How the Social Exchange Theory Can Get You the Network of Your Dreams (Part 1 of 2)

How to Use This Revolutionary Method to Reach Advanced Networking

Social Exchange Theory


By “method,” I mean an approach to social interactions and relationships that maximizes your chances of creating healthy, collaborative, win-win relationships. And, this approach is simple enough that anyone can implement it so long as they care about fairness and understanding.

The social exchange theory has been around for a while, but sociologist, Lucio Buffalmano, refined the theory into a series of practical strategies, techniques, and mindsets for social success (hence why we call it a “method”). And, this information is typically reserved for his students in his course, Power University.

But, he’s kept an open mind and agreed to give away his findings and insights right here for free.

So, I’m very happy to introduce the very first guest post of I love Lucio’s work and he’s undoubtedly an expert when it comes to all things social.

Now, without further ado, here is a wealth of fascinating ideas absolutely crucial for winning with networking — along with a free preview of Lucio’s Power University.

Take it away, Lucio!


Social Exchanges I: The Economics of Social Success


How the Social Exchange Helps You


Understanding the transactional nature of human relationships will help you to:


  1. Assess people’s character.
  2. Recognize and choose collaborators who add value to your life.
  3. Recognize and cut out the value-takers who hamper your progress.
  4. Be a better friend or partner.
  5. Be a better leader.


Let’s start with some definitions:


Social Exchange Theory: Definitions


Let’s review the most relevant definitions of the social exchange theory:


The social exchange theory is:


Definition: 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 prefer relationships that add value to their lives, advance their interests, and generally make them better off.

Yes, there are some exceptions, as with everything.

Some relationships can transcend the transactional aspect, and so can great leadership.

Manipulation also serves to go beyond the “colder” exchange.

But, before we get into that, let’s learn the basics here.


Value is:


Definition: in social exchanges, value is an umbrella term for everything that makes or can [has the potential to] make people better off (when the value is positive).


“Value” includes both material and emotional benefits.

Emotional benefits include things such as compliments, attention, gratitude, or even a positive energy that uplifts people.

What people want and appreciate is value-positive, and what they dislike and avoid is value-taking. So, people naturally prefer dealing and engaging with value-giving individuals and avoid the value-taking ones.

High-value people are generally value-positive people who provide (or could provide) what others want.

For the simple fact that they do (or can) give 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.

By providing value and/or becoming a higher-value individual, you create social capital (see next entry).


Value accounting is:


Definition: the amounts and balances (positive or negative) of actual or potential value-giving transactions (which create social credit) and value-taking transactions (which create social debt) that people naturally keep track of.


Value 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” (Buss, 2019).

The computation and the results of our mental value accounting influence people’s behavior.

When we expect a value-negative transaction from a person, we avoid them. And when we see the potential for a value-positive transaction, we welcome them or maybe even chase them.

And, we are much more likely to follow the value-givers and be influenced by them.


Social capital is:


Definition: social capital is a measure of the social credit (or social debt, in cases of negative social capital) that 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 to) 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 (which would be “passive social capital” because it’s based on your potential to give).


Social currencies are:


Definition: 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.


ExampleAs we will see in the dating section, since people can offer and trade value in different currencies, couples 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, yet still creating a balanced enough exchange to be together.


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


Social Exchange Laws: The Basics



From the 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 others what they want, you are far more likely to also get what you want (“socially balanced requests”).


2. To achieve popularity, influence, and power, give value or develop the ability to give value.


People with lots of value to give are walking moneybags.

Everybody 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 (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 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 have to escape the negative social account balances they create.


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 provide “promissory notes” of future paybacks.


Everyone wants to associate with high-value folks.

But, high-value folks prefer associating with other high-value folks.

Or, at least, with people who are willing to make up that difference.

That’s why the first step to transact with high-value people is to avoid framing yourself as just another taker. They have enough of those vying for their time.

Next, you must show that you can also give something.

And, if you don’t have much right now, you must give loyalty and gratitude. Gratitude is a promissory note of your willingness to pay them back.

Examples are below.


