The Naked Negotiator

“He who owns the most when he dies wins.” - Ivan Boesky

Since your opening offer is arguably the most critical thing that will shape your final deal you need to plan your opening offer carefully.

So how should you open? Should you open aggressively and pitch high or should you start with a fair and reasonable offer?

If you want to build a long-term relationship you should open with a fair and reasonable offer. Aggressive opening pitches can easily antagonize the other side and undermine the changes of any win-win arrangements.

If the relationship is unimportant, and the bottom line is all important, then it pays to play hardball. Open high and concede slowly. This doesn’t mean you should ask for the moon. You still have to be credible. A credible offer is one that can be logically supported and justified.

Research shows, negotiators who start high end up with more of the final pie than those who start with lower aspirations.

Negotiators typically judge their success by how much they move their opponent from their opening figure.

Negotiators who start high have more room to move.

Tips and Tactics

• Don’t open high where you have a weak BATNA (Best Alternative to no Agreement) and the other side knows it. You’re simply inviting the other side to expose your weak hand.
• Don’t highball, where the other party hates haggling. Research shows 15% of Americans detest haggling and won’t do business with hardball negotiators.
• Don’t be afraid to open high in a relationship-based negotiation where your ambitious proposal can be backed by solid credible evidence.
• Making concessions is not a sign of weakness. Rational concessions show the other side that you accept the legitimacy of their demands.

Popularity: 47% [?]

At the turn of the century, American steel magnate Andrew Carnegie sold his steel interests for $300 million to fellow financial titan, J.P. Morgan.

There was no negotiation.

Carnegie, who never bargained, simply jotted his price on a piece of paper, handed it to an intermediary, who in turn passed it on to Morgan. Glancing at the paper, Morgan mumbled, “I accept.”

Years later, legend has it that the two millionaires bumped into each other on the promenade deck of an Atlantic liner.

“I have been thinking,” said Carnegie, “that I should have asked you for $500 million.”

“I would have paid it,” replied Morgan — and walked away.

Before you start bargaining, you need to calculate what you are initially going to offer. More than any other single factor, your first offer will shape the outcome of the final deal, so it’s vital to plan it carefully.

Popularity: 58% [?]

Our lack of skill in negotiating complex, multi-party deals may be the death of the planet.

Before the collapse of the Soviet Union in 1989, only two countries bordered the Caspian Sea: Iran and the USSR.

Now Iran, Russia and Kazakhstan, Turkmenistan, and Azerbaijan all border it and have been unable to negotiate fishing limits.

The Caspian sturgeon population, and thus the world production of Beluga caviar is under threat.

Negotiating with multiple parties invariably multiplies the risks. In fact, deal risk increases exponentially as the number of parties you have to negotiate with increases.

To calculate your deal risk in an upcoming negotiation, square the number of the parties you will have to negotiate with. If you are negotiating with just one other party, the risk level is 1 (1 x 1). If you are negotiating with two other parties the deal risk is 4 (2 x 2). If your deal involves 5 parties the deal risk escalates to 25 (5 x 5).

Popularity: 33% [?]

My daughter Amy, posted this joke about Bill Gates, that was circulating around the net.

This is how business is done!

Father: “I want you to marry a girl of my choice.”
Son: “I will choose my own bride!”
Father: “But the girl is Bill Gates’ daughter.”
Son: “Well in that case…ok”

Next — Father approaches Bill Gates

Father: “I have a husband for your daughter.”
Bill Gates: “But my daughter is too young to marry!”
Father: “But this young man is a vice-president of the World Bank.”
Bill Gates: “Ah, in that case…ok”

Finally Father goes to see the President of the World Bank.

Father: “I have a young man to be recommended as a vice-president.”
President: “But I already have more vice-presidents than I need!”
Father: “But this young man is Bill Gates’ son-in-law.”
President: “Ah, in that case…ok”

The father in this tale is clearly a seasoned deal-maker.

He knows that sequencing agreements is a key factor in deal success.

Sequencing involves lining up deals so that each agreement raises the odds of knocking over the next one.

Popularity: 35% [?]