Social Exchange Theory: 5 Laws of Social Success

Understanding the Social Exchange Theory is crucial to life success, power, as well as to general life happiness and satisfaction.

In its simplest form, the social exchange rule is quite simple.

And yet, too many people fail at relationships -and at life- because they donât get it.

This article is here to help you.

Social Exchange Theory: Definitions

Let’s review the most relevant definitions of the social exchange theory:

• The social exchange theory is:

A framework model that looks at social relationships as exchanges among individuals who seek to maximize their selfish interests.

The social exchange theory starts from the (proven) premise that people seek relationships that add value to their lives, advance their interests, and generally make them better off.

• Value is:

In social exchanges, social value is an umbrella term for everything that makes or potentially makes people better off (value-positive)

What people want and appreciate is value-positive, and what what they dislike and avoid is value-taking.

High-value people are generally value-positive people who provide -or who could provide- what others want.
For the simple fact that they do -or can- give lots of value, high-value people are wanted and sought after.

Value-taking people instead make others worse off, and for this simple reason, they are shunned and avoided.

Being high value, or providing value, creates social capital (see next entry).

• Social accounting is:

The amounts and balances (positive or negative) of actual or potential value-giving transactions (creating social credit) and value-taking transactions (creating social debt) that people keep track of

Social accounting is based on the premse that people naturally keep track of who is giving and who is taking, including who could give and who could take.
There is evidence that almost everyone naturally keeps tab of social acccounting in their minds (Buss, 2019).

The computation of social transactions strongly influences our behavior.

When we expect a value-negative transaction, we avoid people. When we expect a value-positive transaction, we welcome people -or maybe even chase them-. And we are more likely to follow them, and be influenced by them.

• Social capital is:

Social capital is a measure of the social credit (or social debt, in case of negative social capital) you have with other individuals. 

Having lots of social capital means that people see you as someone who has provided them with lots of value (or who can provide them with lots of value).
It means that people like you, want something from you, wants to be around you, or believe that you are giving to them.
Having lots of social capital also means you have lots of goodwill, leverage, and influence over someone. Social capital allows you to ask for something back, and people are far more likely to give it to you.

You can gain social capital by giving value to others, or simply being a high-value person (“passive social capital” based on the potential for giving).

Now let’s start.

Social Exchange Laws

The major laws for social success we can tease out from the social exchange theory are:

1. To get what you want, provide others what they want: asking without giving is the equivalent of a social overdraft. Your request is likely to be denied for “insufficient social funds” (“socially imbalanced requests”). If instead you give what others want, you are far more likely to get it (“socially balanced requests”)
2. To achieve popularity, social influence, and social power, give value, or develop the ability to give value: people with lots of value to give are walking moneybags. Everyone wants them. And most people are willing to follow them and do as they ask since they know that the high-value person can pay them back handsomely
3. To avoid rejections, isolation, and general life failures, avoid taking value from others, and avoid framing yourself as a taker: since nobody wants to transact, befriend, or date value-takers, value-takers struggle to develop and/or maintain relationships (that’s why some psychopath value takers are constantly on the move: they must escape the negative social account balances they constantly create)
4. To befriend, date, do business, or generally socially-transact with high-value folks as a lower-status individual, find something to give, make up the difference, or provide future paybacks: let’s be real now. Everyone wants to get in touch with higher value folks, and that’s why you’re reading here.
   It makes sense: high value people have the most to give. But they don’t want to transact with everyone. High value folks also stand to potentially lose the most. That’s why they are always guarded against others, and generally loath the value takers. To transact with with them, you must avoid framing yourself as a big taker. You must show that you can also give something. Also, you can show gratitude and loyalty, and that you are willing to pay them back somehow, either today, or in the future (“promissory social notes”)
5. To develop lasting and happy relationships, keep a positive account for everyone: these are the “win-win” relationships, the golden standard of social exchanges. Neutral relationships can also somewhat last, but do not thrive. And win-lose relationships (value-taking for the other party) end soon because rational individuals do not willingly stay in those relationships

Social Currencies: Shallow, or Deep?

