Analyzing Exchange: My Mutually Beneficial Exchange with my Host Family in El Salvador
As people in a society, we can not escape exchanges. We make exchanges in some form or another daily. Whether it was exchanging cash for gasoline at a gas station, having a conversation, or doing a favor for someone. Free exchanges are how most societies function. They are the essence of capitalism and I’d argue fundamental behaviour in people. Exchanges are the foundation of any relationship whether it be parental, romantic, friendly, business, or other type. Exchanges are important because they are the essence of relationships. So, understanding exchanges can make us a better parent, lover, friend, and businessman.
This story starts in El Salvador where I got to spend an awesome 6 weeks with a local family. I met them in one of the hotels they own, this one just happened to be their home too. I stayed here for 2 nights and then pitched my idea to the dad, Juan, that I wanted to exchange English tutoring lessons for his kids in return for a room in his hotel. This is how it went.
But before I pitched my idea, I prepared. I knew what I was going to say and conceived different scenarios.
Now, Juan is an astute businessman. He knows I’m coming from America, a place where the cheapest hotels are like $40. He’s strongly biased to think I have money. So, I thought he would be inclined to ask me if we could do a combo deal of cash and tutoring, where I pay maybe $5-10 and tutor his kids.
I also knew he’d be open to negotiation because he’s a good businessman. So, if he said he wanted $10 and tutoring then I’d counter with $5 with more tutoring time. Or if he said he was not interested in my English lessons then I’d offer help in other ways, like around the hotel. Or if he was only interested in the original deal of exchanging a room for $20 then I’d respectfully thank him, say no problem and give him another opportunity to negotiate before I check-out the next morning.
So I went into the conversation setting the anchor at 30-minute lessons per his 2 kids every day in exchange for a room. I also added that I´d be leaving in the morning if he was not interested in some kind of deal.
My undisclosed best offer was an hour per kid plus $5. At first glance, this is a bad deal for me because it values my time at $7.50 an hour (Remember the price of the hotel is $20. [$20 – $5]/2 = $7.50). But I’m in El Salvador where the prices of goods and services are cheaper than in America. So, putting the value of $7.50 in terms of US purchasing power then maybe it’s the equivalent of $22.50 per hour because I think a good rule of thumb is $1 earned in the US is worth $3 of local goods and services spent here. So, at first glance renting out my time for $7.50 an hour doesn’t sound good but it’s not too shabby in terms of local purchasing power. In any case, I still wouldn’t have done it just for “$22.50” an hour if I didn’t see more external benefits from such an arrangement.
Anyways, sure enough, he countered my offer with 30 minutes plus $10. I pondered his offer as if I didn’t prepare for this scenario and I responded with an hour per kid plus $5 (my best offer). He said he loved it and we agreed to this arrangement for 2 weeks. Then as I was walking away he asked for one more thing and it was if I could change from my A/C room on the first floor to a room with just a fan on the second floor. I didn’t conceive this trade in my preparation but if I had then this would have been my first counteroffer to his $10 and 30 minutes. (So, my first counteroffer would have been 30 minutes plus changing rooms.) It’s hard to say if I’d have gotten a better deal if I had conceived this possibility or if we’d have ended up with the same deal. Anyway, I said absolutely I can change rooms and we agreed again to our arrangement.
Implementing a Strategic Problem
For the first few days, I paid $5 each morning but I wanted to see what would happen if I postponed paying the $5. I went two days then paid $10 with no questions asked. “Okay, we are building trust”, I thought. I did it again for 2 days then paid $10. Again, no questions were asked. Now, I tried postponing payment for 3 days but they confronted me about it. In a nervous statement, one of the boys said, “records say you no pay por 3 days”. I responded in a calm and positive demeanor, “ah yeah, one moment” kinda in the same way you’d hear “one moment, please” from a good telemarketer. I went up to my room, got $15, and paid. I did it again for 3 days and they confronted me. I did it again for 3 days but on the third day, I confronted them.
Now before you think, “wtf, just pay the freakin’ $5 and stop causing problems. Let me preface by saying I caused no harm. Let me tell you some things I learned.
