Apr
6
Why Being Generous Makes You Wealthy
Filed Under Career, Conciousness, Entrepreneurship, Money, Motivation & Purpose, Relationships, The Bigger Perspective | 14 Comments
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Today, as I talked with my girlfriend, we came up with one of the most important concepts in my life that will probably make me happier and richer than anything else I’ve ever learned. I hope this idea is as inspiring to you as it was to me!
A Situation To Test Your Generosity
Imagine yourself in a business venture with a friend. It’s new, it’s innovative, and you’re just completely excited! As a result, the business does really well and makes you a ton of money! Now suppose your friend gives you a blank check and asks you to split that money any way you want. That’s right – you get to pick your share and his share!
In glee, your first thought is probably whether you should take all the money. After all, he asked you to do it! If he’s willing to give it, why not take it right? Hmmm… but maybe he would be pissed off and force you to give a fair share…
Maybe you can take a little more than 50%, an amount that he barely cares about and wouldn’t really argue over. Perhaps 52%? He’s not going to give you crap for taking an extra 2% right? And with that 2%, maybe you can buy an engagement ring for your girlfriend…
On the other hand, he is your friend, so maybe you should give him his fair share. Being what you feel is very generous, you graciously decide to make it 50-50. Whew… he gave you a chance to be greedy, but you resisted! Good job!
Now, what if I told you that it might be better if you only took 40%?
Say WHAT??? Take less than 50%? Maybe you think I made a typo.
No really, take 40%. You’ll most likely make more money.
Yes, make more money.
The Nature Of Wealth
It doesn’t seem to make any sense on the surface. Let’s say the business made a million dollars. 60% of it is $600,000. 40% of it is $400,000. $600,000 is greater than $400,000. So how are you making more money by taking $400,000? Like, what?
Before going into the reasoning for that, let’s take a look at the nature of wealth in general.
Let’s assume Person A has some corn, and Person B has some apples. Person A got sick of eating his corn and wants some apples and Person B is in the same situation with apples and wants some corn. A field of apples is worth $1000 to Person B but $2000 to Person A. A field of corn is worth $1000 to Person A and $2000 to Person B. Therefore, Person B gives Person A some apples and Person A gives Person B some corn. They both become happier (see Do You Get Money?).
Before trading, Person A has a field of corn worth $1000 to him and Person B has a field of apples worth $1000 to him. Total wealth: $2000.
After trading, Person B has a field of corn worth $2000 and Person A has a field of apples worth $2000. Total wealth: $4000.
By trading, $2000 of wealth is created out of thin air.
This is also what happens when two people work together. One person brings a certain skill set, and another person brings a different skill set. Together, they accomplish things that neither of them could have alone. As a result, while Person A alone can make say $1000 and Person B alone can make $1000, together they might be able to make $3000 having expended the same amount of effort (see How To Get Your Partner To Do More Work).
So the real question here is how to divide up that extra $1000 of value created through both people. So 50-50 right? Doesn’t that sound really fair? Well, here’s why taking $400 might be better than taking $500.
How Being More Generous Makes You More Money
Assume for a moment that you are now the partner of the person and he took 60-100% of the money. How would you feel about it? Wouldn’t it feel kind of like he screwed you over? Wouldn’t you want to look for someone else who can maybe be happy with 50-50? Or god forbid give you a little more? How would you react the next time this person wants to work with you?
By taking more than your fair share of the money, you make other people annoyed. They despise you. They think you’re petty. They want to get as far away from you as possible. Sure, you got your extra 10-20% this time, but who’d ever want to work with you again?
Now, let’s say he picked 50-50, which is probably what most of the world runs on. “Not bad!” you think, “that’ only fair!” If you find a good deal again though, you’ll probably shop around see who’ll do the most work for their 50% cut. Hey, plenty of 50-50 people out there right?
Now, what if your partner offered you 60% of the money? Boy would you be eager to jump on board and start working hard! After all, you’re getting a bigger part of the pie! Would there be any question of who you’d want to work with?
Think about this for a second… how many 50-50, or even say 55-45 people, are there? Doesn’t that describe most of the world?
And who would they want to work with? Other 50-50 people, or you, a hard working 40-60 person? If word got out that you’re a generous person who’ll give other people more than their fair share, you can expect all those people to come knocking at your door!
With so many more offers to chose from, isn’t it more likely that you’ll find a better opportunity? 40% of a $1 million dollar opportunity is certainly much more than 60% of a $100,000 opportunity! Oh, so is 40% of 100 different $100,000 opportunities!
What you trade off as a smaller portion of a deal is greatly made up by more deals and better deals.
In this way, not only are you wealthier in money, you’ll also be much wealthier in friends!
The more I think about this concept, the more important and astounding it is to me. So many events in my life that didn’t make any sense now suddenly does. It resonates with me strongly both emotionally and logically!
To better understand this concept and spread it to other people, I will write an article once a day for the next 30 days to demonstrate this idea in action!
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Interesting view point, and interesting conclusions about it.
hmm how are you grasped this point view? Can you give an real example of it?
“To better understand this concept and spread it to other people, I will write an article once a day for the next 30 days to demonstrate this idea in action!” – ha?
Best Regards,
Kamil
Hehe!! Just posted on scenario on “Day 1″
Ok saying you took 40%, wouldn’t it be natural to expect a person to give you 60% the next time they chose to work with you and if they didn’t wouldn’t it be natural to feel disappointed? wouldnt that be a natural expectation to have?
^^Ruby,
Yes, that would be a natural expectation to have.
But only if you’re a 50-50 person.
Jesus said: “It is more blessed to give than to receive”. The answer is in the Bible, my friend.
Nice post here. I found that in my personal experience, that being more generous opens up the abundance to flow in my life. We get back in life what we give out.
Great post, Warren.
Reminds a Stephen Covey’s scarcity and abundance mentalities in “7 Habits…” Many ‘scarcity scripted’ people would probably seek more than 50% from a deal.
So you take 40% and give 60%.
And then what? Your friend has a burning desire to reciprocate to return the favor back to 50:50.
Therefore, how you behave in a friendship after the 40:60 exchange seems to be what matters.
Surely good behaviour would be to not keep score but instead to cleanly forget about the 40%.
Instead, perhaps recognise that a tiny 10% has: 1. earned you trust from your partner (trust cannot be purchased) and
2. the pleasure derived from helping them again in the future.
Bad behaviour would be the opposite- keep precise score and remind them that they *owe* you, so the friend immediately seeks to settle the 10% difference back to 50:50… and you accept.
Guess there’s a reinforcing loop here- if you repeatedly give 60% away, you’ll surround yourself with decent people over time… and lose grasping people as they move onto their ‘next victim’ (just beware of the most grasping as they return again and again!).
Nice quote-
“Give more than you take and soon you will be offered more than you need or desire”.
Ouu, I am simply speechless.
Interesting thoughts here. I’ve just been through the exact same situation as you’ve described here with a business partner. Not entirely convinced but some good thought put into this article.
Being generous can make you wealthy in more ways than one, I’d say, as the nature of wealth is pretty subjective; it definitely includes more than just money. There’s research that suggests that generosity can make you live longer. Is that because you can get more money from being generous, which in turn gives you access to better nutrition, health care, and the like? Maybe, but there’s likely other reasons, too. Try taking a look at this article on how generosity influences self-esteem and builds confidence: http://www.psychalive.org/2011/03/generosity-whats-in-it-for-you/
Without a doubt, confidence drives money as well.
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