These findings don’t surprise psychologist Michael Shermer who has spent 30 years of research thinking about how humans form beliefs about the world.

In his brilliant book The Believing Brain, Michael Shermer argues the brain is a belief engine: “Beliefs come first, explanations follow.” The power of these beliefs, Shermer says, shows up in the tribal nature of politics and the stereotypes of what liberals think of conservatives.

Watch the political advertisements in the ongoing battle for the US presidency between the Republicans and Obama’s Democrats.

Here is Shermer’s stereotypes of what liberals think of conservatives:

“Conservatives are a bunch of Hummer-driving, meat-eating, gun-toting, small-government-promoting, tax-decreasing, hard-drinking, Bible-thumping, black-and-white-thinking, fist-pounding, shoe-stomping, morally dogmatic blowhards.”

And what conservatives think of liberals?

“Liberals are a bunch of hybrid-driving, tofu-eating, tree-hugging, whale-saving, sandal-wearing, big-government-promoting, tax-increasing, bottled-water-drinking, flip-flopping, wishy washy, namby-pamby bedwetters.”

If we accept Shermer’s argument that “beliefs come first, explanations follow,” how do you negotiate or settle a dispute between two groups such as mining companies and environmentalists who start with hardened, negative polarised stereotypes of each other?

That’s the challenge I live with constantly, and that’s the challenge I will address in a number of future blog articles.

It’s an urgent and challenging issue. As a world, we can’t afford the cost of intractable disputes caused by partisan disputes.

Great trial lawyers love using questions to entrap witnesses. Questions however can backfire as this amusing story involving an aggressive lawyer shows.

Lawyer: Doctor, before you performed the autopsy, did you check for a pulse?

Witness: No.

Lawyer: Did you check for blood pressure?

Witness: No.

Lawyer: Did you check for breathing?

Witness: No.

Lawyer: So, then, is it possible that the patient was alive when you began the autopsy?

Witness: No.

Lawyer: How can you so sure, doctor?

Witness: Because his brain was sitting on my desk in a jar

Lawyer: But could the patient have been alive nevertheless?

Witness: Yes, it is possible that he could have been alive and practicing law somewhere.

The moral, of course, is before you start trying to entrap people with smart questions, you need to anticipate the answers.

McKinsey consultants, Tim Koller, Marc Goedhart and David Wessels, in their book Valuation: Measuring and Managing the Value of Companies (Wiley, 2010) argue the strategic rationale for a successful acquisition conforms to five archetypes.

If an acquisition does not fit one of these five archetypes “it is unlikely to create value.”

Each archetype provides a specific rationale for proceeding with an acquisition.

Archetype 1: Improve the target companies performance
For example, you buy a company, reduce costs, improve revenues, margins and cashflows.

Archetype 2: Consolidate to remove excess capacity from an industry
In a number of industries, capacity exceeds demand. It can make sense after an acquisition to shut down the least productive plants in a combined entity.

Archetype 3: Accelerate market access for the target’s (or buyer’s products)

Large companies with global sales forces can purchase small companies and use their marketing and sales grunt to extract value out of the acquisition.

Archetype 4: Get skills faster or at a lower costs that they can be built.
Between 1993-2001, Cisco purchased 71 companies to become a key player in internet technologies.

Archetype 5: Pick winners early and help them to develop their business.
Here a company makes an acquisition early in the lifecycle of a new industry before others recognise the industry is about to take off.

If these are the five archetypes of successful value creation through acquisition Koller et al argue there are a number of usually less successful, often value destroying strategies. These include:

The Rollout Strategy: Consolidating lots of small companies in highly fragmented companies. Rollout works when businesses can achieve big cost savings or much larger revenues than individual businesses can.

Rollouts are difficult to successfully execute because they invite copycats driving up prices for smaller companies across the industry.

Consolidating to improve competitive behaviour: It’s not uncommon in highly competitive industries for companies to try to reduce price competition by buying up competitors. The authors notes that unless the industry consolidates to just three or four companies pricing behaviour doesn’t change.

Entering into a transformational merger: Transformational mergers capture cost synergies and create a more innovative whole - by creating cultural and business synergies.

Transformational mergers are rare because the timing, the circumstance and the management team all read to be aligned. Execution requires a higher level of management skill.

Buy cheap: Finally, you can create value by buying cheap - that is buy a company below its intrinsic value.

In the authors’ experience however such opportunities are rare and relatively small.

They are more likely to exist in cyclical industries where you can make money by buying at the bottom of a cycle and selling at the top.

