Before You Are Nice to Someone, Check Whether the Market Is Efficient

I was just thinking about why I can be polite to my brokerage’s customer service, but should not be polite to a middleman.

Author: Koutian Wu; GitHub: ktwu01

At first I felt I should not be so nice to the brokerage rep. Look at the guy I dealt with, who did not even know the fund’s fees and still worked as an account manager. That bothered me. Why should someone like that get my courtesy?

Then I thought it through, and I decided I was doing the right thing.

Why should you never be too nice to a middleman? Because a middleman’s business is the information gap. Be nice to them and they conclude you are easy to fool. That is not an efficient market. Things are not fully priced. You have no idea what the service is worth, so you have to believe whatever they say. The friendlier and more agreeable you are, the more they see an easy mark.

Now look at the securities market. Your account manager simply cannot fool you, because everything is out in the open. It is an efficient market. Prices are public, fees are written down, and you can check them in a minute. In an efficient market, nobody can fool you, and anyone who tries gets caught.

So in that setting you can absolutely say, thank you. They know they cannot cheat you. Even if they think you are a pushover, they still cannot cheat you, right?

The question is not whether to be nice. The question is what kind of market you are in.

In an efficient market, the rules protect you. You can show goodwill freely, and it will not be used against you.

In an inefficient market, information is lopsided, pricing is opaque, and the other side has room to cheat. There, your goodwill is your weakness. That does not mean being harsh. It means not letting them think you are easy to push around.

Next time you deal with a person or a transaction, ask first. Is this an efficient market or an inefficient one? Is the information symmetric? Is the pricing transparent? Do they have room to cheat me? Once you know, you know which attitude to bring.

Kindness is good. Kindness also needs clear eyes to protect it.