Relationships 2.0: Become a Better Negotiator

When we head into a negotiation — whether we're asking for a raise or trying to get our spouse to do the dishes — our focus is usually on getting the other person to agree to our preferred outcome. What we don't focus on are our own biases and blind spots. Behavioral scientist Max Bazerman studies the theory and practice of negotiation, and he says that paying attention to these biases can help us to craft better deals.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Shankar Vedantam?

  This is Hidden Brain. I'm Shankar Vedantam.

• 0:04Shankar Vedantam?

  More than five decades ago, an iconic scene in an iconic movie damaged the way millions of people thought about the art of negotiation.

• 0:16Shankar Vedantam?

  In The Godfather, Marlon Brando, playing the role of mafia boss Vito Corleone, is approached by his godson, Johnny Fontaine. The younger man wants a part in a movie, but a big shot Hollywood executive refuses to give it to him.

• 0:33Shankar Vedantam?

  The mafia leader assures his godson that he will get the role. How? Vito Corleone says of the Hollywood exec:

• 0:41Speaker 01

  "I'm gonna make him an offer he can't refuse."

• 0:46Shankar Vedantam?

  By the standards of 1972, what follows is violent and gory. Suffice it to say, the mafia don scares the Hollywood executive into giving his godson the role.

• 1:02Shankar Vedantam?

  For decades now, that memorable line, "I'll make him an offer he can't refuse," has helped inform how millions of people think they can get their way in negotiations. If you want a raise, or a business deal, or an agreement to end a war, you do it by arm twisting. If you can make me hurt badly enough, I'll give you what you want.

• 1:27Shankar Vedantam?

  Today on the show, we explore the science of negotiation. What researchers have found about the art of crafting a good deal is more nuanced and more uplifting than the lessons of mafia movies.

• 1:41Shankar Vedantam?

  How to become a better negotiator, this week, on Hidden Brain.

• 2:03Shankar Vedantam?

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• 3:36Shankar Vedantam?

  When we head into a negotiation, to buy a new car, to get a refund, to figure out how to divide household chores, our focus is usually on getting the other party to agree to our preferred outcome. We focus on all the ways the other side can be obstinate or intransigent. What we don't focus on are our own biases and blind spots. At Harvard Business School, behavioral scientist Max Baserman studies the theory and practice of negotiation. He says understanding those biases and blind spots can help us craft better deals. Max Baserman, welcome to Hidden Brain.

• 4:11Speaker 04

  Thank you. I'm delighted to be with you, Shankar.

• 4:14Shankar Vedantam?

  Max, I want to start with a story of a man named Robert Campo. In 1987, he was featured in Fortune's 50 Most Interesting Business People. He was a real estate developer from Canada, but I understand he had a burning ambition to be more than a real estate developer from Canada?

• 4:30Speaker 04

  Yeah, he seemed to be on the search for his new adventure. And he explored a variety of terfs, eventually landing in the retail space.

• 4:48Shankar Vedantam?

  I understand that some of this was not just about his business interests. He also wanted to be a somebody. He wanted to be invited to the right parties. And so part of his explorations of acquisitions was connected to him wanting to be a mover and a shaker.

• 5:02Speaker 04

  A lot of stories that we see in the acquisition world have people who have some ego interest in being on the front page of the newspaper, making the acquisition occur. And this can often lead people to depart from what we might think of rational action or what's best from a financial perspective.

• 5:29Shankar Vedantam?

  So Robert Campo was a very colorful character. I want to play you a clip featuring the financial reporter, John Rothschild, who wrote a book about him. The reporter is talking with Public Radio host Terry Gross about what happened when bankers trying to execute a deal for Robert Campo once tried to contact him.

• 5:48Speaker 05

  They tried to get back to Bob Campo, but he was off having a facelift. He always had other priorities besides his business. The sideshow in this story is his self-improvement, his flying around, getting injections for longevity and facelifts and having people following him, squeezing fresh orange juice every 15 minutes because he didn't trust it if it was older than 15 minutes. And so he sort of had a designated orange juice squeezer for a time.

• 6:14Shankar Vedantam?

  So presumably, between shots of freshly squeezed orange juice, Robert Campo decides he wants to acquire a company called Federated. It's the parent company of the celebrated department store Bloomingdale's, as well as other merchandise stores and supermarkets. There's only one problem: he's bidding against Macy's, which also wants to buy Federated.

• 6:36Speaker 04

  He basically ends up making a bid, but there ends up being kind of a bidding war. And in lots of different acquisition stories, we often read about the fact that company A buys company C at a very high price. And what we often don't think about is the role the company B played in it. And that is that A and B ended up in a bidding war on who's going to get C. So we could think of the Campo story that you're telling where Campo ends up bidding against Macy's for Federated. And I can't see directly into the brain of Mr.

• 7:16Speaker 04

  Campo, but it sure looks like he wanted to win at any cost rather than make a financially successful acquisition.

• 7:30Shankar Vedantam?

