made a selection for you to the same degree that they have. If they've invited you to corporate headquarters or wherever to talk about it.

56:36Now you really can say, what was it about my candidacy that led you to do this? And now they're going to commit themselves to something that they consider very important. I want to talk about the nation's most successful car salesman and how he uses the unity principle of influence to achieve his success. But before we talk about his specific tactics, please explain to us what the unity principle of influence is. Unity principle says that any communicator who can convince us that he or she shares a social or personal identity with us, is a member of a particular in-group with us, becomes immediately more influential to us.

57:28We trust that person more. We want to cooperate with that person more. We want to learn more from that individual. We want to say yes to that individual more. We say yes to the people who share the boundaries of what I call a we relationship. So these are not people who would be able to say, oh, you know, Robert is like us. That's not it. It's Robert is one of us. Robert is of us. If you can get them to say that, everything is easier for you now inside the influence process. Let me give you an example from a study that was done on a college campus. A young woman, college-age woman, stopped people who were walking by, students, and asked them to make a contribution to the United Way.

58:20And she got some level of success out of the standard request that the United Way makes to people. But if she began with one preliminary sentence, she more than doubled contributions. And the sentence was, hello, I'm a student here too. I'm one of you. And now, twice as many, more than twice as many people gave more than twice as much. So how did the world's greatest car salesman use this principle? It used to be a man named Joe Girard. Joe Girard has since passed away. But he wrote about the strategies he used to get people to buy his cars and trucks, which he sold on an average of every day he worked, he sold an average of five cars and trucks.

59:13And he used all kinds of methods for doing so, making sure that people liked him, making sure they knew he liked them. That was the most important one. But also working with they ever came in with a repair, making sure that the people in the repair shop gave them high priority and so on. He had a series of these. And the new king, a guy named Ali Radha in Dearborn, Michigan, said he patterned his approach directly on Joe Gerrard's. And yet, he outdistanced Joe, even in Joe's most successful years. Ali is doing better. Now, why? Well, I don't know how much you know about Dearborn, Michigan, but it is the single American city with the greatest population of Arab Americans or people of Middle Eastern descent who have settled in Dearborn.

1:00:14And Ali, who is also of Arab descent, interacts with them at all kinds of community events and so on, so that they know he is of them and they come to him to buy their cars and trucks. He's got one thing that Joe Girard didn't have. He's got ethnic commonality with the majority of his customers, and that elevates his success over Joe's. Robert Leonard Bob, thank you so much for joining me today. It has truly been an honor to have you here and to have the opportunity to speak with you. I told you before we started recording that your books have been some of my favorites, and I was really looking forward to this interview.

1:01:01It definitely did not disappoint. This has been one of my favorites. I know the listeners are going to absolutely love it as well. For those listening that want to learn more about you and your book, where is the best place for them to go? The best place is our website, www.influenceatwork.com. Influenceatwork, all one word, no spaces,.com. I will put a link to that website below in the show notes. I highly recommend that everybody listening goes and checks that out. You will be doing yourself a disservice if you do not do that. If you're watching the video version, you can see the book behind me here.

1:01:38I absolutely love it. I could not endorse it enough. My endorsement is nothing. It pales in comparison to Charlie and Warren. So if you don't take my advice, at least take theirs. Bob, thanks so much for joining me. I enjoyed it. All right, guys. That's all I had for this week's episode of Millennial Investing. I'll see you again next week. Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor's Podcast Network. Every Wednesday, we teach you about Bitcoin, and every Saturday, we study billionaires and the financial markets. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com.

1:02:20This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor's Podcast Network. Written permission must be granted before syndication or rebroadcasting.