Normative or Deviant?

What do you do if your son's best friend at school keeps inviting him over to his house and subsequently showing him his penis? Nothing? Anything?

I first heard about it after it happened a few weeks ago at our house. I was informed of it by son #2. Son #1 proceeded to confirm the story and state nonchalantly that it happened at the kid's house, too.

Then, son #1 rode the bus home with this kid and they did "something bad on the bus" which he refuses to talk about.

Monday, he went to this kid's house again. I asked, "Did you have fun over there?" to which I got an excited response about various video games they played and Naruto cards they swapped. I then asked, "Did he show his penis again?" "Oh yeah." As if it was nothing. So, of course, I don't want to make it something. I just think it's really weird behavior for a seven-year old. But I don't know. Maybe that's what boys do?

I told him that he could have this kid over if he promises that he won't let him take "it" out of his pants. "I already know that." Well, okay then.

Beyond that, what? Speak with the kid's parents? Is this something innocuous that boys do? Or the sign of worse things to come? Can any guy answer this for me?