  So I want to just zero in for a second on what happened in March 1988. It looked like Macy's was going to win the bidding war with an outlandish number. The market value of Federated was about $3 billion, but the bidding war had taken the price past $7 billion. I understand Robert Campo approached Macy's with a deal?

• 7:49Speaker 04

  Yeah, so Campo approaches Macy's and basically says, I'll let you win as long as you in turn agree to sell Bloomingdale's to me. So it's basically a side deal between the two bidders, something that today's Federal Trade Commission might not look fondly at at all. Because there is a potential for antitrust collusion going on in the story. But Macy's basically turns down Campo. Macy's had already sort of doubled the value of Federated in the bidding war, yet Campo, being annoyed by Macy's rejection, turns around and bids another $500 million above Macy's.

• 8:33Speaker 04

  It's basically a completely irrational action where Campo is bidding to win at any cost rather than making any kind of wise financial assessment of whether this upping the bid makes any sense at all.

• 8:55Shankar Vedantam?

  But he won. It sounds like he won the deal.

• 8:59Speaker 04

  He won. I once wrote a paper, "I won the auction, but I don't want the prize."

• 9:10Speaker 04

  It's an easy strategy for winning any auction. Keep on bidding until no one else wants to bid anymore.

• 9:15Shankar Vedantam?

  Yeah.

• 9:16Speaker 04

  He got federated, but he paid too much. And two years later, his own firm goes bankrupt. And he's ousted from his position as the leader of the firm. So it very much is a story of, "I won the auction, but I don't want the prize." Because the overall story that he inherits as a result of winning is not a very positive story. And it's now looked back on as sort of an example of irrational negotiation.

• 9:49Shankar Vedantam?

  So more recently, Max, something along the same lines happened between Spirit Airlines, Frontier Airlines, and JetBlue Airlines. Can you tell me that story?

• 9:59Speaker 04

  Sure. Frontier made an offer to acquire Spirit Airlines. These are two poorly rated airlines. Financially, they weren't doing great. JetBlue, an airline that often had very good ratings for customer service and was doing fine financially, decides that it wants to enter the low-cost market in a more serious way to potentially challenge Southwest Airlines, a leader in the US low-cost space. And they make an offer for Spirit that's more attractive than the Frontier offer.

• 10:39Speaker 04

  We get multiple rounds of bidding over an extended period of time in this story. And eventually, JetBlue seems like it won the auction. But in the process, the stock value of JetBlue plummeted by more than 50%.

• 10:56Shankar Vedantam?

  Wow.

• 10:57Speaker 04

  JetBlue kind of repositioned itself to be more of a low-cost airline, lowering quality of Customer ratings fell. And then eventually, the government doesn't allow the merger to go through based on antitrust issues. So the deal falls apart. And spiriting, all this confusion and turmoil did not do well either. And in November of 2024, I'm filed for bankruptcy.

• 11:34Shankar Vedantam?

  When companies and individuals go into a negotiation, it's easy to get swept up in the desire to win at all costs. In Robert Campo's case, he saw himself as going up against the titans of industry. But in the end, his biggest enemy wasn't Macy's or the people sitting across from him at the negotiating table. Robert Campo's biggest enemy was Robert Campo himself.

• 12:01Shankar Vedantam?

  When we come back, how we self sabotage our negotiations and how we can do better. You're listening to Hidden Brain. I'm Shankar Vedantam.

• 12:29Shankar Vedantam?

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• 13:14Shankar Vedantam?

  now available in Canada and the UK too. And when Quince asks where you heard about them, let them know it was Hidden Brain.

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• 13:55Shankar Vedantam?

  This is Hidden Brain. I'm Shankar Vedantam. When most of us think of a negotiation, we focus on the people we are negotiating with. We ask ourselves what's going on in their minds and how we can take advantage of their flaws and foibles. Most of us don't ask ourselves about the flaws and foibles in our own minds. We don't ask how we might be making systematic mistakes as we negotiate. It turns out, this is a huge blind spot. At Harvard Business School, negotiation expert Max Baserman has studied the many ways negotiators foil themselves. Max, you've written about the career of a very promising baseball player named Matthew Harrington.

• 14:40Shankar Vedantam?

  In the year 2000, he was profiled in USA Today and Baseball America. How do those articles describe him?

• 14:47Speaker 04

  As a pleasant, earnest, future pitching superstar, bound for the major leagues.

• 14:56Shankar Vedantam?

  So he entered the draft in the year 2000, and he signed up with a major agent named Tommy Tanzer. What were the discussions before the draft happen in terms of how he was going to perform and what kind of income he could expect to receive once the draft was done, Max?

• 15:13Speaker 04

  Yeah, so basically, the agent convinces young Mr. Harrington and his parents that he's worth a very large amount of money. They agree to put a price tag at a very high number, that they're assuming that the baseball team will eventually cave in. And unfortunately, they don't. And Tanzer basically encourages Harrington to be patient and wait for them to cave. And under the rules of the Major League Baseball system, a potential employee can only negotiate with one team in any specific year.

