Posts Tagged ‘negotiation’

Did Anyone Notice That…

May 7, 2013
English: Christiane Amanpour at the Vanity Fai...

The queen of news reporting…Christiane Amanpour!

In my last post, I was fooled by randomness, or more specifically, by my System 1 thinking. I had hoped that a couple Kahneman fans would call me out in the comments section – though that is not to imply that my rush to judgement was intended as a test (it wasn’t)!

What am I talking about? Well, in my last post, I called out Bangladeshi Prime Minister Hasina based solely on her appearance on Christiane Amanpour’s excellent show. Now, if we think about it, it makes zero sense to base our entire judgement of her ability to govern on one appearance on one news show. I don’t know if we have any experts on Bangladeshi government  residing here on TPS Planet, but I am certainly not one. I would need a great deal more information on her regime, their policies, and their effectiveness in managing change before making even the slightest judgement in this regard.

The story is a great illustration of how our minds work, though. Our system 1 makes rapid judgements about individuals. When there is little evidence of a particular trait available, we fill in those gaps in information with what we do know – substituting good qualities when we have an overall good feeling about someone and vice versa. On a blog post meant to entertain, the consequences are not dire. In other cases – negotiation involving known suppliers being one – we need to take steps to avoid that bias.

We’ll explore those in greater detail in the days, weeks or months that follow…whenever my lazy System 2 gets itself motivated again.

The attribution bias

July 31, 2012
English: Normal distribution with bias

English: Normal distribution with bias (Photo credit: Wikipedia)

“The word of the day is ‘job’ – J-O-B…you gonna look for a job today!” With a nod the dad in Friday, we begin today with the bias of the week – the attribution bias. Don’t be that guy. However, if you are that guy, it may be outside the scope of your abilities to change. (Yeeeaaah?)

The attribution bias is a good time…it goes something like this:

  1. “My negotiation went well because I really held firm” and “Your negotiation went well because circumstances were in your favor.”
  2. “My project is not on time because this person could not deliver her part, and we did not get funding, and…” and “Your project is not on time because you simply did not get the job done.”
  3. “The sale happened because of the previous work I did with client X, and I really won them over with my pitch” and “Your sale happened because our company had the best product offering.”

We are all subject to it, but for the sake of those who must needlessly waste energy rolling their eyes, understand that it is out there. Resist the urge to think you have really looked at the situation objectively. You haven’t. In fact, your mind is specifically designed to ensure that you have not looked at the situation objectively.

Pirlo’s penalty – a lesson for life and business

June 24, 2012

For those few that did not see England vs. Italy, it was an excellent football match. The match went all the way to penalties, and the key one was taken by Andrea Pirlo of Italy. But this post has nothing to do with football.

Pirlo bucked convention by playing a ‘change-up’ penalty that, if the keeper had simply stayed where he was, would have been saved easily. It takes a cool, confident person to play such a penalty.

I would even take it a bit farther and say that it takes a certain view of life to take such a penalty. It takes true flexibility and mental agility. It takes a higher level of intelligence to know that any option involves risk…it is all about a probabilistic way of looking at life.

There is no way of ensuring success in anything, so sometimes taking a calculated risk is the way to go. Pirlo knows, do you?

We have links…and commentary

June 14, 2012
English: Global rare earth element production ...

For illustration only – no idea if accurate! English: Global rare earth element production from 1950 through 2000, colored to indicate source. (1 kt=106 kg) (Photo credit: Wikipedia)

  • Check out this infoworld post about open source software – A solid illustration of how rules without brains can sometimes get in the way.
  • An update on rare earth minerals. Good to see that the current monopoly is not permanent, because if not, I might have to start remembering things.
  • TED talk on what’s coming in the world of identity verification. Interesting for technology freaks buffs like me.
  • Check out the head of TPS planet talking about negotiation preparation. What else are you gonna do for the next two minutes?