It is however much more common for buyers to pay a premium over the current market value.

By highlighting the five types of acquisition strategies that have created value for acquirers in the past, the authors have made it more likely that smart acquirers - will target acquisitions that will create value.

Powell constantly quotes from Machiavelli’s, The Prince, to provide a brilliant insider’s account of political life in Tony Blair’s Britain.

Powell points out that The Prince written between 1513 and 1514 still remains useful as a guide book to power and how to wield it in today’s world.

The problem is, Machiavelli views have been caricatured so often that today “Machiavellian”  is a term of abuse.

Read Machiavelli’s classic, The Prince, it’s less than 100 pages long and you’ll quickly find why leaders down the ages have continued to consult it.

Napoleon reportedly said, “The Prince is the only book worth reading.” The Whig historian, Thomas Macaulay, thought Machiavelli was a liberal pragmatist. The philosopher, Bertrand Russell, called The Prince “a handbook for gansters.”

Powell points out Machiavelli was misunderstood because he was so original. Read it. And make up your own mind. I believe Machiavelli is a must read for all serious negotiators.

If you like non-fiction political thrillers, read Powell’s insider account of life in Tony Blair’s political bunker.

In a deal, it’s the organ grinder who holds the real power. It’s the organ grinder who calls the turn, sets the bottom line and approves concession. The monkey may do most of the talking and project authority, but the real power lies with the organ grinder.

Distinguishing between the monkey and the organ grinder is not always easy. I have worked in a number of deals where the organ grinder likes to create the impression that s/he is a secondary player.

Sometimes you can distinguish between the monkey and the organ grinder in a negotiation by looking out for body language signals that indicate who defers to who. The monkey invariably defers to the organ grinder by using deferential language and relatively submissive body language.

Read this newspaper clipping that reports on Russia’s under-performance in the 2010 Winter Olympics:

“Russia suffered its worst ever Olympic performance, coming 11th in the medal table with just three golds. Mr. Medvedev said that the trainers and coaches who had prepared Russian athletes for the Vancouver games ’should take the brave decision and submit their resignations,’ he said. ‘If they cannot do it, we will help them,’ Mr. Medevdev added.”

When the hapless trainers and coaches later resigned, do you think they did it voluntarily or were they sacked? Were they persuaded to resign or were they coerced?

When it came to making decisions over Russia’s Olympic programme, Medvedev was the organ grinder. In the end, the coaches were monkeys.

Since I’ve been doing work helping clients buy and sell companies, I have just re-read Richard Stielitz’s and Stuart Sorkin’s book, Expensive Mistakes When Buying and Selling Companies - and how to avoid them in your deals (Acuity, 2010).

Since success is in large part of the art of learning from the failures of others, it’s worth reading Stielitz’s and Sorkin’s thoughts and insights.

Stieglitz and Sorkin argue the most basic mistakes that many business owners make - is they don’t have an exit plan - “they don’t begin and run their companies with the end (their exit) in mind.”

In their introduction they make the point “a successful acquisition or sale is created three times: first in your imagination as a possibility, second in your plans as an objective, and third in reality as the result of your actions.”

Consider the problems an Eskimo trapper faces when he emerges from the Artic darkness to trade his fox first at the one and only trading post for hundreds of miles around. If ever a buyer enjoys a monopoly, it has to be the Artic fur buyer. Yet the Eskimo knows just how to limit the power of the trader.

When a fur laden sledge carrying an Eskimo trapper, his wife and family emerges from the farthest wilderness on its six monthly trading mission, all the inhabitants of the village gather round to welcome them. The trapper and his wife enter the trader’s house for a big feast. All the villagers come in too, listening and looking on. Peter Freuchen, a Norwegian fur trader, describes what follows in his Book of the Eskimos.

We discuss the weather, the hunting in the summer, the dogs. The only matter we don’t talk about is foxes. Next day the same thing - eating, dancing, talking - and the next day and the next, until I for my part think that the hospitality has come to an end. Then I just casually ask the man whether he has caught any foxes this year.

“Me, foxes?” he answers. “Nothing doing. One is a poor hunter as far as that goes, but especially for foxes.”

“Well,” I say, “I’m sorry, because I’d like to have a few foxes just to send home to the white people’s country when the shop arrives next summer.”

“Oh!” the man yells out. The big, nice white man has made a mistake. “Oh, you don’t know how unable I am to catch foxes.”

“Well,” I remark, “I saw a couple of bags out on the load which is now on the meat racks, and I thought they contained fox skins.”

“Well,” the man says, “maybe there’s just a couple of skins in the bags, but we just use them to wipe the grease off our hands and other dirty things.”

“Good!” I say. “But just the same I might like to have some of them. What about looking at them tomorrow?”

Next day comes, and after breakfast I again have to encourage the customer to show his merchandise. Now comes the big moment of the year. They bring in a couple of sacks, each containing some fifty blue fox skins, and they have beforehand assured themselves that the whole village is present to witness their triumph. As if they were being dragged to the gallows, they open the sacks and pour the contents out. Now it is my turn. I look at the skins, amazed, surprised and beaten.

“Well,” I say, “as usual, those are the best skins in the year. I knew they would come from you; and they certainly did. Here is something I will have to mourn about for years, because I am unable to get those foxes.”

The man raises his head, interested. “What did you say? Are they too poor for you to accept?”

“Oh no; not at all. Just the opposite. You will have to take every one of your skins back with you because I have nothing to pay with. The trading goods that came out this year were especially bad. We haven’t got enough of them and they certainly aren’t of a kind that can pay for such skins as yours.”

“Pay!” yells the man at the top of his voice. “You don’t think that I would show myself low enough to take any pay for those poor skins? I will feel myself happy if you’ll accept them.”

Finally I put in a question. “I am unable to pay for the skins but anxious to show my gratitude through my poor gifts. What could you be thinking of wanting in case I should be presumptuous enough to compare my unworthy goods to your valuable furs?”

He starts in. “What do I want! What do I want! Oh, I am a man without wishes. I don’t know if I want anything”

It is then up to me. “Don’t you want a gun?”

“A gun! A gun! Oh, a gun had been in my mind and in my dreams for a long, long time; but I, the man you listen to now, am a terrible hunter. Why should I have a gun?”

“Well, I will give you a gun. You need a knife, too, and you need some tools. And what more?”

Now that the big time is here he doesn’t’ know what he wants. But I have the skins, so I invite the man, his wife, and his children to go into the store and look at the things over. They get the key and go down to the store. They go in, closing the door carefully behind them, and spend the rest of the day going through everything.

Meantime, I get a chance to look these skins over and figure out my prices, and finally, in the evening when the couple comes back, the man has his wishes. He never tells what he wants, but he relates of what fine knives he saw, both those with the white handles and those with the brown, and the small ones with the point.

He goes on: “And then I looked at the files. My, what beautiful files! And I saw out there that you have axes.”

He interrupted by a sort of yelling or crying from the background. It is his wife, carefully instructed by him, who now breaks in complaining what a bold and fresh husband she has, keeping on asking like a beggar even when it has been proved to everybody that he has nothing to pay with. This, of course, only serves to cause me to protest that his skins are marvellous, unmatched so far, etc.

I turn to the wife. “What about you? Aren’t you going to trade? Don’t you want something?”

She blushes and looks for a place to hide. “Me? Certainly not! What should I want? Am I one who deserves anything? Oh, no; I have no wants, no wishes at all.”

“But wasn’t there something you would like?”

“I would like to have - oh, I happen to be without wishes; only those people who are worth something should have something.”

“Well, but I just want you to take something with you.”

And after several more excuses, she tells what she might like to have. A few needles. And she wanted some scissors, and she wanted thread. Maybe for the children some undershirts would be good, and some for herself; also combs. And “I would like to have a mirror, even though I, of course, will never look at myself in it.”

The wife keeps on asking, and finally I have to stop her from asking for more. Meanwhile I have figured out how much they can have for each skin and write it down on a piece of paper, sending them out to my clerk, who now is in the store ready to deliver the goods. Now the clerk has his troubles out there while they are making their choice between the different cups, the different kettles, the guns and what not.

And now comes the end of the trading, where they show their smartness and prove what fine business people they are.

The man will come running in. “Oh I’m so sorry; when I told you what my needs were I forgot to ask for tobacco. I’d like to have some tobacco.”

“All right” I will allow him the tobacco.

A few minutes after he will be back with his purchases.

“Well,” he will say, “I saw a knife out there I would like to have instead of this one, though it will ruin my sleep to part with this one, too”

I let him have the knife.

The wife will be there. “There was also some red cloth.”

Then the man comes again. “I have the whole time been thinking of a saw, but my tongue refused to pronounce the word.”

I let him have the saw. And they keep on. The only way to stop them is to have lunch ready. And the deal is closed.

Next day the departure takes place. The dogs are harnessed up and attached to the sledge. But sure enough, he comes in at the last moment: “Oh, I forgot matches! Why didn’t I mention a saw file! If I had only asked for a little more goods! Enough for a harpoon shaft!”

The smartest man is the man who remembers most. He gets a reputation amongst his countrymen. Of course the perfectly straight-minded man doesn’t know about his and doesn’t allow for it, but the seasoned trader keeps back four or five fox skins to make up for the forgettings and additional wishes.

When everything is loaded on and the woman and children placed on top of the sledge, the man gives a signal to the dogs to ruse up and be alert. Then I come out with a package in my hand, giving the wife some tea and sugar, or whatever else I know she would like. Of course, these things have been allowed for, too.

The Eskimo showed all the skill of a master negotiator. From the start he involved the whole village in the negotiation. The villagers witnessed many of the proceedings. As a result the fur trader was always under public pressure to behave fairly and reasonably.

By playing the role of the reluctant seller the Eskimo forced the trader to publicly state how marvellous the furs were and how much he wanted them.

The Eskimo used time well. Throughout he displayed great patience; there was never any hint of desperation to sell. Before they got down to the actual trading, the Eskimo and his family spent a whole day in the store sorting out their priorities. The actual trading was carefully orchestrated with his wife chiming in at the opportune times. Then after the training had supposedly ceased they were not averse to extracting a few last minute extras.

In short, the Eskimo understood the different ways power can be used, and exploited each of these to the fullest.

Here are Diamond’s 12 strategies.

1. Goals Are Paramount: Goals are what you want at the end of the negotiation that you don’t have at the beginning. Many, if not most, people take actions contrary to their goals because they are focused on something else.

2. It’s About Them: You can’t persuade people of anything unless you know the pictures in their heads: their perceptions, sensibilities, needs, how they make commitments, whether they are trustworthy.

3. Make Emotional Payments: The world is irrational. And the mroe important a negotiation is to an individual, the more irrational he or she often becomes.

4. Every Situation Is Different: In a negotiation, there is no one-size-fits-all. Even having the same people on different days in the same negotiation can be a different situation. You must analyze every situation on its own.

5. Incremental Is Best: People often fail because they ask for too much all at once. They take steps that are too big.

6. Trade Things You Value Unequally: All people value things unequally. First find out what each party cares and doesn’t care about, big and small, tangible and intangible, in teh deal or outside the deal, rational and emotional.

7. Find Their Standards: What are their policies, exceptions to policies, precendents, past statements, ways they make decisions? Use these to get more.

8. Be Transparent and Constructive, Not Manipulative: This is one of the biggest differences between Getting More and the conventional wisdom. Don’t decieve people.

9. Always Communicate, State the Obvious, Frame the Vision: Most failed negotiations are cause by bad communication, or none at all.

10. Find the Real Problem and Make It an Opportunity: Few people find or fix the real, underlying problem in negotiations. Ask, “What is really preventing me from meeting my goals?”

11. Embrace Difference: Most people think different is worse, risky, annoying, uncomfortable. But different is actually demonstrably better: more profitable, more creative.

12. Prepare - Make a List and Practice with It: The List is like a pantry, from which you choose items for every meal.

This list however doesn’t do Diamond justice. Read this book then read it again. Highly recommended

Philip Tetlock, a psychologist at the University of California examined twenty-thousand forecasts made by three hundred experts, from sixty countries, delivered over fifteen years.

He found it was “impossible to find any domain in which humans clearly outperformed crude extrapolation algorithms, less still sophisticated, statistical ones”.

Tetlock’s research however shows there are a group of experts who are much better than their peers.

So, what distinguishes the best experts from the rest? What distinguishes an expert’s ability to forecast or predict well is how they think.

Tetlock split experts into two groups; hedgehogs and foxes. Hedgehogs know one big thing to try to explain everything through that lens. Foxes tend to know a little about a lot of things and are not married to a single explanation for complex problems.

Foxes are consistently better forecasters because they use “diverse sources of information”.

Hermut Kormann, CEO of Voith, the world leader for water turbines doesn’t believe you need to be blindingly bright to be successful. It is sometimes enough o avoid the stupid mistakes others make or correct errors earlier.

Kormann’s theory “In order to be successful, you don’t have to be clever, it is sufficient not to be stupid.”

Mistakes can’t be avoided writes Hermann Simon in his insightful book, “Hidden Champions in the 21^st Century” but they can be corrected fast.”

I never fail to be amazed by the number of companies that keep making the same mistakes. All deals: the successful and the not so successful must be reviewed.

If the deal you have settled for is a Barely Acceptable Deal (BAD) ask why you didn’t achieve your Best Possible Agreement (BPA).