Since they held my mounting debt, up to $15, they inadvertently gave me a 3 day $15 dollar loan. And of course, hotels are not in the business to loan their rooms, they want payment when payment is due. No long-term functional business lets their clients pay whenever they want. So, why then did they let me get away with it? I think it implies one or more things. Firstly, it is because they took our exchange personally; our exchange was no longer just business. But perhaps a personal relationship was kindling. Secondly, they trusted me (or they were just willing to lose $15, but I doubt this is the case). This alone put a monetary value on how much they trusted me (or it put a monetary value on how much they were willing to risk on me). And thirdly, it meant that they wanted me around despite this problem. You see, when people don’t want you around they will look for relatively insignificant reasons to separate. They’ll focus on the bad. And I just gave them a damn good reason to kick me out. But they didn’t, so I conclude the sum positive of my presence and the things I was providing them counteracted, at the very least, the negative of late payments.
Purposefully creating a negative aspect about my presence and them accepting it validated that to them I was worth more than the problem. Their actions implied they wanted me around.
What I really wanted
Now while this was going on I also wanted to get close with the family. The problem is that a regular exchange of money with this family would get in the way of a close relationship. You see, a close relationship can never rely on money to pick up the slack and in my perspective, that is what my $5 payment was doing. This is because close relationships typically rely on non-monetary favors, where throughout time each party cycles through giving and taking. The added benefit is that what one party chooses to give is often out of love and not out of duty. It´s a completely free-will exchange, each party gives when and what they see fit. The close relationship continues so long as each party is getting a good deal. But when one is extracting from the relationship with bad intentions then the relationship fractures.
So, my method to get closer with this family was not to have money exchanged at all but I wanted our time to be exchanged, our services. What I provided foremost was English practice. And the value of it was blatantly understood by Juan. I extend my service from just the two boys to Juan. I also provided Juan a consultant service, of sorts. I don’t think I provide too much value here but I critiqued his kitchen remodeling plans and his hotel brochure (which I was a model on lol). I helped remodel the kitchen by putting up some drywall and I helped make the dining table. I also helped paint the outside of the hotel, helped make a metal banister for his wife´s spa, cooked about 5 meals at my own expense, and did dishes. I did all this plus some other odd and end things. I list what I´ve done not to boast but to make known how it may have been beneficial for Juan and his family to have me around.
Of course, they gave too, namely, a place to call home. But Juan also showed me glimpses of his life. He showed me his culture. Sometimes, I’d spend most of the day with him while he did his errands and I loved seeing how he lived. He let me sit in on one of his business meetings and I felt special when he listened to my input. He often welcomed me to eat breakfast, lunch, and dinner with his family. His wife and him got me a cake for my birthday on December 8th and we went to his mom´s home and had a special meal made by her. I got to interview Juan about how he went from a poor kid to a successful businessman. I celebrated Christmas with him and his family. I was invited to a New Years party at his friend´s home. I was able to use their Netflix account and was able to use his laptop for 6 days to build my website. But most of all, they gave me love and appreciation.
So, all this happened I think because money was not in the way. We were able to give and take and I think we both received more than $20 of value. After all, I believe any gift given out of love is worth far more than an equivalent gift given out of duty because it’s given willingly. As such, it has the ability to touch our hearts.
In a society where people have free-will (a capitalistic society), there are three key factors in an exchange between parties.
Firstly, an exchange is mutually beneficial, it takes at least two willing parties that each get something they want. If one party doesn’t want what the other party offers then negotiation happens or there is no deal. (So, saying a “mutually beneficial exchange” is nearly redundant but I preface it because I don’t think it’s a common way to look at exchanges. Instead, I think people often think of exchanges in terms of givers and takers.)
Secondly, each party is only concerned about their self-interest, always. Even donors, for example, may receive recognition, a sense of moral superiority, a tax-writeoff, and/or entrance into an after-life. In the same way, a stranger spending time helping you may get recognition, respect, and appreciation. Or in my case as a tourist, the people who help me often get English practice.
Thirdly, if an exchange is to repeat again and again then the parties must be honest. Price gouging, suppressing information, or lying in a world with Google and other ways of accountability like social media doesn’t work very long. When I go to a street vendor the vendor has a choice to give me an honest price and information. If they don’t and I find out then I’ll label them untrustworthy and I’ll want no further transactions with them. Providing an honest price with honest information is a long-term strategy for repeated exchanges. It’s in the vendor’s self-interest to be honest if they are playing the long game. But, sometimes they aren’t, especially when it comes to tourists like me. They know tourists typically don’t stay around in the area long enough for a long term strategy to be the default.
Advice for tourists: A tourist should expect higher prices for several reasons one reason is because they’re short-term customers. It’s how the economy and game theory works, it is not personal. If you´re unhappy with the vendor’s price then you may be able to find a cheaper price in a competitive market. With this framework in place you’d expect vendor’s prices to be higher around bus terminals and cheaper in a neighborhood.