Todd Simkin on the principle of charity in conversations, negotiations, and trading

Shane Parrish interviewed Todd Simkin, of Susquehanna International Group, for his Knowledge Project Podcast.

Simkin explained what he calls the principle of charity:

Simkin: When I’m modeling decision processes for my classes or kids, I use this principle of charity.

[Whenever] somebody says something, I assume that they’re not an idiot. I assume that they’re coming from from a place of sincerity and good intentions. And I give them the benefit of the doubt.

On the trading side, this principle of charity is [about] really giving somebody credit for knowing what they’re doing when they’re trading against you. This [humility] is what sort of protects you from being run over by somebody who has better information than you do.

On the interpersonal side, this gift to the other person, is an assumption that that they are well-intentioned, and smart, and approaching this for the same purpose that you are. And therefore you’re going to end up being aligned in your process to reach a resolution to a conflict, or to come to an agreement about whatever it is that you guys are talking about.

Every single negotiation is a cooperation and collaboration. We’re never in a situation where the person has to negotiate with you. They have some alternative, they can walk away, which means that the only reason anybody’s going to engage you in a negotiation is because by doing so they’re going to get a better outcome than by not doing so. If that’s the case, then every negotiation is collaborative. Having a favorable outcome for yourself means that you have to have a favorable outcome for them as well. Otherwise, they’re not gonna be part of this conversation, and definitely not future conversations.

Kris Abdelmessih complements Simkin with a pertinent observation (a):

What stands out for me is the magic that can happen when we combine the principle of charity with a demand for mental rigor and vulnerability.

For more on the other components of this “magic,” see:

• Todd Simkin on overcoming cognitive biases by communicating well with the right kind of group
• Todd Simkin on conversation techniques that seem dull but actually help others think and reason