Related articles

Negotiation and evolutionary psychology – a look at our nature

May 18, 2012

A couple disparate events came together to form the basis for this post. One is my rediscovery of my interest in evolutionary psychology. The other is a random PR guy on the BBC breakfast show this morning. On a side note, I’m mentioning this show for the last time, because it is simply unwatchable. I put it on while feeding the baby at 7 AM, and was tempted to knock back some of the formula milk.

Let’s start with the random PR guy. ‘Breakfast’ wanted to discuss the Facebook IPO and realized they needed an angle apart from the purely financial aspects. So, they trotted out some guy to provide the expected, but painfully misguided idea that Facebook has cemented its place as our number one social media platform…forever. Random PR guy, meet book, book, random PR guy.

So why mention this? The point is that we are all biased – some more than others – and possibly irrevocably so. It is the same reason that some people believe they are the first one to develop new approaches to marketing, procurement, accounting, strategy or operations that have established a new framework which will then last forever. And develop the ego to go with it.

History vehemently disagrees, and although that is sort of known – again, some people are widely read while others are too busy enlightening the world – it gets conveniently pushed to the background. Certain approaches fit well in certain environments, but then the environment inevitably changes in a big way (here is where you go back and reference Black Swan and/or Fooled By Randomness).

The same human nature that causes the “I’m super-special” bias (have I just coined a term?) also was kind enough to bring us the “I am incapable of being in a true partnership” bias. If you are super-special, why should you partner with anyone? They will only mask your brilliance.

We have seen obvious examples of negotiations that are crying out for a true partnership (NFL and the NFL players union) for example. Companies with their main suppliers. CEOs with key executives. There are only a very small percentage that are able to break through the desire to pull leverage games, degrade the other side, and invent reasons why you are superior. This feeling comes through in every interaction and trust is broken down. In game theory terms, the recipient’s optimal strategy is then risk minimization mode…which then prevents reaching the larger prize.

If you are that guy, you most likely don’t know it. But give listening a shot and you may be surprised.

The Black Swan (film)

Random Black Swan photo. People like pretty pictures. The Black Swan (film) (Photo credit: Wikipedia)

Negotiation – a look at empirical evidence

January 1, 2012
Löwenstein

Random pic from a guy with a similar name to Loewenstein. Image by matthiashn via Flickr

Academics can be both frustrating and refreshing all at once. They do a great job – George Loewenstein is one of the best – of providing empirical evidence of how things are. Often, however, they don’t express strong opinions on the implications of their findings. They leave that sort of thing to hacks like me. Hooray?

Loewenstein hops into the world of negotiation in an article called “Explaining the bargaining impasse.” I won’t do a full review or try to explain his points in detail. I’ll leave that to people with even more boring lives than mine. I will, however, offer some opinions where Loewenstein leaves off. I’m sure he would agree with everything I’m about to say…if only off the record.

The most interesting finding that he presents is that when people are asked to write down the weaknesses in their own position, they are able, to some extent, overcome the self-serving bias (processing information that supports one’s own position more readily than opposing information).

The question that he leaves unanswered is whether this activity is a good one, or whether the self-serving bias actually helps us achieve a better result. My answer is that it depends on the type of negotiation.

In a one-off deal, do the self-serving thing. In a long term relationship, write down the weaknesses in your position. It will help you understand the other side. I’d also use this knowledge when developing a contract. What risks are you foisting on the other side, and will this damage trust? I’ve seen people talk a good game with relationships, but then go out and dictate a position that suppliers will outwardly accept. However, under this veneer, the lack of trust percolates and we are no longer united by a common objective.

The same principle can work in interpersonal relationships, both professional and private. I have seen people always complain about others not taking responsibility for things, and then proceed to not take responsibility for anything. Before behaving like a politician complaining about the deterioration of ethical standards, think about what the other person could realistically have accomplished given the circumstances. You’ll find that your ability to solve problems rises while the time spent blaming people falls dramatically.

This way of thinking can dramatically improve our lives. I have seen a small number of people in which conflict is truly a part of almost every relationship they have whether professional or private (this is the default, but even these people are able to overcome this state with conscious effort). They may not even recognize themselves in this portrait, because it is simply viewed as the way things are – i.e. you are not getting as much stuff as you potentially could if you are not in conflict with everyone who could potentially give you more stuff (curiously, kids are the only ones left out). It is as if their world is defined by the conflicts they have.

