It’s considered good business, but at what cost? "
increase sales and referrals. It’s considered good business, but at what cost? When I was a head trader of a couple billion-dollar hedge funds, you could walk by my desk every December and see cases and cases of wine, Omaha steaks on dry ice, broker-branded attire and luggage, signed memorabilia from Cleveland sports teams, private plane invites to the upcoming Super Bowl... You know, just a nice holiday gesture from the brokers who covered my account. And of course I was influenced. Who was I going to give my next million-share trade to? The guy who sent me two cases of my favorite tequila, or the guy who sent me a $25 gift card to Applebee’s with a scarf that had his firm’s logo emblazoned on it? Decisions were made without a thought of fiduciary duty. The financial industry has taken aggressive steps to stop this kind of pay-to-play behavior over the last decade or so. They tell employees on the “buy side” that if they accept gifts it can, and will, result in termination. And the “sell side” brokers are no longer allowed to expense lavish gifts to their clients. Many of the men and women I spoke with at mutual funds, hedge funds, and sell-side brokers told me that it’s much harder to curry commission dollars with expensive gifts these days. But it’s wrong to say it’s been eliminated... An easy way to circumvent these rules is to send the gifts to the home instead of the office, and for the buyer to eat the costs. It’s because they know they’ll be handsomely rewarded. It comes down to simple math.
And once that’s been established, I get the royal treatment. I also try to tip those who might be overlooked. For the person that checks you into a hotel, an extra $20 or $40 is powerful. Upgraded rooms and free movies start popping up on the computer screen. Everyone wins... Well, except for maybe the hotel. The favor economy works the same way. It’s simply doing something for someone with expectations of reciprocity. It’s mutually beneficial. Like when a pair of New York Jets tickets landed in my lap. Despite being a huge football fan, I wasn’t interested in driving to New Jersey on a Sunday to see a team that I didn’t like. But I knew the mechanic who works on my car was a huge fan. The result: My good deed turned into some excellent free service. But where should we draw the line? Is there some moral stratosphere where the tit-for-tat strategy becomes cloudy ethics with increased temperatures of risk? We begin to see a shift toward more serious consequences as we go higher up the ladder... On Wall Street and in other big-revenue industries, we see similar actions and reactions in the form of tipping or gifting. If you take care of your clients and employees it can potentially increase revenues, improve image and perception, create lead generation, and
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