The Social Exchange Theory is crucial to life success, power, effective socialization, as well as to general life satisfaction.

In its simplest forms, the social exchange rules are simple, logical, and, for many, even intuitive.

And yet, too many people fail at relationships -and at life- because they either don’t get them or don’t apply them.

This article is here to make sure you get it, apply it, and reap the rewards.

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 can make people better off (value-positive)

What people want and appreciate is value-positive, and what they dislike and avoid is value-taking.
Don’t think only in terms of material benefits, though. Making people feel good, or simply being a kind and pleasant human being to talk to are also forms of value.

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, avoided, and disliked.

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 premise 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 keeps a “social accounting tab” in their minds (Buss, 2019).

The computation and the results of our mental social accounting influence people’s behavior.
When we expect a value-negative transaction, we avoid people. and when we see the potential for a value-positive transaction, we welcome people -or maybe even chase them-.
And we are more likely to follow the value-givers 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, and want to be around you because you lift them up -or can lift them up-.

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, if you want, and people are far more likely to give it to you.

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

Social currencies are:

A social currency is a specific form of value that people seek in social exchanges

Value can come in all different forms, as we said.
The currency is the specific form of value that is being offered or traded.
For example, a physical trait like beauty, a character trait like kindness, or a more material benefit like owning a villa in Tuscany.

As we said in the sexual marketplace since people can offer and trade value in very different currencies, people can pair up while looking very different to each other -think of a beautiful woman with a less attractive wealthy man, both offering very different currencies to each other-.

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Now let’s review some basic social exchange laws that can help you be more successful and powerful in life.

Social Exchange Laws

From social exchange theory, the major laws for social success are:

1. To get what you want, provide others with 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 what you also want (“socially balanced requests”).

2. To achieve popularity, influence, and status, 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 -of course, they will rarely rationally think that way, but everyone subconsciously thinks that way-

3. To avoid rejections, isolation, and general life failures, avoid taking value from others, and avoid presenting or 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 a positive reputation is so helpful.
A good reputation is like a personal recommendation preceding you and saying “this guy is an honest value-giver”.

And that’s why some psychopath value takers are constantly on the move: they must escape their negative social account balances.

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 make sure they know you’ll give in the future:

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 just about anyone. They prefer transacting with other high-value folks who can give back.
Or, at least, with people who are willing to work to make up that difference.

High-value folks stand to potentially lose the most from takers. That’s why they’re generally cautious, wary, and guarded. And, often, they loathe value-takers.

That’s why the first step to transacting with high-value people is to avoid framing yourself as just another taker: they have enough of those vying for their time.
You must show that you can also give something.
Also, you can show loyalty or gratitude, and that you are willing to pay them back somehow in the future (“promissory social notes”).

You can see examples in Power University.

5. To develop lasting and happy relationships, keep a positive account for everyone:

“Win-win” relationships are the gold standard of social exchanges.

Value-neutral relationships can also last but do not thrive.

And win-lose relationships (value-taking for the other party) either end soon, or turn toxic and must be kept in place with coercion and/or manipulation.

Social Currencies: Shallow VS Deep

Social currencies are specific forms of value that people offer and seek.

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

One of the most helpful and insightful ways to develop social strategies is to divide the currencies in terms of “visibility”.
We will call them “layers”, “external layers” for high-visibility social currencies, and “inner layers”, or “deeper layers” for low-visibility currencies.

External Layers:

External layers are the qualities that people first notice about you.

They include:

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

Deeper Layers:

Deeper layer currencies are not directly visible.

To access the deeper layer people need to get to know you.
In technical terms, they are “high opacity”.

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?

The old “being” VS “appearing” argument deals with the visibility of social currencies.

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

Some people like to virtue-signal by scoffing at “appearing” and saying that they prefer “being”.
Of course, that’s rarely true: deep down people know that both are valuable.

But one is readily visible, and the other… The other you need to learn how to make it visible.

Which layer to prioritize?

Now the question is:

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

Well, it depends.

In some social situations, external layers are king.

For example, in short-term dating, especially for women.
Locations such as noisy clubs also favor external layers as it’s harder to access and showcase the deeper layers.

It’s important that you take care of external layers because:

External Layers Are Pass-Through for Deeper Ones

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

Most people are not interested in 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.

External qualities can help you get your foot in the door.
The better your external qualities, the more of a chance you will have to also showcase your deeper ones.

