Why follow the golden rule?

In the agricultural era before the Industrial Revolution, if the lord of the manor demanded that one of his peasants turn over all his crops on pain of death, then he had no choice but to comply.

Might was right, and fairness was optional. The dominant type of exchange relationship between those in power and those below them was extortion. It was a win-lose zero sum game.

In the modern era, all business opportunities require an exchange of value between more or less equal parties. Instead of considering each other marks or suckers or victims to be exploited, we consider each other to be stakeholders in cooperative growth.

Stakeholders include your employees, customers, investors, and suppliers. These aren’t people that you’re aim to rip off. They have a choice. They don’t have to do business with you, and there are plenty of alternatives.

While the powerless peasant was tied to his land and was stuck in relationships, your stakeholders can easily tell you to take a hike. They don’t need to have a relationship with you, they’re not doing it at the point of a sword.

In this age of ecommerce and social media, if somebody does feel, after the fact, that they’ve been extorted or taken advantage of, they can easily attempt to balance the value exchange by providing negative user feedback to an audience of millions.

Rather than engaging in win-lose haggling to get a better margin, rather than using transactional tactics to get a better short-term deal, you’re much better off striving to create long-term fair value relationships in which both sides can consistently win. In fair value relationships, both sides strive to create long term value together, working to grow the pie.

A good example is McDonald’s, which has had relationships with its suppliers for decades. Whenever it opens a new market, it takes its suppliers with it, and together they figure out how to grow in the new opportunity environment. Because they trust each other, they’re willing to spend years in a cooperative learning process that can eventually pay big dividends.

Imagine if McDonald’s had an old era attitude. Every time they went into a new market, they would find a local potato supplier and squeeze him to save extra pennies. That approach would probably fail, especially in difficult markets like India.

Successfully entering new markets requires a sustained journey of learning and adapting. You can only do this if you work in a spirit of trust and cooperation with stakeholders over a sustained period.