Here’s an easy question… what do you say when someone says, “Thank you?” Hopefully this one’s a layup. You say, “You’re welcome.”
But something weird struck me once. When you buy something at a store you say, “thank you.” Then, the person working the register replies with – wait for it – another “thank you.”
What’s going on here? As it turns out; something really fundamental and frequently misunderstood.
As I read the news and interact with people, I notice an unstated, widely accepted assumption: individuals and businesses play as opposing teams. Each side fighting daily battles big and small to take advantage of the other.
The assumption grows up around a kernel of truth. As consumers, we would always like to get the best version of the product or service we want for the lowest price possible. The company selling to us would love to sell us the lowest-cost version of the product possible for the highest price it can. Each side is just following their own incentives.
An Everyday Miracle
In spite of those opposing goals, something unexpected and critical happens when the two sides meet. See, when both sides of the transaction say, “thank you,” both are correct saying it. They each get what they want.
The seller says, “thanks” because they are making a profit on the sale. Translation… you paid them more than the item or service cost them to provide. Companies don’t sell things (usually) for less than they cost them, or even what they cost them. This truth is fundamental to the widely held idea that companies operate on greed and/or take advantage of the customer, but it misses something critical.
Customers do exactly what companies do, but in reverse. As buyers, we say “thank you” because we value what we’re buying more highly than what we pay for it. How can you tell for sure? Because we voluntarily traded our money for that good or service… like an upside-down company, we don’t buy things for more than they are worth to us. So why don’t we condemn consumers for their greed!? Because we tend to identify as the consumer, not the business, even though most of us are in some way both.
Foundational Stuff
This process is nothing less than the way voluntary exchange lifts entire populations out of poverty and destitution. With each sale, a buyer walks away a bit wealthier, having exchanged some amount of money for something they value even more highly. Simultaneously, a company walks away a bit wealthier, having just exchanged a good or service for more money than it cost them to build and or deliver. Most transactions add just a tiny amount of value, but there are easily a billion transactions a day in the US alone! Over months, years and decades, that adds up to a whole lot of people’s diets, healthcare, homes, cars and lives getting a whole lot better!
Why is this Important Right Now?
Our antagonism towards business is becoming more and more politicized. In an open market, when people think of companies as adversaries it actually works out great! It causes us to shop around and pressures companies to find ways to deliver better products and services at lower prices.
But when politicians get involved, that same antagonism can easily yield undesirable results. They look at our animosity towards business and see a path to more votes. We get more regulation and higher corporate taxes (which interestingly are shared by shoppers in the form of higher prices and fewer transactions). All of this throws sand in the gears of the machinery that lifts us a little each day. Certainly not a process we should short-circuit without careful consideration.
This isn’t to say there’s never a reason for a single regulation or tax on a business. It’s more a reminder for us all to give some thought to the oddly profound implication of the two correctly used “thank yous” at the end of billions of transactions around the world each day between one customer and one company. Each side winning in a game that’s ultimately far more cooperative than competitive.