The Case for Strong Reciprocity



In 1997, Elton John gave journalist, and soon to be pop artist, Cliff Jones some advice:

“Fame is an illusion, the devil is in the detail, money buys freedom and misery in equal measure and the music industry does not care about music. It cares about selling music. And that is an entirely different thing.”

Most musicians would agree with Elton John: the music industry only cares about money.

Look at Prince. In the early 1990s he wrote ‘Slave’ on the side of his face. He said, “I don’t own my stuff, they [the record companies] own it. They own me.”


When the Internet came around, Prince cut out the “parasites in the record industry” by producing, distributing and marketing his albums. Yet he didn’t sell as many records for an artist of his stature.

Has the music industry’s reputation as a parasite been deserved? Should anyone treat business stakeholders (including investors) as parasites?

As Nucor leader Ken Iverson aptly said, “In the end, you have to choose your master – the investor or the speculator.”

In other words, you get what you give. Jason Zweig reminded active investment managers “you get the clients you deserve.” And QuikTrip’s founder Chet Cadieux advised managers that “[QuikTrip employees] don’t deserve to work for an asshole… Please be sure that you always treat your employees the way you want to be treated.”

Reciprocity works everywhere, in physics, personal relationships, business, etc. Treat partners well at all times and they will reciprocate. You sow what you reap.

Here’s a great example of a band working with the music industry. U2 has chosen to be as awake to the business as they were to the art. They have treated all stakeholders - record producers, labels, tour management, etc - like valued partners. They are one of the rare few musical acts that fully understands and leverages strong reciprocity, and more.

U2 did not treat the music industry, or its participants, as parasites. In his autobiography Bono said, “[Prince] underestimated how important all those people are in the process… They’re important.” U2 treated the music industry as if they were vital to the band’s overall success.

Paul McGuinness, U2’s manager long-time manager, described how the music industry treated U2 in return: [Members Can Read the Full Transcript]

I think the industry has an ill deserved reputation for sharp practice. I certainly have met many, many honorable people, in fact, nearly all of them. And it's quite surprising that you can do, or I have certainly done, very substantial agreements on the basis of a handshake. And the deal has started to operate before the lawyers caught up.

Unlike Prince, and many other musicians, U2 has gone onto control their destiny. Treating all other stakeholders like partners opened up many opportunities for them. Now, they own all rights to their songs - U2 did it by taking a lower royalty and reacquiring the rights to every song they’d ever written. And they have been able to attract and surround themselves with the best people in business. Included are the best lawyers, accountants, relationship with events promoter LiveNation, Apple, record executive Jimmy Iovine and many others.

Giving pays in many ways. Leveraging reciprocity has paid U2 immensely over the long term. From 2009-2011, their 360 degree Tour generated $736 million in revenues, and is considered the highest grossing concert of all time. U2 also has two other concert tours in the top 20. No other band has done that. That was only possible with help from many partners, LiveNations included. Additionally, U2, as a whole, is worth well over a billion dollars.

Like Aravind Eye Care and many other intelligent fanatic led organizations, U2 has achieved stupendous success by aligning itself with reciprocity, one of the key principles of the universe we live in.

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Thanks Sean