• 15:52Speaker 04

  And basically, Tanzer and Harrington push the team to the limit, and the team eventually says no. And when that occurs, that basically means this superstar, who's been offered many millions of dollars in a variety of different forms, ends up being unemployed for the following year.

• 16:20Shankar Vedantam?

  So the agent tells Matthew Harrington that any team that signs him would have to offer a $4.95 million first-year signing bonus. Now, this was an extreme offer at the time. The Colorado Rockies, who chose Harrington as the seventh pick in the draft, actually made a number of fairly compelling offers, including $5.3 million over eight years, or $3.7 million without a long-term commitment. But the agent and the family and the young man declined.

• 16:52Speaker 04

  Yeah, so just to put this in perspective, this is in 2000, so these dollars are very different than dollars today. But still, we're talking about a lot of money being on the table, and we're talking about somebody who doesn't have a college education, doesn't have a terrific alternative career outside of baseball, who's being offered around $5 million in a variety of different forms, depending on the number of years that Matt Harrington would sign for.

• 17:21Speaker 04

  And Tommy Tanzer, the agent, pushes the Harringtons to be patient and wait for more. Unfortunately, the Colorado Rockies, the baseball team, wants Harrington, but not at the price level that Tanzer and Harrington are demanding, and basically, no deal is created.

• 17:48Shankar Vedantam?

  So after holding out this first year, he gets a second shot at the big leagues the following year. Matthew Harrington switched agents and entered the Major League Baseball draft again. This time, the team from San Diego chooses him as the 58th overall selection, but the final offer they make is $1.25 million over four years with a $300,000 signing bonus. Now, that's significantly less than what the Colorado team offered him a year earlier, and it's also less than what Tommy Tanzer had promised that he would get when he became this baseball star. So what happens in year two?

• 18:23Speaker 04

  So we have a very similar kind of phenomena here in terms of Harrington being disappointed that his market value has fallen so dramatically. So we can easily imagine that there was an anchor set by the prior year, and Harrington's hoping for something in the range of what, at least what he passed on the year before. But during the year, he has not shown his potential, and his value has fallen. And basically, with over $1 million on the table, and again, this is in a year $2,000, or 2001, he basically passes on the opportunity, holding off for more, and he continues to

• 19:06Speaker 04

  not be able to pursue playing baseball at the level of the major leagues. And as a result, his value goes down and down and down over time, and Harrington never gets the opportunity to be a Major League Baseball player, perhaps because Tanzer and Harrington, and then the following year Harrington and his new agent, are basically Overconfident that they can obtain an amount that wasn't viable in the first place.

• 19:38Shankar Vedantam?

  Yeah.

• 19:38Speaker 04

  Certainly, the fact that this happens year after year in the Harrington story is suggestive of the fact that the Harrington team, with rotating agents, continues to expect more than what the market will provide.

• 20:04Shankar Vedantam?

  So I understand that in year three, he comes back to the draft again. This time, he's chosen as the 374th pick by the Tampa Bay team. And now he's offered less than $100,000. Now, of course, he'd been previously offered $3-plus million, and then $1-plus million, and now $100,000. And each time, he says, "How can I be offered so much less than my value?" He becomes the longest holdout in the history of Major League Baseball?

• 20:31Speaker 04

  Yeah, so the original offer was more in the $5-million range, and then a little over $1 million, and then $100,000. And we can see what's happening. The market is basically seeing him as a less valuable prospect as the time goes by. But first, he escalates his commitment in year one, and then he anchors on prior numbers. And he's anchoring on numbers that the market does not see as appropriate or even worth paying in order to get him to sign. And as a result, he ends up working in a low-level retail context as opposed to ending up as a major league pitcher, which seemed to be where his future had been headed.

• 21:22Shankar Vedantam?

  So yeah, by the year 2009, he's working in the tire department of the local Costco, earning $11.50 an hour. And of course, now that decision looks really foolish. But it's not just the initial contracts that he passed up on. Presumably, if he had played for these teams and had become a star, there would have been future contracts that could have also been lucrative. There could have been a future career in coaching, and scouting, and broadcasting. There's so many ways in which his overconfidence at the front end may have cost him a great deal through the rest of his life.

• 21:54Speaker 04

  Absolutely, and he seems to be a very nice human being. Yeah. Who copes with these losses well. Yeah. So you can certainly imagine that he had potential for a second career after being a major league pitcher in other aspects of sports.

• 22:13Shankar Vedantam?

  The same kind of negotiating mistakes show up in our personal lives. Each partner in a marriage can overestimate the value they bring to the relationship.

• 22:27Speaker 04

  If we ask two partners in a romantic relationship, what percent of the household work do you do? Depending on the study, it seems to come in at 120 to 130 percent. More recently, Nick Epley and Eugene Caruso and I asked MBA students who worked in study groups, what percent of the good ideas or what percent of the work came from you? Yeah. And the sum total comes up to more like 140 percent. Wow. When we ask co-authors of academic papers, what percent of the work did you do? We come in at 140 percent when the sum total of the actual work has to be 100 percent. And what's going on is we all see the work we did do.

