Influence

Cialdini's argument is that people facing too much information rely on automatic shortcuts, and that those shortcuts can be triggered on purpose. Each principle gets a chapter that explains the research behind it, shows how car dealers, fundraisers, advertisers and recruiters use it, and ends with advice on defending yourself.

Cialdini, a professor of psychology and marketing at Arizona State University, first published the book in 1984; it has sold millions of copies. The 2021 New and Expanded edition adds unity, the pull of shared identity, as a seventh principle along with new research, new examples and online applications.

Its reach in finance comes largely through Charlie Munger. In his 1995 Harvard talk on the psychology of human misjudgment, Munger said he stumbled on the book fairly late in life and that it filled holes in the rough system of psychology he had already built for himself; several of the tendencies on his list map directly onto Cialdini's principles. Caveats: the new edition is long, at 592 pages, and many of the classic studies come from decades-old laboratory work, so treat individual findings as illustrations rather than precise effect sizes.

Bankers who pitch, investors who sit through pitches, salespeople, investor-relations teams and anyone who wants to spot an exploding offer or manufactured consensus will get the most from it.

1. A small gift creates a large debt. Reciprocation explains why free samples, favors and price concessions work; a retreat from a big ask to a smaller one feels like a concession that deserves one back.
2. Commitments harden. Once people take a small public or written position, they act to stay consistent with it, which is the engine of foot-in-the-door and low-ball tactics and of investors defending losing positions.
3. Crowds count most when you're unsure. Social proof is strongest under uncertainty and among people like us, a useful lens on manias, hot deals and momentum.
4. Scarcity raises perceived value. Limited supply, deadlines and rival bidders make a deal feel more desirable; treat an exploding offer as a reason to slow down.
5. Defend by spotting the trigger. Cialdini's defense is to notice when a principle is being used dishonestly, such as fake authority, manufactured scarcity or staged testimonials, and then judge the offer on its merits.

The 2021 edition opens with a chapter on the levers of influence and then gives one chapter to each principle, closing with influence in an age of information overload.

1. Levers of influence. Why automatic responses exist, how they save effort, and how the contrast principle makes a second offer look better or worse than it is.
2. Reciprocation and liking. The obligation to repay gifts and concessions, including the retreat from a large request to a smaller one, and the ways similarity, compliments, cooperation and association make people agree.
3. Social proof and authority. How people copy similar others when they're unsure, and how titles, clothing and other trappings produce deference, as in Milgram's experiments.
4. Scarcity and commitment. Why limited supply, deadlines and competition raise desire, and how small commitments, foot-in-the-door requests and low-ball tactics lock people into consistency.
5. Unity. The new chapter on shared identity, kinship, place and joint action, and how a sense of we makes people say yes.
6. Instant influence. How these shortcuts work in a fast, automated age, and when relying on them is sensible versus when it invites exploitation.