I have also seen people who seem to live in harmony with just about everyone. It is rare, but I believe that it is a glimpse our future. Collective action is the next frontier. More on all of this to follow, unless I catch the laziness bug that’s been going around.

Game theory in debt ceiling negotiations

August 1, 2011
A prisoner's dilemma with an outside option fo...

This is actually prisoner's dilemma, but it's easier than finding another image that I'm allowed to use. Image via Wikipedia

Experts in game theory say that the best way to win a game of chicken – the one where two people drive cars towards each other until one of them swerves – is to, in plain view of your opponent, remove the steering wheel and throw it out the window as the two cars are careening toward a collision. By doing so, the other guy has only two choices – end both players’ lives or swerve and lose the game. Either way, the other guy loses, so he might as well take the smaller loss and swerve out of the way.

TPS report, as a policy, does not get involved in politics mainly because our tolerance for nonsense has gone from “not much” to “even less than not much” over the last five years or so. So, we offer no political view of winners and losers in the US’s debt ceiling negotiations. However, we are interested in the elements of this drama that relate to negotiation.

There are many instances of political negotiation which represent a search for the best result for both parties, i.e. a more collaborative negotiation. However, this instance seems to me to be about the closest a political negotiation can come to a game of chicken.

If we turn our attention back to Game Theory, the possible outcomes of this game are Democrats gain a small victory, Republicans gain a small victory, or both lose heavily. I’m oversimplifying here, but let’s say that a small victory for Dems is that the debt ceiling is raised, but spending cuts are smaller and don’t impact their pet programs. Let’s also assume that Republicans and Tea-partiers win when the debt ceiling is raised but cuts are deeper and don’t affect their pet programs. A loss for both represents no agreement on raising the debt ceiling and some level of crisis for the US and even the world economy.

In a pure game of chicken, both sides stand to win and lose equal amounts. However, in reality, purity is rarely found. Maybe one driver has Christiano Ronaldo abs, Beckham money, and is dating Pippa Middleton while the other guy’s shape depends on the chair he is sitting in, can’t hold a job, and who’s dating prospects are as gloomy as a London evening in early December.

In this case, the Republicans are best placed to toss the steering wheel out the window (i.e. risk financial crisis), since the Dems are in power. President Obama and the Dems seem to have more to lose, which damages their capacity to project power. Plus, don’t discount the fact that tea-partiers – whether you love’em or hate’em – have successfully convinced people that they are insane enough to risk a US government default. Never underestimate the power of crazy.

Add it all up, and it looks like the conservative end of the political spectrum holds the cards here, and that, at least in the short term, chicken is the right game.

Pippa, stop calling me. I’m already taken.

NFL labor negotiations and last minute tricks

July 31, 2011
A photo of the Logo of the National Football L...

Image via Wikipedia

There is some debate amongst negotiators whether we should be doing things like slipping in last minute terms when it looks as if an agreement is about to be concluded. The thinking is that the other side won’t hold up a final agreement just to negotiate a small issue.

Generally, we at TPS report believe that these sort of tactics lead to a breakdown of trust, and should be used sparingly, if at all. We also believe that if they are to be used, it must be in a situation when all that is required is a one-time result rather than an ongoing business relationship.

We saw these tactics play out on a grand scale with the end of the NFL lockout. The owners, according to Mike Florio at PFT.com, may have attempted to slip terms into the final agreement without the players noticing. At the very least, they voted to approve an agreement that wasn’t completely, you know, approved by the players.

The move may have been an attempt to build public pressure on the players to approve a deal they did not have time to fully digest.

Then, there was a bit of an issue around the process for re-certifying the NFL Players Association. After a bit of shenanigans on the owners side, there was apparently some concern that the players would respond in kind. Once the deal was approved by the owners, they needed the players to re-certify their union.