• 23:11Speaker 04

  We don't necessarily see the work that other people have done. So, and, you know, and if we go back to my education, I was an accounting major a long time ago, which this leads to the notion that I should be able to do my own taxes. And when I spend time doing my taxes, my spouse doesn't give me full credit for that work. And meanwhile, you know, when it comes to walking the dog, you know, I'd say I average about a mile of walking a dog. Marla's more in the range of two or three miles a day, but I think that's because she likes walking the dog. I don't think she should actually get credit for the extra.

• 23:50Speaker 04

  The extra mile, because it wasn't for the dog, it was for Marla. So you can begin to see the wide range of ways in which we can see our own work, our own contribution, but not see the work of others.

• 24:04Shankar Vedantam?

  Yeah. So with Eugene Caruso and Nick Epley, you've also researched a technique to take the focus off ourselves and on to the other person. Tell me about this work, Max.

• 24:13Speaker 04

  So let's go back to the context where there's four people working on a project.

• 24:19Shankar Vedantam?

  Yeah.

• 24:20Speaker 04

  And we'll call them A, B, C, and D.

• 24:21Shankar Vedantam?

  Yeah.

• 24:22Speaker 04

  If we ask each of them, what percent of the work did you do? We get perhaps 140%.

• 24:29Shankar Vedantam?

  Yes.

• 24:31Speaker 04

  But if instead we ask A to write down what percent of the work was done by A, B, C, and D, now all of a sudden, I as A will think about B, C, and D in a more significant way. I'll realize that they in fact did do some important work. And that 140% falls.

• 24:54Shankar Vedantam?

  Hmm.

• 24:55Speaker 04

  So the 140% as the sum total of what each claimed as credit for themselves seems to come down by about half of the overclaiming. They're still overclaiming, but it's down to perhaps 120%.

• 25:10Shankar Vedantam?

  In other words, you're focusing now on the contributions of the other people rather than on your own contributions.

• 25:16Speaker 04

  Right. So I engage in less overclaiming. But there's a problem still. And the problem is the fact that I'm thinking more about the topic. I become even more reluctant to deal with these other folks in the future because they didn't do enough work. I'm thinking more about them and my negative inferences about them go up as a result. So we reduce the overclaiming, but we don't create a more constructive group in this process. So one of the problems with overclaiming generally is if the other side doesn't do their fair share of the work, I don't want to work with them in the future.

• 25:56Shankar Vedantam?

  So one way to apportion credit properly is to follow the advice of the philosopher John Rawls. Can you explain what you mean by this, Max?

• 26:06Speaker 04

  Sure. So John Rawls basically argues if you want to think about what a just society should look like, you need to put on a veil of ignorance. You need to forget about whether you're male or female. You need to forget about whether you're American or from Lithuania. You need to sort of drop all of your own identity to try to imagine how the world should operate if you didn't know what role you had in society. And across a number of studies, we find that getting people to try to put on a veil of ignorance allows them to think about what

• 26:46Speaker 04

  would be just in a much fairer and more objective way. So anytime you're in a dispute, if you could get yourself out of the fact that you're the landlord or you're the tenant, and think about what a fair resolution would be from the perspective of a third party, you're more likely to have a bearing on what would be a fair settlement to whatever dispute you happen to be involved in. And this idea of using the veil of ignorance comes up across lots and lots of different studies. So more recently, with Josh Green and others, we even

• 27:27Speaker 04

  looked at the allocation of scarce resources. Like, you could imagine who gets the limited health resources under COVID. And so imagine, for example, there is only one ventilator left, and whoever gets it lives and whoever doesn't get it dies.

• 27:46Shankar Vedantam?

  Yeah.

• 27:46Speaker 04

  And the 65-year-old arrives two minutes before the 25-year-old.

• 27:53Shankar Vedantam?

  Yeah.

• 27:54Speaker 04

  And if we ask the question, who should get it? We find that people tend to be self-serving in the direction of which of the two people are more like themselves. So old people are biased toward the 65-year-old, young people toward the 25-year-old. But if we encourage people to think about what would be fair if they don't consider their own demographics. And now, all of a sudden, people realize that the 25-year-old has many, many more years to live than the 65-year-old on average. And now, there's a shift among the older people we ask this question to, to give this limited resource to where it can do the most good, consistent with what we think Rawls

• 28:39Speaker 04

  would mean by putting on a veil of ignorance.

• 28:42Shankar Vedantam?

  I'm wondering, in the modern world in which we live, Max, there are so many ways in which we now collaborate, not just with people, you know, face-to-face, who are working down the corridor from us, but people who are working remotely, people who are working in other parts of the world. You know, I would imagine that the challenge of apportioning credit fairly, of understanding what other people might be contributing, of understanding in a negotiation what somebody else is giving, becomes so much harder now than it was before.

• 29:11Speaker 04

  Absolutely. And you're highlighting one of the important ways in which the game has changed. We deal with more people who differ from us today than we ever did before. And so, we're dealing with people in different locations, from different ethnic groups, on a much, much more regular basis, and we're often doing it without seeing them face-to-face.