Social currencies are the personal traits, skills, or possessions that people offer and seek.

There are countless currencies that people exchange in the social marketplace.

The most helpful and insightful way to understand the social exchange theory is to divide the currencies in terms of “visibility”, which we’ll call “layers”.

External Layers:

External layers are the qualities that first notice about you without even having to talk to you.

They include:

• Beauty
• Style
• Physical fitness
• Body language / Nonverbal cues
• Posture
• Grooming
• Walk

Deeper Layer

To access the deeper layer people need to get to know you.

They include:

• Humor
• Knowledge
• Connections
• Personality
• Life achievements
• Mastery (of something)
• Future potential (to acquire any of the above)

Being VS Appearing: A False Dichotomy

Now it makes sense, doesn’t it?

When people discuss “being” VS “appearing” they are discussing the visibility of the social currencies.

“Appearing” refers to the external layers, while “being” refers to the deeper layers.

And, as it’s often the case, people usually scoff at “appearing” and say that they value “being” far more.
But… Is it true?

Which social currency do you need?

Now the question is:

Which one is more important, superficial layers -appearing- or deeper layers -being-?

In some social situations, external layers win the day.

For example, short-term dating, especially for women, can sometimes begin and end at the superficial layer.
Locations such as noisy clubs also heighten the importance of external layers as it becomes harder to access the deeper layers.

And of course, what matters more also depends on people’s personal dispositions.

External Layers are Pass-Through for Deeper Ones

Here’s an important real-life application for you:

Most people will not be interested in accessing your deeper qualities if you don’t reach at least a minimum threshold of external qualities.

External qualities are then what will get your foot in the door.

Have great external qualities and more and more people will be interested in your deeper ones.

Example: how willing are you to talk with a smelly homeless in tattered clothes?
That homeless man is the extreme example of someone with highly negative social external currency: just by being together, he takes social value from you.

Appearing IS Being (& Vice Versa)

The “appearing VS being” dichotomy makes little sense.

All layers always influence each other, and feed into each other.

For example:

• Beautiful people are perceived as smarter (Kanazawa, 2004)
• People in authority positions are perceived as taller (Bowden, 2013)
• Great personalities who make us feel good are also perceived as more attractive (Tornquist, 2015)

For example, I have had several women tell me they loved my muscular body.
Some even made drawings of me.
Now the funny thing about that?
I don’t really have that much of a muscular body. Not even close to what they were referring to, at least. Especially not like Hugh Jackman, whom a woman told me I was like.
But by then, my deeper qualities that they started appreciating more and more had started coloring my external ones (that, plus the intimate bonding through oxytocin).

Of course, the opposite is also true.
Value-negative appearances will make you come across as a worst person, and value-negative personality traits will make you come across as less physically attractive.

The Exchance Sets the Value (Mostly)

In economical terms:

The market determines the value, not the seller

And in social exchange terms:

The people you deal with determine your value offering, not you

Albeit largely true, that is not 100% true.
And if you carry yourself like you’re very valuable, that will influence your actual value.

However, if you overdo it, or if you come across as abrasive, then your attitude can negatively influence your value.
You come across as stuck-up, overly-entitled, or “crazy” if you’re too out of touch with reality.

PRO Tip: never tell people “I know my value”

Why not?

Because it makes you come across like you’re an entitled status inflater.

This is what it actually says:

I know my value, HENCE you must give me a lot back

But who says that?
Usually, it’s not people with a lot to give.
Instead, it’s the typical sentence that you hear from people who’ve been reading too much on positive thinking. And they focused more on thinking positive, rather than on actually delivering more value.

Those words actually say that you focus you get, rather than what you give.
And high-value folks usually stay away from those.

If you know your value, great. Just don’t go around advertising with words, but to so with actions.

The Relativity of Value

Currencies are relative.