If the union did not re-certify, owners would be liable to anti-trust litigation since federal law generally frowns upon collusion amongst employers to hold down labor costs. Since the re-certification would not happen until after the agreement, in theory, players would have a short window in which they could sue. Or a longer one if they did not agree to join the re-certified union.

In the end, it all worked out and there will be football. However, with players and owners sharing revenue, they are a model of what should be a collaborative relationship. It was in both parties’ interests to work together to maximize revenue, yet they still lost the Hall of Fame preseason game to delays in finalizing the deal. They both did everything they could to build leverage throughout the process, including the threat of and initiation of legal action.

So, my takeaways from this include a question and a couple observations:

  1. Is it possible to have a truly win-win attitude in a negotiation, or is it more like WIN-win?
  2. I had to chuckle to myself when people would say things like “they have to do a deal, both sides stand to lose so much.” Those in the know understand that rationality has only a small place, if any, in our decision-making.
  3. Building on the previous point, there are some people who are better at making their decisions sound rational than others. There are some people whose words are so divorced from what they do and from reality that when they speak, it is hard to contain a sly smile. Or is that just me?

As always, we would love to hear your comments.

The status of NFL labor negotiations

April 18, 2011

The NFL labor dispute adds further proof to the idea that powerful, intelligent people are not there by some decree from above. Those people are not there because they are of greater intelligence, or have super problem-solving ability. They are there, among other reasons, because the serotonin in their brains and non-verbal feedback from others tell them they should be there, causing just enough people to believe them.

What they are doing now is the classic “we aren’t very good negotiators, so let’s let the courts tell us what to do.” For a good take on this by Frank Deford of SI.com, click here. The players’ union (or more accurately, ex-union) is, not suprisingly, leading their clients astray. A court battle will only lead to long delays, with the Plaxico Burress’s, Dez’ Bryant’s, and others continue to rack up bling, thus weakening their positions. Appeal after appeal will be filed, and the players will eventually cave. However, in the meantime DeMaurice Smith will rise in profile and Jeffrey Kessler will have racked up thousands or possibly millions in fees.

Contracts and agreements are there for parties to develop greater understanding. Try pointing out the cost of the litigation route and transaction costs that produce inefficiency many times the visible costs, and many buyers and many salespeople will view you as naive. The reality is that buyers are paying for this inefficiency through hidden costs (but at least they aren’t losing face with the guy in the cubicle next door). The illusion of control is alive and well, and if I weren’t a fan of the NFL, it would all be quite amusing.

The NFL labor situation – in a few short notes

March 22, 2011

A friend asked me why the owners locked out the players at this point in the negotiation. Here is my answer without much editing. Why do more work than you have to?

1. The owners are not happy with the current deal.

2. If the owners did not lock out the players, they would have to come up with rules for free agency, etc. to govern the league until the settlement was reached.

3. If they came up with their own rules, they would most likely put at least as strict rules on player movement as they have now, or else they would not have opted out of the old CBA to begin with.

4. The players’ union, which has decertified would then have a good case to sue the league for an anti-trust violation, because if there is no union (and therefore no CBA), then a group of separate businesses cannot come together to impose restriction on the movement of workers (think if Alcoa, Alcan and Rio Tinto came together and decided that they could spend no more than $500,000/yr on mechanical engineers in their respective companies, and that these were the only companies mechanical engineers could work for.)

5. By locking out the players, the league achieves maximum leverage (if their argument that the players’ union decertifying is a sham holds up). If the NFL were to impose work rules similar to the previous CBA, then the players would not have much incentive to do a deal that reduced their slice of revenue…they would just go on playing. If the owners imposed draconian rules on player movement, then not only would the players likely succeed in an anti-trust suit, they would also be able to strike at any time during the season. The later into the season, the more leverage the players would have (play-offs and Super Bowl). Also, the free agents would have received their signing bonuses, easing the financial pressure on them. Plus, if the players continued to play by the rules that were similar to previous rules, it would likely aid them in defending against the owner’s argument that the decertification was a sham.

6. The players are fighting that effort, because they understand all this, and would be happy to continue by the old rules.


%d bloggers like this: