The Behavioral Economics of ‘The Swedish Fish Theory’

Over the course of several weeks, I explored what's known as "The Swedish Fish Theory"–the idea that, in an increasingly impersonal world, a personal gesture goes a long way. In part two of this series, I explored the theory from the perspective of others that have employed it, and enlisted the aid of a few notable academics to see how it all fits into the workings of human behavior.

In February 2015, Josh McGuire shared his story on the Tales from Tech Support sub-Reddit. He dubbed it the "Swedish Fish Theory" because that's what the original technician, Agent XYZ, liked. By this point, it had been about seven years since the Theory was developed. Josh had tested it out many times, and was convinced it worked.

The response was immediate, and positive. Many applauded the do-good sentiment. Some noted it as a handy trick they'll use next time they send something out for repair. There was a long, spirited discussion about the suitability of various types of candy. (Gummies are best. Chocolate melts. Peanuts are potentially lethal.)

It didn't take long, however, for a few commenters to highlight a darker, unsavory side of the Swedish Fish Theory.

"Well, at first it sounds just like kindness. And who doesn't like kindness, right?" /u/Enfors told me in a Skype interview. He's a software developer in Sweden, and one of the early commenters on the original thread. "But it's kindness with strings attached. You do it to get special treatment. And if I get special treatment then that means everybody else doesn't. The way I see it, it's a bribe."

Another Reddit commenter I interviewed via Skype, /u/10thTARDIS, echoed that sentiment:

"A bribe is anything that someone else will accept in return for doing work. So, it can be cash, it can be gummy bears, it can be Swedish Fish! Or, it can just be something saying, 'hey, I thought of you.' In effect, you're essentially recognizing that they're a human. That in itself is a bribe."

Whether something as innocuous as a friendly letter can indeed be understood as a bribe, it comes down to the sender's motivation. Some, no doubt, approach the Swedish Fish Theory from a cynical perspective, as a way to get something for nothing. Others, like Josh, claim it's all about being kind to strangers. It's possible to feel both ways at once.

By focusing on the motivations of the sender, however, we're only getting half the picture. It doesn't explain why an anonymous technician in a lab way off in the middle of nowhere chooses to play along when they open the box and see the candy and the note.

In a face-to-face, personalized setting, it's clear why giving a gift makes sense. "I'm going to do something nice for you because you're going to do something nice for me," says Mark Hughes, a Professor of Behavioral Economics at Columbia University. "But in the case of the Swedish Fish Theory, you don't have that repeated interaction. I send you something and then you send me something back and that's it. We're never going to meet again. Within that context, it's very tricky to understand why a self-interested person would ever do this."

According to Hughes and his colleague Pietro Ortoleva, another Professor of Economics at Columbia, there's considerable evidence that people respond to kindness with kindness, even if they don't stand to gain anything. The concept is known as reciprocity.

One component of the idea of reciprocity is that friendly acts create a feeling of indebtedness, which compels us to repay in-kind. It's why companies often give free samples as a sales technique, or why smiling waiters get better tips. They do it because it works. It's one of those subtle, powerful social norms upon which this crazy experiment called civilization depends.

There's also evidence that money doesn't work the same way. "Making people feel bad is significantly more efficient than making them pay," says Ortoleva, "just as making people feel good, and in the mood of reciprocating, can be much more efficient than actually paying them."

"This is why the Swedish Fish example is particularly impressive." Ortoleva continues. "It's much easier to think about somebody being nice to someone else in front of them. But to do it in an anonymous fashion to somebody who may be living in another country is much harder to find. This is a very good example, because it's showing reciprocity, even in an abstract, completely detached form."

One study supporting the theory of reciprocity, published in 2000 by two Swiss economists, Ernst Fehr and Simon Gächter, uses a simple game called the "ultimatum bargaining experiment" to explore how we respond to gestures in an anonymous, one-shot interaction. It has now been conducted hundreds of times all over the world, even with isolated tribes in the jungle.

Here's how it works: One person has $10, and they can give a second person as much of that as they wish. The second person, the Responder, can either accept the offer, or refuse, in which case they both walk away with nothing. According to old school economics, the Responder should accept any offer, even if it's a penny, because one penny is better than none.

But that's not what people do. Most reject an offer below 30%, even though it means they walk with zilch. Or, as Hughes put it, "people are prepared to turn down money to screw someone they think they've been screwed by."

These kind of one-shot experiments illustrate how Responders reward offers they consider fair—i.e., in accordance with social norms—even if it's against their self-interest. It also shows that they punish offers they consider unfair. What's interesting is that, according to the authors of that study, there's an emerging consensus that the propensity to punish is stronger than the propensity to reward.

Part of what Josh was proposing with the Swedish Fish Theory was that we should establish a new social norm for how to behave when engaging with anonymous service providers. It seems that, for whatever reason, when people open a box and find some candy and a friendly note, they often choose to reward the sender by expediting their order. But is it possible that the only reason it "works" is because these gestures are rare? What would happen if Josh succeeded in establishing this norm, and we all subscribed to the Swedish Fish Theory?

I put this question to the professors. "As time goes by, people are going to find out that this is what you're supposed to do," says Pietro. "You're not so special anymore for sending the Swedish Fish. And then what happens? You don't get preferential service."

"In fact," Mark added, "you're probably going to get screwed if you now don't send in the Swedish Fish."

In the final part of my exploration into this viral phenomenon, I met with some people on the receiving end of this experiment in gifting, learning how the devices we're so connected to can mean more to people than you'd expect.