• 29:36Shankar Vedantam?

  Yeah.

• 29:37Speaker 04

  So, the farther people get, both in terms of our connectivity to them and our identification with them, the easier it is to not place full value on what they're bringing to the deal.

• 29:56Shankar Vedantam?

  And how do you fix that? Because, of course, I don't know if we're going to go back to a world where all of the negotiations are always going to be face to face. I mean, we are in a world now where, for better or worse, we are stuck with, you know, virtual communications and handoffs that can span many, many time zones.

• 30:13Speaker 04

  Yeah, so to begin with, you kind of already brought up an answer. To what extent can we put on available ignorance so that we're not as biased by our own lens? We have found that people are pretty good at taking a neutral perspective if we ask them to and to put on available ignorance and think about that problem. So it's not that we're incapable of thinking about the other side, we simply don't. And the more they're distant from us, the easier it is to ignore their critical role in a negotiation. So simply stopping and adopting in the perspective of the other side not only makes you a nicer

• 30:54Speaker 04

  person, but it strategically makes you a more effective person to understand who they are in the negotiation. And the failure to consider the perspective of the other side is one of the key barriers that keeps negotiators from being more effective.

• 31:08Shankar Vedantam?

  I want to play you a clip from the television show The Office. In this clip, Michael Scott, played by Steve Carell, has quit his job as the manager of a paper supply company and started a rival firm. Michael and his business partner are now negotiating with the chief financial officer of his former company about selling their startup.

• 31:29Speaker 07

  Michael, in order to expedite these negotiations, we are prepared to make you a very generous offer. And we are prepared to reject that offer. Michael, you haven't even heard. They'll never accept their first offer. What is your second offer? $12,000. Are you kidding me? That is insultingly low? I don't even want to hear what your first offer was.

• 31:54Shankar Vedantam?

  I mean, in some ways, Max, this is comedy, of course, but all of us do this in real life. We simply don't pay attention to what's important to the other side in a negotiation.

• 32:02Speaker 04

  There is something kind of over the top, obvious about not listening to the other side. But so often in real life, we think of negotiations simply as a haggling session, when we could be so much more effective if we think about it strategically by asking, how can I best understand the perspective in which they're making me an offer? To what extent do they need me in their firm? What are they going to do if I don't accept their offer? This helps me to formulate how far I can push things to my advantage. It also provides a basis for understanding where there's interesting opportunities for trades.

• 32:43Shankar Vedantam?

  I mean, so much of this comes down to how we are anchored in our own minds, Max. So much of what we've been talking about here, you know, comes down to the problem of egocentrism. We are seeing things from our perspective. We are seeing things from a narrow perspective. We're not able to get out of our own headspace. We seek confirming evidence to back up what we previously thought. We don't go out and seek more information from the people we are negotiating with. All of these are ways in which we are trapped inside our own heads.

• 33:11Speaker 04

  That's right. So sort of a wonderful example of what you just described is the work of Linda Babcock and George Lowenstein. They basically study people in a legal dispute. So everyone agrees that there's been an accident. And what they find is that the plaintiff's role, the role representing the injured party, think that the case is worth roughly twice what the party representing the defendant thinks it's worth.

• 33:38Shankar Vedantam?

  Yeah.

• 33:39Speaker 04

  And some people say, but it's only a simulation. It may only be a simulation, but once we put people in those roles, they begin to believe their side has some kind of moral justice to it that the other side lacks at a remarkable level.

• 34:02Shankar Vedantam?

  I understand that over the years, you have fielded many requests for negotiation advice, and you regularly receive what you have termed the Sunday night real estate call. What is this call, Max?

• 34:13Speaker 04

  Sure. So first of all, why Sunday night? And the answer is the American institution of the open house in the residential real estate market. So Sunday is a most common day for people to post a timeline about when their house will be open so you can go take a look at the house without having an appointment, a house, condo, whatever. And as a result, an awful lot of house visitations on the real estate market occur on Sunday. This means that agents are busy on late Sunday afternoon, early evening, as people sometimes decide to make an offer. So in an example of the story,

• 34:56Speaker 04

  I'm at home on Sunday night, and it's 9:30, and my phone rings. And I pick up the phone and say hi. And on the other end of the line is somebody who introduces themselves as a friend of a friend of mine. And I like our mutual friends, so I want to be polite despite the timing of the phone call. And after introducing themselves as a friend of a friend of mine, they explain why they're calling. They looked at a house this afternoon. In fact, they've been looking at houses for the last three months. They've looked at over 20 houses. But today, they found an amazing house. And they proceed to describe it to me in intricate detail. They seem to be under the illusion

• 35:41Speaker 04

  that on Sunday night, I care what it looks like. But they proceed to the reason for the call. So the house is listed for $599,000. Earlier in the day, at 4:30 in the afternoon, in fact, they made an offer for $550,000. So $599 offer, asking, and they offered $550. And that evening, they went to our mutual friend's house for dinner. And about 10 minutes ago, the agent called back and said that the seller had countered at 585. Yeah. And they want to know what they should do next because they had been talking with their friend who said, I know what to do.