5. To develop lasting and happy relationships, keep a positive account with everyone (win-win).


“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 one party or the other) either end soon or turn toxic and must be kept in place with coercion and/or manipulation.


Social Currencies: “Surface” 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 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 lower-visibility currencies.


External Layer Currencies


Definition: external layers are the qualities that people first notice about you.


They include:


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


Deeper Layer Currencies


Deeper layer currencies are not directly visible because to access your deeper layer people need to get to know you.

So, in technical terms, your deeper layer currencies 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 the social currencies.

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

Some people like to scoff at “appearing” and say that they value “being” far more.

Of course, that’s rarely true because both are valuable.

The only difference is that one is readily visible and the other…well, the other you need to learn how to make visible.


Which layer to prioritize?


Now the question is, which one is more important: superficial layers (appearing) or deeper layers (being)?

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 one’s deeper layers.


Your external layers are a pass-through to your 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 can help you get your foot in the door.

The better your external qualities, the better your chances to also showcase your deeper ones.




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

That homeless woman below 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.


Example of Social Value 1


Who would you rather engage with, be with 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 one another.


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 will make you come across as a worse person, and value-negative personality traits will 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, albeit a manipulative one (more on that later).

But, you need to be careful with that approach of “fake it ’til you ‘make it'” (faking it until it becomes true).

If you overdo it, or if you do it with people who won’t fall for it, you come across as haughty, annoyingly entitled, or even out of touch with reality. And, that decreases your value.

Here’s a common attitude that seeks to inflate one’s own value, but that often turns people off and decreases their value:


*PRO Tip: Never brag to people “I know my value”


It makes you come across as an entitled status inflater.

This is what it actually says:


Sub-communication: I know and I set my value, not YOU. So, independently of what you think, you must put in a lot of effort for me.


That’s a covert, one-up power-move (more on that later), and it annoys people.

Especially if the receiver is a high-value person who is aware of power dynamics (and most high-value people naturally are).

If you know your value, great.

Just don’t say it, but show it.

Read more for free here.


Pitching Your Deeper Currencies (Advanced Social Skills to the Rescue)


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 what you’re saying is true, bragging looks like you are trying to gain their approval, which empowers others and disempowers you.

So, how do you do it, then?

Well, this is where advanced social skills come into play.

Not to sound like a sales answer, but there are many strategies for pitching your currencies in the course, and it would take me quite some time to summarize everything without making this exhaustingly long.

But, as a preview:


  • Talk in a way that indirectly shows your deeper qualities
  • Bait others to ask you the questions — or bait them to compliment you
  • Compliment others for the qualities you also have
  • Share your achievements not with a focus on the achievements, but on the fight to get there
  • Frame whatever could come across as “look how cool I am” as advice or lesson learned




See a good example here:





I loved that view and wanted to share it. But, I knew it could come across as showing off.

So, I framed it as “here’s me sharing tips on where to visit.” And, that frame pulls people up to my same level, indirectly saying that they can travel there and can appreciate it as well.


The Relativity of Social Currencies


The value a social currency has is always relative.

In economic terms, a $1,000 hunting rifle has little value outside of hunting circles. 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 that empowers you is highly dependent on the situation, the person, and the specific need at the specific time.

So, for example, if a realtor meets someone looking to buy property, his wisdom and knowledge make him high value. But, if one is not interested in real estate, then he’d better have something else going on for him.

The sexual market value is also similar.

If a man is rich but a lady is looking for a rebound one-night stand, his wealth matters less. Conversely, if a woman is looking for long-term relationships and is low in sex drive, then his physical attractiveness loses some power.

This is why moving to sexual marketplaces that are more in line with your goals is a great hack to increase your returns.


Strategy #1: Stack Your Environment On Your Side


The environment can either subtract or add to your power.

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

Or, a person can be a very average guy, but if he brings a date to a club where he skips the line, gets served first, and everyone says “Hi” to him, he looks like he has loads of status (which is a form of value).

Plus, people will also think he must be potentially wealthy or have some qualities that these people recognize (which is value through social proof).

If you can develop a few environments where you look like a bigger fish, then you can strategically bring people into them when you need to strategically impress.