In economical terms, a $1.000 hunting rifle is not worth $1.000 cash in terms of value-exchange in 99% of the cases. That rifle has very low value outside of hunting circles and gun enthusiasts clubs.
But if society were to collapse, that hunting rifle would be invaluable.

Currencies in social exchange are similar.

Any type of skill or positive trait is a positive currency.
But how much people actually value them is highly dependent on the situation, the person, and the specific need in the specific time.

There are countless of examples for this.
So for example, if you’re a realtor and you meet someone who is looking to buy a house your wisdom and knowledge make you high value. But if that person is not interested in real estate markets, you better have something else going on for you.

The sexual market value is also similar.
If a man is rich but a lady is just looking for a one night stand, his wealth matters little. Conversely, if a woman is looking for long term relationships and is low sex drive, then his physical attractiveness loses some value when a man communicates he is all about short-term sex.
This is why moving to sexual marketplaces that are more in line with your goals is a great sexual market value hack to increase your returns.

Environmental Relativity

There’s also a situational element in the value we possess.

A professor can be an invisible man most people don’t particularly want to speak with, but when he steps in his classroom, students crave his approval.

Or one can be a very average uy, but if he brings a date to a club where he skips the line, get served quicker and everyone says hi to, he looks like he has loads of social power (a form of value), as well as the qualities to be treated well by others (value through social proof).

Example from Goodfellas:

Individual Relativity

Subjectivity also plays a role.
There are general standards of beauty and style, but there is also a level of subjectivity.

However, the relativity is not infinitely elastic.
Some social currencies tend to be appreciated by everyone and have a large appeal (“hard-currencies”), while some others are more situation-specific, or more individual-specific (“soft currencies”).

PRO Tip: Focus on currencies everyone wants…

So you’re better off working and focusing on those hard currencies who are appreciated by everyone -say, wealth-, rather than getting great in a niche that nobody cares about -say, becoming the N.1 authority in ant-farming-.

There is an exception, though.

… Unless you can become world-class (The Halo Effect of Peak Performers)

If you spend all of your time developing values in areas nobody cares, you can still become attractive even outside your area of expertise.

Why?

Because peak performers have power.

Take software developers, for example.
Boring to most anyone outside of developers.
But if you’re a wiz of coding, popular hacker or pioneering a new programming language, now that changes the game.

Not only you show grit and determination to reach the peak and shape the world around you, but you also acquire riches, status, and power. And those are all hard-currencies that everyone appreciates.

Also read:

• The relativity of social status
• Big fish in a small pond

Social Relativity: From Nobody to Superstar

Marketability: Selling Your Value Well

Let’s introduce the topic of “marketability”.

Let’s think in economic terms first:

• 1 Million USD: a million in United States Dollars cash give you great options to access goods. And if people don’t take USD, you can easily convert it.
• 1 Million USD in Ukrainian Hryvnia: it gets complicated now. You need to either be in Ukraine, or convert it -and few people want to take that-.
• 1 million USD in Palladium: it’s even more impractical. You can’t trade it easily, and how are you even going to convert it?

Please note that all currencies have the same nominal value, they all take the same effort to acquire, but they heavily differ on how readily they are accepted.

Social currencies are similar.
You have to be able to market your social currencies in a way that people appreciate.

WIIFT: Increasing your value with a mindset shift

This is one of the most important mindsets shift in life.

The easiest way to increase the value of your skills and traits -and your value in general- is to stop approaching others asking for stuff, but to instead approach social exchange with this mindset:

What can I, including my labor, skills, and traits do for others?

This is the “what’s in it for them” approach to social relationships.

When you think that way, you will automatically think in ways that market your currencies well.
You will think in a way where your skills and traits provide value to others, which in turn allows you to get more back for yourself.

This leads us to another topic:

Pitching yourself: bragging VS adding value

How do you market your less visible currencies?

Well, you could talk themselves up, like many people do.