• 36:26Speaker 04

  Let's call Max. He teaches negotiation. And when I get this call, and I promise you, I've received some version of this call so many times, the first thing I ask them is, what are they going to do if they don't buy this house? Yeah. And they typically respond with some notion of, Max, we didn't call you for how not to buy the house. We called you for advice on how to buy the house. So I've been trying to figure out, what are these people actually asking? And I think what they're asking is, Max, how do we get a great deal? And by the way, we don't want to run any risk whatsoever of losing the deal. Yeah. And that question, I know the answer to is, you can't.

• 37:10Speaker 04

  To get the best deal possible, you probably need to run some small risk that you'll lose the deal. And if, instead of feeling like I have to have this house at any cost, you had a second house, or a second and third house, that you liked almost as well, but you needed to repaint the kitchen, then all of a sudden, you're empowered to counter in a way that runs some risk, but allows you to get a significantly better price. So if the world ends, if you don't buy this house, you should pay the 585. If there's another house, where buying the other house would make you indifferent between

• 37:55Speaker 04

  that and paying 570, well, now you can counter at 560, knowing no tragedy is going to happen. You can always go to the other house instead.

• 38:04Shankar Vedantam?

  So in other words, you say that the most important rule in real estate is to fall in love with three, not with one?

• 38:12Speaker 04

  That's right. And for most negotiations, falling in love with three rather than with one is a pretty good piece of advice.

• 38:19Shankar Vedantam?

  When we come back, when to stick to our guns and when to fold. You're listening to Hidden Brain. I'm Shankar Vedantam.

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• 40:11Shankar Vedantam?

  This is Hidden Brain. I'm Shankar Vedantam. We've all seen the movies of cool negotiators who bluff their way into amazing deals. By exuding overconfidence and charisma, they get their opponents to fold. Real life, of course, is not the movies. The people sitting across from you at work or at the kitchen table are unlikely to be overwhelmed by your charisma and overconfidence. In fact, they've watched the same movies you've watched. They may also falsely believe that you'll fold if they just push you hard enough.

• 40:48Shankar Vedantam?

  Max Bazeman is a social scientist at Harvard Business School. He's the author of several books about negotiation, including Negotiating Rationally, Negotiation Genius: How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond, and, most recently, Negotiation: The Game Has Changed. Max sometimes advises people who are confronting a negotiation to ask themselves an unusual question. How would I feel if the other side instantly accepted my offer?

• 41:19Speaker 04

  So I'll tell you a story based on my travels. So I've taught in Thailand a fair amount. And Thailand ends up being kind of a center for sapphires and rubies. So I'll ask you to imagine that you take a trip to Thailand.

• 41:37Shankar Vedantam?

  Okay.

• 41:38Speaker 04

  And you're walking down Selon Road, a major market street in town.

• 41:43Shankar Vedantam?

  Yeah.

• 41:44Speaker 04

  And for some reason, you know a little bit about sapphires and rubies. And you're walking down the street and in the window, you see a beautiful ruby ring.

• 41:53Shankar Vedantam?

  Hmm.

• 41:54Speaker 04

  And your first estimate is that it's worth about $5,000.

• 41:59Shankar Vedantam?

  Okay.

• 42:00Speaker 04

  But you don't want to pay anywhere near that because your knowledge is rusty.

• 42:04Shankar Vedantam?

  Yeah.

• 42:05Speaker 04

  So you go in, you have a conversation with a store owner, and finally, you ask to see that ring. And she pulls it out, and you ask, "How much would this ring cost?" And she says, "You know, that ring just showed up yesterday. I haven't even put a price on it. But in Thai culture, the first sale of the day brings you luck. So, Shankar, make me a reasonable offer, and I'll do my best to accept it." And you're wanting to protect yourself and get a good deal. You pull out $1,000 out of your wallet. And you say to her, "I can give you $1,000, but not a penny more."

• 42:44Shankar Vedantam?

  Hmm.

• 42:45Speaker 04

  And she says, "Okay, I'll take it."

• 42:51Speaker 04

  How do you feel? Well, most people feel unhappy.

• 42:55Shankar Vedantam?

  Yeah.

• 42:56Speaker 04

  Because her quick acceptance tells them something.

• 43:00Shankar Vedantam?

  Yes.

• 43:01Speaker 04

  Like perhaps that isn't a ruby, but rather a red piece of glass.

• 43:04Shankar Vedantam?

  Yeah.

• 43:06Speaker 04

  Now, perhaps before you offer $1,000, it makes sense to think about how would you feel if she accepted it?

• 43:13Shankar Vedantam?

  Hmm.

• 43:15Speaker 04

  And this might tell you that I need to have the ring assessed by an independent party before I part with my $1,000. Now, what's intriguing about this is had she haggled with you and allowed you to pay $1,700.

• 43:32Shankar Vedantam?

  Yeah.