*PRO Tip: Develop high-status environments, and bring people you need to impress into them


Example from Goodfellas:



Outside of the club? Just another pretty face. But, inside? His value was through the roof.


Him(takes her to a popular venue in the city where he skips the line, knows everybody, and gets complimentary drinks)




But, you don’t need that much.

It can be just places where you feel welcome and comfortable, which naturally makes you act more confidently.

Or, it can be a restaurant where you are a regular and know the menu, together with the owners and waiters.

I make it a point to go back to places where people treat me well.

And, it almost infallibly impresses the people I bring in there.

Read more for free here.


Strategy #2: Focus on Large-Appeal Currencies or Hidden Goldmines


An important property of value currencies:


Some currencies have large and deep appeal (which are “hard-currencies”), while some others are more situation-specific or more individual-specific (referred to as “soft currencies”).


Which means to you:


*PRO Tip: Focus on currencies everyone wants OR strategic niches


Hairstyling can be considered a niche skill/value.

And, the best male hairdresser in town will be in touch with lots of women and many wealthy wives.

And, you can’t go wrong with large-appeal currencies such as wealth, looks, status, power, authority, uplifting mood, etc.


*PRO Tip: Avoid the “feel-good trap”


People sometimes pursue the “feel-good feelings” of “becoming someone” within a small niche.

But, if that niche brings little benefits, you’re not maximizing your efforts.

Becoming the most respected Trekkie (Star Trek fan) will likely add little practical benefits to your life.

So, avoid that trap and focus on what adds the most benefit.

From the blog, also relevant (but not necessary reads):


– How to understand the relativity of social status (from nobody to superstar)

– How to escape the social status trap! The Big Fish, Small Pond Syndrome


High-Value People: Profiling


Here is a high-level definition for high-value people:


Definition: high-value people are individuals with an abundance value.


Easy, right?

That “value” can be traits, skills, or possessions that others enjoy or want.

As a rule of thumb, the more you can associate with high-value people, the more successful you will be.

But, as we’ve seen, high-value people prefer associating with other high-value people.


Because they can get back more, of course!

The social exchange theory says that people who have a lot to give also demand a lot back.

So, if you’re a high-value person, it doesn’t make sense for you to associate 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.


High-Value People Are Guarded


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. They ask and want, but give nothing back.




Here’s an example of the burden of being high value.

Imagine this situation:

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 her help send her poor CVs that only waste her time.

Some of them are the usual “friends” (“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 so many simply because of her looks.

“God,” asks Sara, “Can’t these people see me for who I really am?” (Here, Sara is complaining that people only see her external currencies and nobody is 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. (Here, Sara is complaining about the lack of reciprocity in the social exchange.)

That’s how many high-value people often feel in the presence of value-takers.

The value-takers are trying to get something from them without giving anything back.


How to Take 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, that’s OK.

But, seek to give something that’s helpful to them.

Bar that, seek to give emotionally at least.

As a matter of fact, this might be more important than material giving, since most interpersonal transactions are emotion-based.

Except for dating, a strategically deferential demeanor can also help, so you avoid stoking competitive feelings and make the receiver feel good about associating with you.

One way of giving back is to make them feel good for being so giving and helpful.

For example, with praise and gratitude.

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 (and that you’re in debt to them)
  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)


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.


Give and Take In Balance


The more you can balance that give and take relationship, the more likely it is that the relationship will start and last.


Value-Takers: Profiling


There are countless ways of being a value-taker.

Some of them include:


– Nasty Social Climbers: trying to climb status and power hierarchies is normal. But, the value-taking social climbers do so by pushing others down

– Complainers: they are not value-taking with other complainers, but they are value-taking with the go-getters of this world

Nervousness & Insecurity: states are contagious, nervous people make for poor social interactions

– Party Poopers / Mood Dampeners: they take value by making people sadder

Braggarts / Status Inflaters: we like people who make us feel important, not those out to prove they are important

Socially Oblivious: they have no idea how social dynamics and power dynamics work, including the basic laws of the social exchange (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.


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


Later we’ll learn how to better ask for a positive review.


Value-taker: “Matt told me you’re having a housewarming party tonight, is it still on?”


High-value person’s interpretation: you’ve got nothing to do, and you 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’s interpretation: if I hear “pick your brain” one more time, I’m gonna lose it. Why would I want to sit around for coffee, expend effort to explain things, while you take as much as you can from me without giving?


Value-taker: “Please, please, please…”


High-value person’s interpretation: begging is all you’ve got to offer?


Notice all of 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 their time and knowledge.

Also read:


– WIIFT Failures: a thread with plenty of examples of people who mistakenly present themselves as value-takers (including a few examples from Ali).


First Impressions In Social Exchanges


The social exchange theory applies the most to fresh relationships.


Because there is no previous history, and people are naturally on the lookout for potential gains and losses.

The balance is not at zero though.

Usually, there is someone who looks higher value, or who already has a good level of status or reputation if the two are meeting within a social circle.

In dating, the higher-value person is often the one that looks more attractive.

So the higher-value person is usually asking themself, “Is this person taking or giving?” And, the lower-value person’s job is to make sure that they show themself as a giver. (Or, at least, not as a value-taker.)

Conversely, it’s often OK to ask and take when you have a solid relationship already in place. You’ve most likely already given a lot and you will likely give more in the future, so there’s more leeway.


Advanced Social Exchange Rules


You’ll see many examples of how to apply the social exchange to your benefit in part two of this “social exchange series.”

And, in the last module of Power University, you also have an advanced add-on (it unlocks after 35 days).


Social Exchange Manipulations


Now that you understand the basics of social exchanges, you can better spot manipulations — and better deal with them.

As a pictorial overview of social exchange manipulations:



And, a schematic one:


social exchange manipulation matrix


In simple terms, “social scalpers” are manipulators who abuse the social exchange system in order to create win-lose situations.



  • Make it seem like they are giving more than they actually are (“credit inflating”)
  • Make you feel like you are giving less than you actually are (“credit erasing”)
  • Make you feel more indebted than you actually are (“debt inflating”)
  • Make it seem like they have a smaller social debt than they actually have (“debt erasing “)


All of them are interconnected.

In simple terms, the manipulator seeks to get more, while giving back less.

For two real-life examples, see:



As you become more attuned to value accounting, you will develop a natural feel for what’s “fair,” and who is manipulating.


Moving Past Exchanges


Great close relationships move past the more economical exchanges.

And that’s an approach of the advanced social strategist:


Advanced Approach #1: to clearly state or frame your collaborations as being beyond “cold” exchanges.


You will see specific examples of how to do that later on in part two of this series.

But, even “beyond” social exchanges, never forget these basic rules:


  1. Few relationships are ever completely free of an exchange element.
  2. Eventually, if either person takes repeatedly without giving, the relationship suffers.


Main Takeaways


The most important takeaway is this:


Main Takeaway: The more value you give, the more value you can ask for


The most important real-life applications from social exchange dynamics are:


1. Focus on what you bring to the tablemake this your number one rule for social exchanges.

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. (Imbalanced relationships often hide an element of emotional manipulation.)

4. Cut out the takers: you have no space for them in your life.

5. Stick with the collaborators: you recognize collaborators because they want to give back. One of our Power University alumni says that good collaborators feel bad being in debt, and seek to give back. They might also refuse a favor if they feel it’s “too much.”

6. Maintain the win-win: win-win people and partners are social treasures. Tend to these people and keep these relationships.




Ali here again, and I hope you enjoyed that part one of the social exchange series. Are you a little better off now than before you started reading?

If so, check out this thread on how Power University helps people win their negotiations in life.

Lucio actively avoids doing direct sales for his products at The Power Moves, so if I never mention them, you might never know about it. What I can tell you though, is that Lucio’s blog articles at The Power Moves are jam-packed with actionable content. And, his course is no different. (Even more than that, Power University is designed to be more practical, “condensed,” and effective than his articles at The Power Moves.)

So, I highly recommend at least checking it out because it has a money-back guarantee if you don’t like it anyway.

All of that said, if you’re still a little undecided, no worries, check out part two of this social exchange series.



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