But that’s often weak.
Anyone can talk -and lie-. And, even if true, it’s bragging, and it looks like you are trying to gain their approval, which empowers others, and disempowers you.

How do you do it, then?
Well, this is where advanced social skills come into play.

It’s all about:

• Telling stories that hint at your deeper qualities
• Baiting others to ask you questions (or bait them to compliment you)
• Share your achievements not with a focus on the achievements, but on how you overcame external problems and personal weaknesses
• Indirectly show your refined tastes and good lifestyle by talking about what you like and dislike

And, finally, frame whatever can come across as bragging as advice or lesson learned, rather than “how great you are”.
See a great example here:

• Social media strategy: no to bragging, yes to giving value

Also read:

• Effective self-promotion at work

10 Techniques for Strategic Self-Promotion At Work

High-Value People: Profiling

Here is a high-level definition for high-level people

High-value people are individuals with an abundance of traits, skills, or possessions that others enjoy, or want

Easy, right?

And the more high-value people you have around your life, the more you become high value.

But guess what?

High-value people prefer giving value to other high-value people.

Why?

Because they can get back more, of course!

The social exchange theory says that people who have a lot to give also demand a lot back.
And if you’re a high-value person, it doesn’t make sense for you to enter into an exchange with someone who doesn’t have anything to give back.

The law of social exchange is the reason why people tend to pair up with mates who are similar in socio-economical background, education, and general physical attractiveness.

Also, keep this in mind:

High-value people perceive people with little value to offer as a personal risk.

Low value people trying to hobnob with high-value people get branded as “potential leechers” of value, people who ask and give nothing.
To get around these people, you have to make it abundantly clear that you are not there to take.
This is true for very successful, rich, high-status, or also very attractive people.

The Burden of High Value: An Example

Imagine this situation:

Sara is the head recruiter of a major corporation.

She’s smart, cute and takes care of herself.
She has lots of value, particularly among those looking for employment -or a mate-.

Sara has lots of people pleading for help and then sending poor CVs that only wasted her time
And of course, some of them are the usual “friends” and friends of friends who ask for a job and put her in the difficult situation of having to refuse them.

Some colleagues are also out swinging for her sexual value: it’s almost routine that at the company’s parties someone gets drunk and sloppily makes a pass at her.

She tries to fight it, but she is irritated for being a target to many simply because of her looks.

“God”, asks Sara, “couldn’t these people see her for who she really is”? <— here Sara is complaining that people only see her external currencies, nobody being interested in her deeper layer

She particularly feels a pang of resentment when she sees the eyes of people brightening up when she mentions her job in recruitment.
She feels they only care about what she can do for them, without giving anything back <— Sara is complaining about the lack of reciprocity in the social exchange here

That’s how many high value people often feel in the presence of the many value takers.
The value takers are trying to get something from them without giving anything back.

In game theory, these people are also called âfree-ridersâ. In normal life, they are called “free riders“, or leechers.
Independently of the name though, high value people just naturally feel like they need to avoid the value-takers.

Taking when you got nothing to give: give gratitude

This is what high value people dislike the most:

High value people dislike the most those who give nothing, ask for value, and act as if it was due to them.

If you need something from someone, it’s OK.
But you should at least be willing to give something back like praise or gratitude.
Except for dating, this is also where a submissive approach can help, since you make the receiver feel high in power, which can make them more well-disposed towards you.

Praise and gratitude, as opposed to an “entitled value taker” approach, does a few great things for you:

1. It shows you understand social dynamics
2. It makes the receiver feel good
3. Gratitude works as a promissory note of future support: for the receiver, it’s like making an ally
4. It shows you are least willing to give something and rebalance the relationship

This is crucial to understand, because this is what keeps many low-value individuals stuck in low-value mode. They don’t understand that high-value people don’t want to mingle with low-value people who don’t make an effort to rebalance the relationship.

Simply showing that you are willing to make an effort can help you go far with high value people.

Also read:

• High-value women
• High-value men

Value Takers: Profiling the Pariahs

There are countless ways of being a value taker.