• 43:33Speaker 04

  You might have been happier, but that wouldn't improve the quality of the glass anymore than with the story where you pay $1,000. Now, now, this may sound remote, being about a ring in Thailand, but many of us end up being busy when we take a job in a new city. And we have limited time to look at the real estate market.

• 43:56Shankar Vedantam?

  Yeah.

• 43:57Speaker 04

  So we fly in and we make what we think is a slightly low offer. And the seller says, okay. Well, who knew more about the market, the buyer or the seller?

• 44:08Shankar Vedantam?

  Yeah, the seller did.

• 44:10Speaker 04

  Exactly. And again, this is an example, a different kind of example of what we earlier called the winner's curse. They're more likely to take your offer when you least want them to.

• 44:22Shankar Vedantam?

  What I love about the question, will I be happy if my offer is accepted quickly? Is that by asking ourselves the question, it's a way of actually pointing out to ourselves, we might not know the terrain on which we're standing. And therefore, if this offer was accepted quickly, it would actually tell me that in fact, I do not know the terrain on which I'm standing. I should actually educate myself. And so the question is really a disguised way of telling me, go out and do more research, go out and learn some more.

• 44:51Speaker 04

  Absolutely. And when we think about things more deliberatively in advance of negotiation, we prepare more thoroughly and we're more effective in negotiation.

• 45:08Shankar Vedantam?

  Max says that he is often surprised by how little research people do before going into a negotiation.

• 45:14Speaker 04

  One of the aspects of the modern world is that there's so much information online. And this means that we can so often do our homework to have a better idea of what the zone of possible agreement might look like before the negotiation ever begins. So one of my favorite examples is the negotiation context that so many people find terrifying, which is going and buying a new car. And what I find fascinating about the fact that people are terrified by this task is that it's so easy to get good information about the dealer cost of a car online.

• 45:55Speaker 04

  There's probably better than a dozen websites that will allow you to punch in the details of what you want to buy and find out the dealer cost. And once you do that, it allows you to have a very good idea of what the zone of possible agreement should look like. And going back to your question, if you're going to put the number on the table, you want to put a number that's favorable to you, but yet reasonable enough that you're not so far worse than the other sides that they end up walking without wanting to talk to you anymore.

• 46:37Shankar Vedantam?

  I want to go back to Bangkok, Thailand for a second. As you mentioned, Max, you used to teach the art of negotiation to students there. But I understand that your students would challenge you on your own negotiation skills when it came to hiring taxicabs?

• 46:53Speaker 04

  So every morning, class started the same way. As teaching a group of Thai students and as teaching negotiation, of course, they want to know, does this professor actually know anything in the real world? And their favorite way of assessing this is to say, "Professor, where did you go last night?" And after I would tell them, they would say, "And how much did you pay the taxi driver to bring you home?" Now, I need to put this into perspective. So this is before the taxi system changed in Bangkok to using meters. And before taxis used meters...

• 47:30Speaker 04

  You basically haggled with the taxi driver. You'd tell them where you want to go and they would make me an offer which would be too high and you'd haggle and typically in about forty seconds you'd converge on a price. You know, the first few days, they laughed at me and they would basically tell me that I paid forty cents too much or eighty cents too much and that gave them a great chuckle and they were happy. But I would say within two weeks, I had some increased credibility based on my sort of mastering the art of negotiating with the taxi driver. But then the problem showed up and that was my spouse.

• 48:15Speaker 04

  She flies into town. We go for a long walk the first evening to go to a restaurant across town. Come out of the restaurant and my wife, Marla, is, she's a bit tired from having flown from the US to Bangkok that day. And I held down a taxi. And in my best tie, I say to the taxi driver, "Pun man man shell siak Jiranpan," which I think means something like, "Can you take me to the Shell Station by the corner of Jiranpan?" And in response to this, he holds up seven fingers for seventy baht, which is basically

• 48:56Speaker 04

  worth two dollars and eighty cents at the time of the story. A dramatically high price for what I, for the ride I was asking him about. So I respond by holding up three fingers, or a dollar twenty. To which, he responds with five fingers, or two dollars. Eventually, he comes down to four fingers, or a dollar sixty. I'm holding at a dollar twenty, which I, I've already taken this ride for a dollar twenty, so I know I can get it for a dollar twenty. And he responds by driving away. So I held down another taxi driver, who starts at a much more reasonable five fingers, or two dollars. I respond, one twenty.

• 49:40Speaker 04

  He comes down to four fingers, or one sixty. And I respond with three fingers and he drives away.

• 49:48Speaker 04

  At which point Marla, my tired spouse, says, what's going on? And I explained to her that they were both asking for $1.60 when the fare price is $1.20. And she says, so you're telling me I'm standing here because you're too cheap to pay an extra 40 cents? And I said, well, you have to understand, I have to explain to my students tomorrow morning how much I paid. And this did not impress my spouse at all. And so in this story, you have this notion of sort of, is it worth the cost of disputing? So I was literally keeping my tired spouse awake on the streets of Bangkok, Thailand over 40 cents.

• 50:33Speaker 04

  And you can simply, you can easily argue that I could have paid the additional 40 cents. So you can see how getting a good deal can take over things.

• 50:42Shankar Vedantam?

  But it is such a powerful story because I think it shows how negotiations, I think, have a way of sucking us in. And then we're almost enmeshed in the narrative of the negotiation that we lose track of the bigger picture.

• 50:54Speaker 04

  Absolutely. And to this day, I'm still guilty of when I'm looking for a hotel online or an airfare online, I over-search to the point where I'm working for a wage that I wouldn't remotely accept if someone offered me work at that wage. So this notion of getting a good deal can become obsessive in ways that don't make a whole lot of sense.

• 51:32Shankar Vedantam?

  In our companion story to this episode, available exclusively to subscribers to Hidden Brain Plus, we explore what Max calls integrative bargaining, negotiating in a way that tries to leave both parties better off. Max says a crucial idea in getting to win-win outcomes is to negotiate multiple issues at the same time instead of going after them one at a time, as many of us are prone to do.

• 51:57Speaker 04

  As soon as we have two or more issues in a negotiation, the parties are likely to have different valuations on those issues. And if we can find out who cares more about which issue, we can make wise trades that create value and make both of us better off.

• 52:17Shankar Vedantam?

  We also examine the single biggest psychological obstacle to coming up with win-win outcomes. It has to do with a certain mindset that is extremely common. Max says fixing this one error can save companies and litigants lots of money and save relationships much grief and heartache. If you're a subscriber, that episode is available right now in this podcast feed. It's titled Relationships 2.0: Win-win. If you're not yet a subscriber, please visit support.hiddenbrain.org or apple.co/hiddenbrain if you're using an Apple device. You can get a free seven-day trial in both places.

• 52:57Shankar Vedantam?

  Again, that's support.hiddenbrain.org or apple.co/hiddenbrain. Max Bazerman is a social scientist at Harvard Business School. He's the author of Negotiation: The Game Has Changed. Max, thank you so much for joining me today on Hidden Brain.

• 53:16Speaker 04

  Thank you so much.

• 53:24Shankar Vedantam?

  If you have follow-up questions about negotiating and you're comfortable sharing those questions with a Hidden Brain audience, please record a voice memo on your phone. Email it to us at [email protected]. That email address again is [email protected]. Use the subject line Negotiation. Hidden Brain is produced by Hidden Brain Media. Our audio production team includes Annie Murphy-Paul, Kristin Wong, Laura Kwerel, Ryan Katz, Autumn Barnes, Andrew Chadwick, and Nick Woodbury. Tara Boyle is our executive producer. I'm Hidden Brain's executive editor.

• 54:07Shankar Vedantam?

  We end today with a story from our sister podcast, My Unsung Hero. This My Unsung Hero segment is brought to you by Discover.

• 54:18Shankar Vedantam?

  Our story comes from Paul Cotter. More than 40 years ago, when Paul's father was in his early 50s, he began to show signs of early onset Alzheimer's disease. But no one suspected cognitive decline, and his father lost job after job.

• 54:34Speaker 07

  He was no longer able to make decisions, and he couldn't handle the slightest amount of pressure. Since there was no medical explanation given for what he was going through, everyone assumed he was having a crisis of confidence. And he was told that he needed to pull himself together. My father, as you can imagine, felt totally humiliated. After he was diagnosed with Alzheimer's, he was horrified by the news, but I imagine he also felt some sense of relief. Finally, there was an explanation for his decline. And in spite of it all, he still wanted to keep working. And this is where my unsung

• 55:16Speaker 07

  hero stepped in. It wasn't a single person, but a whole company. A small firm located in our hometown in Buffalo offered my father a job, knowing full well that he was suffering from Alzheimer's disease. They hired my father to handle small tasks, like making copies. They gave him a paycheck, which made him feel needed and valued. But more than just a job, they gave him respect, dignity, and a sense of purpose at a time when his life was falling apart. Unfortunately, my father's disease ultimately progressed to

• 55:56Speaker 07

  the point where he was having problems keeping his balance. One day at work, he fell off a small step ladder. He wasn't hurt, but it was clear to everyone that it was no longer safe for him to continue working. The company told my father and my Mother in a very compassionate way that it was with deep regret that they'd have to let him go. On my father's final day on the job, they threw him a party to thank him for his service. What a beautiful, remarkable gesture that was. I wish my brothers, my sister, and I could remember the name of this company.

• 56:37Speaker 07

  Forty years later, we don't know if they're still in business or what happened to them. If I could see them today, I would tell them, "Thank you," from the bottom of my heart. Your kindness during my father's final chapter will never be forgotten.

• 56:54Shankar Vedantam?

  Paul Carter of Charlotte, North Carolina. This segment of My Unsung Hero was brought to you by Discover. Discover believes everyone deserves to feel special and celebrates those who exhibit the spirit in their communities. I'm a longstanding card member myself. Learn more at discover.com/creditcard. I'm Shankar Vedantam. See you soon.