Example:

How willing are you to talk with a smelly homeless in tattered clothes?

That homeless woman is an extreme example of negative passive value.
She might have much wisdom to share, but few people will want to know. And it’s all because she has negative external currencies.

Just by associating with a homeless person, you can lose status. So the homeless, sadly, is a value taker just by being homeless.

Who would you rather engage with, be it for a date, a friendship, a chat, or even a business deal? Easy choice. The woman on the left takes care of herself and has high external value. And that “colors” everything about her, including her deeper character-based traits

Appearing IS Being (& Vice Versa)

The “appearing VS being” dichotomy is bogus.

However tenuous, there is a relationship between external qualities and internal ones (Miller, 2000).

And when it comes to perception, the link is even stronger.

The end result is that both 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 more attractive (Tornquist, 2015)

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

The Exchange Sets the Value (Mostly)

In economic terms:

The market determines the value far more than the seller does

And in social exchange terms:

The people you deal with determine your value offering far more than you do

You can influence your value of course.
For example, by carrying yourself like you’re very valuable, you can increase your actual value.
Social scalping is also a way to increase the value of your offering (more on it later).

But you need to be careful walking that line.
If you overdo it, or if you come across as haughty, then your attitude can decrease your value.
You come across as stuck-up, overly-entitled, or “crazy” if you’re too out of touch with reality.

Here’s an example of a value-decreasing attitude:

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

It makes you come across as an entitled status inflater.

This is what it actually says:

I know and I set my value, not YOU, so independently of what you think, you must put a lot of effort for me

That’s a covert, one-up power-move, and it’s very annoying for the receiver.
Especially if the receiver is a high-quality person aware of power dynamics (and most high-value folks are naturally aware of power dynamics).

• “I know my value”: the keywords of bad entitlement

And also see:

• Overcoming entitled mentality: overly-entitled mentality in social exchanges is to demand (far) more than one gives, and smart folks usually see through that

Entitlement Mentality: Signs & Cure (W/ Examples)

Pitching your deeper currencies: the stuff of master socialites

How do you market your less visible currencies?

Well, you could talk yourself 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:

• Tell stories that hint at your deeper qualities
• Bait others to ask you questions (or bait them to compliment you)
• Share your achievements with a focus on the struggle
• 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

I loved that view so much that I truly wanted to share it. But I also knew I could come across as a braggart. So I framed it as “here’s me sharing advice on where to visit”. That frame pulls people up to my same level, indirectly saying that they can travel there, and can appreciate it as well

Also, read:

• Effective self-promotion at work

The Relativity of Social Currencies

Social currencies’ value is relative.

In economic terms, a $1.000 hunting 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 exchanges 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 circumstances.

Examples abound.
Take the sexual market value, for instance.
If a man is rich but a lady is just looking for a one-night rebound, his wealth matters little. Conversely, if a low sex drive woman is looking for long-term relationships, then his physical attractiveness loses some value.
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 an environmental element to the value we possess in someone’s eyes.

A professor can be invisible 90% of his life, but when he steps into his classroom, his value shoots up.
Many students crave his approval.

Or one can be a very average guy, but if he brings a date to a club where he skips the line, gets served quicker and everyone says hi to him, he looks like he has loads of status (a form of value).
Plus, people will think he also must be potentially wealthy, or have some qualities that these people recognize (value through social proof).

Individual Variance Relativity: Focus on Large Appeal

Individual variance, or subjectivity, 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 that 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 currencies nobody cares about, you can still gain value outside your area of expertise…

… As long as you reach the top.

Why?

Because top performers gain power.

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

Not only do 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 review now the topic of “marketability”.

In economic terms first:

• 1 Million USD: a million in United States Dollars cash gives 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, and they all take the same effort to acquire, but they heavily differ on how readily they are accepted.

Social currencies are similar.
It’s your job to market your social currencies in a way that people appreciate.

This website helps you with that.
And this mindset shift will help:

Social hack #1: switch to a “WIIFT mindset”

This is one of the most important mindset shifts in life.

The easiest way to increase your social efficacy 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.

PRO Tip: think empathically about what’s valuable for them, not for you

You must still apply psychology to successfully leverage social exchanges.

And a valuable currency for you might not be valuable for someone else.

This is the case for example with “high opacity“ currencies.
Such as currencies whose value is not immediately visible.
For example, a great book can change a life, but until people read it, it’s just a valueless piece of paper to them.

