psychology of free stuff

Last Diwali, a vendor sent me a gift hamper.

Premium dry fruits.
Saffron.
Expensive chocolates.
The works.

Easily ₹20,000 worth.

I called to thank him. "Arre, it's nothing," he said. "Just a small token for Diwali."

Three weeks later, he pitched a project.
40% above market rate.

I found myself thinking: "He's been so generous. Maybe I should give him a chance."

Then I caught myself.
The gift was never free.
I'd just been handed an invoice disguised as almonds.

And we all experience this at some point or the other.

In 1971, researchers at Cornell ran an experiment.

They brought people in for an "art appreciation study."

Everyone sat in a room looking at paintings.

A guy named Joe was in the room too, pretending to be another participant.

Midway through, Joe left. When he came back, sometimes he brought everyone a Coca-Cola. Sometimes he came back empty-handed.

Later, Joe asked everyone to buy raffle tickets from him.

The people who got the free Coke bought twice as many tickets.

The Coke cost 10 cents.

It didn't matter if people liked Joe or not. Even the ones who found him annoying bought more tickets.

Robert Cialdini documented this in his research on reciprocity. 

A restaurant study showed the same pattern.

When servers gave one mint with the bill, tips increased 3%. Two mints?
Tips jumped 14%.

When servers gave one mint, walked away, then came back saying "for you nice people, here's an extra mint," tips increased 23%.

Pennies in mints.
Dollars in return.

When someone gives you something, your brain creates what psychologists call "indebtedness."

You feel obligated to return the favor.

The concept is called "rishta nibhana." Maintaining relationships.

India's corporate gifting market hit ₹12,000 crores in 2022. 
Growing at 10-12% annually. 
Diwali alone accounts for 40-45% of annual spend.

Post-pandemic, average corporate gifts jumped from ₹2,500 to ₹4,000.
A 60% increase during an economic slowdown.

Why are companies spending more on gifts when budgets are tight everywhere else?

Because the math works.

Corporate gifting increases client retention by 47%.
Customer lifetime value goes up 306%.
About 50% of business professionals admit holiday gifts influence their vendor decisions.

My CA told me something last year.
His firm tracks "gifting expense" as a separate line item.
They calculate conversion rates: how many gifted prospects became paying clients within six months.

The conversion rate? 12%.

Compare that to cold outreach at 2-3%.

Think of Marriages

Indian business culture makes this stronger.

Your client invites you to his daughter's wedding.
You go. You give shagun.

Future reciprocation is built into the tradition.

Three months later, that client pitches you a new service.
You remember the wedding. The warmth. His family.
Saying no becomes harder.

This is real. As a doctor. Even scary.

98% of Indian doctors admit pharmaceutical promotional activities influence their prescribing decisions.

84% of clinicians acknowledge that accepting gifts compromises their integrity.

A Delhi study found that giving doctors keychains increased pharmacy sales by 17%.

Keychains.

In 2024, AbbVie flew 30 doctors to Monaco and Paris for "medical conferences."

Cost: ₹1.91 crore.

Those doctors prescribed more Botox and Juvederm afterward.

Everyone involved knew what the trip was.

From 2018 to 2024, ₹16,518 crores flowed through electoral bonds.
Corporate donations to political parties, Anonymous. Untraceable.

In February 2024, the Supreme Court struck the scheme down.
The judgment said anonymous corporate funding "fosters crony capitalism."

Future Gaming purchased ₹100 crore in bonds seven days after an Enforcement Directorate raid.

88.92% of all political donations came from corporate sources.

You give.
Licenses get approved.
Investigations slow down.
Regulations become flexible.

While it was happening, everyone called it "relationship building."

India's Prevention of Corruption Act makes intent the deciding factor between gift and bribe.

If you give something specific in return, legally it's a bribe.

How do you prove intent?
You can't.
Unless someone records it or confesses.

Government employees have clear thresholds. 
Senior officers must report gifts over ₹5,000. Junior staff over ₹2,000.

Private sector? 
Tata's Code of Conduct prohibits gifts "intended to obtain business favours" but allows "nominal gifts which are customarily given."

What's nominal?
What's customary?

A ₹5,000 hamper seems fine.
₹50,000 feels questionable.
₹5 lakh foreign trip crosses some lines.

But where exactly is that line?
It keeps moving depending on industry, relationship, and who's watching.

I created a rule for myself.

Before making any business decision, I ask: "Would I make this exact choice if I hadn't received the gift?"

If the answer is no, the gift is influencing me inappropriately.

I stopped accepting gifts as much as I can. 

For gifts I do yet receive, I either share them with the team or donate them.

Removes the personal obligation.

And I've gotten comfortable saying: "Our company policy prevents me from accepting, but I appreciate the thought."

Most people understand.
Those who were offended probably used the gift strategically anyway.

Research shows people in Asian cultures are more likely to refuse small gifts from casual acquaintances than people in Western cultures.

Because we anticipate the reciprocity obligations that come with acceptance.

We know this game.

We just don't always admit we're playing it.

One of the best cultural policies I've seen at a large corporation in India (traditional brokerage) is that all diwali gifts are parked downstairs in an inventory.

The reception notes down who it’s from and who it’s for.

They then host a giveaway during Diwali. The teams shuffle gifts and employees are randomly given one.

Takes away the attempt to influence completely as no one knows what their “friend” / “vendor” actually gave.

What’s one way you combat the gifting as favors culture?

I read every email.

Until next week,
Ritesh