Some of them include:

• Nasty Social Climbers: trying to climb status and power hierarchies is normal. But the value-taking social climbers do so by pushing others down
• Complainers: they are not value-taking with other complainers, but they are value-taking with the go-getters of this world, who ruthlessly cut them out
• Nervous & Insecure: states are contagious, nervous people make us feel nervous and social interactions become unpleasurable
• Party poopers / mood dampeners: they take value by making people sadder
• Braggarts / status inflaters: we like people who make us feel important, not those out to prove they are important
• Socially Oblivious: have no idea of how social dynamics and power dynamics work (one example below)

Being socially oblivious is particularly dangerous, since low-value and socially oblivious people don’t even realize they enter relationships by asking without giving.

• Low-value women
• Low-value men

Typical Expressions of Value Takers

Here are some examples of social exchange deal breakers:

Value taker: “Lemme know when you’re having some cool party man

High-value person interpretation: yeah, sure, so you can bring your value-taking ass, right?

Value taker: “Matt told me you’re having a housewarming party tonight, is it still on?

High-value person interpretation: you got nothing to do, and want to tag along. But if I wanted you here, I would have invited you myself

Value taker: “When are you free for a coffee? So I can pick your brain on that business I want to start”

High-value person interpretation: if I hear “pick your brain” once again, I’m gonna lose it. Why would I want to sit around for coffeee, expend effort to explain things, while you take as much as you can without giving?

Value taker: “Please, please, please…  “

High-value person interpretation: begging is all you’ve got to offer?

You will recognize that all these messages are requests that don’t give anything back.

Sometimes just a little fix could make them more balanced.
For example the guy who wants to pick your brain could invite you to lunch.

Lunch is a small token, of course, but more than the monetary value it shows that the inviter gets it and shows respect and consideration for your time and knowledge.

Also read:

• WIIFT Failures: a thread with plenty of examples on value takers

First Impressions In Social Exchanges

The social exchange theory applies the most in fresh relationships.

Why?

Because there is no previous history, and people are on the lookout for potential gains or losses.

The balance is not at zero though.
Usually, there is someone who looks higher value, or who already has good status or reputation, if the two are meeting within a social circle.

If it’s in a dating or seduction situation, the higher vale person is usually the one that looks more attractive.

So the higher value person is usually asking himself “is this guy taking, or giving”?
And the lower value person’s job is to make sure that he shows himself as a giver. Or, at least, not as a value-taker.

Conversely, it’s often acceptable to ask and take when you have a solid relationship already in place because you’ve most likely given already a lot and you will likely give more in the future, so there’s more leeway.

Takeaways: Give to Take

The most important take away is this:

The more you bring, the more you can ask for

“Ask for” is also important, since giving makes you entitled to ask. And sometimes you need to clearly demand for your value back.

Here are important real-life applications from the social exchange theory are:

1. Focus on what you bring to the table: make this your N.1 rule of social exchange
2. Focus on what they bring to the table: as much as you want to bring value, you also want to avoid value takers
3. Ask yourself if the relationship is balanced: seek to have balanced relationships, are they stronger and happier. Imbalanced relationships also often hide emotional manipulation or negative judge roles
4. Strategize for win-win: Are the people around you taking or giving? Cut out the takers, give more to the givers.

Read next:

•  Value and availability: this is another crucial article to understand how value impacts social dynamics

Value & Availability: Two Foundations of Social Dynamics

Summary

The social exchange theory borrows the approach of game theory and microeconomics (rational choice theory & Chicago school mostly) to analyze social dynamics.

The social exchange theory is an inherently limited model for human relationships since it does not account well for crucial aspects such as emotions & feelings, soft power (and judge roles), power dynamics, or social frames.

Yet, it does provide us with crucial insights to understand how social dynamics work, as well as how we can be more effective with people, and more successful in life.

This is an excerpt from Power University, where you will find more examples & real-life strategies