The more you can balance that give & take from their point of view, the more likely it is the relationship will start and last

Case study: offer a lunch, rather than a book

You can see an example/case study here.

Ali is a winner, an awesome guy, and a contributor to this website.
He wrote a book and, just like any good author would, he regarded and valued his book very highly.

Ali worked hard on his book for 6 months, which naturally made it precious in his eye.
Plus, he applied solid power dynamics principles, so he also knew his book had great content.

But the receivers didn’t know that.
A book is a high opacity, and they have missed his true offer.

In that case, offering lunch was probably far more valuable.
Lunch is a highly visible form of value. It’s far easier for most people to appreciate, which means it’s far more effective in increasing your social credit, which in turn makes it far more likely you’ll get what you want.

• Getting what you want with currencies’ exchanges: a case study

High-Value People: A Profile

Here is a high-level definition for high-value 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 predicts 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 socioeconomic 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 are under heavy scrutiny as “potential leechers” of value, people who ask and give nothing.

The Burden of High Value: An Example

Here’s a story to highlight value imbalances in social exchanges:

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-.

Lots of people pleading for help and then send poor CVs that only waste her time
Some of them are the usual “friends” (read: “value-taking folks” on the way out of her circle) who ask for a job and put her in the difficult situation of having to reject them.

Some colleagues are also out swinging for her sexual value. At the company’s after-hours there’s always “that guy” who 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”? <— Sara is complaining that people only see her external currencies, nobody being interested in her deeper layers.

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 exchange

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 “free-riders”. 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 concrete 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 seek to give something back, even if it’s 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: value-taking social climbers push others down
• Complainers: they are value-taking with the go-getters of this world, who ruthlessly cut them out
• Nervous & Insecure: states are contagious, and social interactions become unpleasurable
• Party poopers/mood dampeners: they take value by making people sadder
• 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.

Also, read:

• Low-value women
• Low-value men

17 Early Signs She’s a Low Value Woman

Typical Expressions of Value Takers

Here are some examples of social exchange deal breakers:

Value taker: “can you leave me a good review?”

High-value person interpretation: how about you earn your good review by giving great value? I’m an honest reviewer, don’t corner me into this BS to take my power and freedom away.

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 coffee, and 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?

Notice all the above are requests for value from people with no social capital, who give nothing 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 of people who mistakenly present themselves as 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 a good status or reputation, if the two are meeting within a social circle.

If it’s in a dating or seduction situation, the higher-value 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 already given a lot and you will likely give more in the future, so there’s more leeway.

Social Exchange Manipulation

Manipulation is part and parcel of human relationships:

But here’s the great news:

Now that you understand the basics of social exchanges, you are also better placed to spot manipulation -and deal with it-.

Here’s an overview of social exchange manipulations with some examples:

In simple terms, “social scalpers” are manipulators who abuse the reciprocity of the social exchange system to:

1. make it seem like they are giving more than they actually are (“credit inflating”)
2. make you feel more socially indebted than you actually are (“debt inflating”)
3. make you feel like you are giving less than you actually are (“credit erasing”)
4. make it seem like they have a smaller social debt than they actually have (“debt erasing “)

And then they will use those extra credits to get more concessions in negotiations, more favors in friendships, more money in salary negotiations, win more arguments in relationships, and, in general, more power and control over you.

Main Takeaways

The most important takeaway is this:

The more you bring, the more you can ask for

“Ask for” is also crucial.
Giving entitles you to ask, and sometimes you must do so assertively.
Some other times, you need to either market your value-giving to get your fair share or social credit or fend off manipulators who try to get more than their fair share.
When you’re able to do that, you enter the stage called “enlightened collaborator” (name credit to Stef).

TPM aims to make people high-power, high-value enlightened collaborators.

The most important real-life applications of the social exchange theory :

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, as they are stronger and happier.
4. Cut out imbalanced relationships: imbalanced relationships often hide emotional manipulation -manipulation is a way of keeping win-lose or lose-lose relationships alive, a negative judge role, or a toxic relationship based on addiction, rather than win-win (see for example Norwood, 1985).
5. Strategize for win-win: to be successful in life, you must have around you people who can give and are willing to give. And the best to take from them is to find a way to give something (win-win). Also, see “basic strategies for power“.
6. Tend to win-win: win-win folks are a true social treasure. Keep and care about them.

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 when it does not account for crucial aspects such as psychology, 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