Pod Insights Something You Should Know Scams You Might Easily Fall For & Mastering The Art of Deal-Making About this episode You might think that a good way to get closer to someone is to do them a favor. Yes, that might work – but there is another technique that is even more effective and takes less effort. This episode starts with an easy way to bond you with someone you want to get to know better. https://www.psychologytoday.com/us/blog/the-initiative/201605/the-power-merely-requesting-favor
Scams and identity theft are a constant threat– and the scammers keep getting better and better. So, it is critical to understand what the latest scams are and how to protect yourself. Steve Weisman is an attorney who has been following the scammers and understands them very well. His website www.scamicide.com is highly regarded as one the best sites for information about scams. Steve is the author of a book called 50 Ways to Protect Your Identity in a Digital Age (https://amzn.to/3sonvav). Since it is very likely that you will be the target of a scammer, if you haven’t already been, you need to hear Steve’s advice.
You probably have an idea in your head about how a negotiation is supposed to go. What you are about to hear will challenge that idea. Barry Nalebuff, is an entrepreneur and professor at Yale School of Management, and author of the book, Split the Pie: A Radical New Way to Negotiate (https://amzn.to/3pvOoYi). As you listen to our discussion you will get a new perspective on how to approach any future negotiation.
Have you heard of the Baker/baker paradox is? It has to do with remembering peoples’ names - which most of us aren’t particularly good at. Listen and you will hear a simple way to help you remember anyone’s name the next time you see them. Source: Joshua Foer author of Moonwalking With Einstein (https://amzn.to/3psUGrC).
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Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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1:27 Mike Carruthers? Today on Something You Should Know, if you want to get to know someone better, there's a simple technique that works really well. Then, protecting yourself from the constant threat of scams and identity theft.
1:40 Speaker 01 Identity theft is high-tech, low-tech, and no-tech. It isn't just coming through your computer. It is going through your trash. This is anything they can do to get the information, they will do.
1:54 Mike Carruthers? Also, a simple way that will help you remember names a lot better. And a look at some common negotiating techniques that don't work, like starting with a low-ball offer.
2:06 Speaker 02 The problem with doing that is that you make yourself untrustworthy. If I'm selling something that's worth $1,000 and you offer me $200 for it, are you trying to take advantage of me? Do you not know what this item is worth? What kind of person are you?
2:22 Mike Carruthers? All this today on Something You Should Know.
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4:18 Mike Carruthers? Today, Something You Should Know with Mike Carruthers. Hey there. Welcome to Something You Should Know. Have you ever been taken by a scam artist? I have. And fortunately, it hasn't happened very often, and it wasn't very much money. But I don't think I know too many people who haven't fallen victim to some scam sometime, somewhere. Which is why I think you're going to find the conversation with Steve Weisman coming up in just a moment really interesting. First up today, you probably think that one of the best ways to get closer to someone you would like to be closer to is to do something nice for them. Do them a favor. Make some nice gesture.
5:03 Mike Carruthers? Well, it turns out that you're better off asking them to do you a favor. A study in the Journal of Human Relations revealed that when someone gives you their time or advice, or does a small favor for you, a connection is made. And it's a more powerful connection than if you were to do them a favor instead. I'm sure you know from your own experience that it feels good to do someone a favor. So when you ask them to do a favor for you, you're making them feel good. And then it also opens the door for a return of the favor, in the form of lunch or a cup of coffee. And presto, you've got the opportunity to get to know each other a little better and
5:48 Mike Carruthers? to get a little closer. And that is something you should know. I think it would be hard to find someone who has never been scammed, or never had their identity stolen, or their credit card compromised in some way, or been taken for a ride by some scammer out there. Scams are everywhere. A lot of them are online. But they're not all online. And most all of them are designed to separate you from your money. And I know a lot of people believe they're too smart, too sophisticated to fall for a scam.
6:27 Mike Carruthers? But as you're about to hear, some very smart, sophisticated people have been victims right along with the rest of us. One of the leading authorities on scams and identity theft is attorney Steve Wiseman. He also wrote a book a few years ago called 50 Ways to Protect Your Identity in a Digital Age. Hey Steve, welcome to Something You Should Know.
6:51 Speaker 01 It's great to be with you.
6:52 Mike Carruthers? So I'm kind of curious how you got interested in scams and identity theft and these kind of crimes in the first place?
7:01 Speaker 01 I'm a lawyer and also a college professor at Bentley University where I teach white collar crime. Actually, before I taught at Bentley University, I taught at a number of other colleges with ever setting foot on the campuses. I used to teach in their prison education programs in the Massachusetts state prisons. And it was there I met a number of scam artists and con men and criminals. Always found it fascinating. And then unfortunately had a personal experience about 20 years ago where I was a victim of identity theft. And this was, I think, really around the time that identity theft was taking off as a crime. It is now the biggest consumer crime.
7:46 Speaker 01 So I just find it very, very interesting and timely.
7:50 Mike Carruthers? I have a sense, and I'd like you to comment on this if you agree or disagree, that there's this kind of general perception amongst a lot of people that scams are for idiots, that I'm too smart to be scammed. And you know, if you're dumb enough to read and give money to the Nigerian prince because he sent you an email, well, you know, that's your problem, but I'm way too smart.
8:15 Speaker 01 Well, you know, there's two things about that. First of all, no one is too smart to be scammed. All you have to do is look at Bernie Madoff and the many intelligent people that wound up being victims of his scam. And he actually was kind of of that mind that if you're too smart, you wouldn't be scammed. He actually blamed his victims at one point. He said, "If anyone looked into what I said I was doing, they would know it's impossible." But when you mentioned about the Nigerian email scam, it brought a smile to my face because lately, the Nigerian email scam's still with us, and they are absolutely even more ridiculous than ever.
8:59 Speaker 01 And at first, I was thinking, you know, why would they do that? And the thing is, they want to get the most vulnerable, the most greedy, and people who will fall for it. They don't want to spend time with someone who'll be asking a lot of questions. But the short answer to your question is, anyone can get scammed, and the person that thinks they're too smart for it, they're going to be the next victim.
9:23 Mike Carruthers? Okay, so because this is such a big problem, and can come at you from lots of different directions, where do we start? What should I be on the lookout for?
9:35 Speaker 01 One of the things is the Internet of Things. Anything that you have that is connected to the Internet, and that is a vulnerability for you. So, you know, if you have a smart TV in your home, if you haven't protected that and changed the default password, an identity thief can get into, hack into, your Internet of Thing device, and there were more than 1.5 billion attacks last year on these. Get to your computer, from your computer, they get to your online bank account. You know, there are other times where, again, the identity theft, they trick you into providing information.
10:15 Speaker 01 I was speaking with some victims in a TV crew about a victim of a scam. They went online, they found... A what looked like a legitimate site. It appeared to have all of the good credentials. But they didn't check it out. And the bottom line is they sent their money to a scammer. So we really have to do our homework in these scams. The SEC, which is interesting, actually did a phony website called for a a non-existent cryptocurrency called Howie Coin. And it looked good, had all of the endorsements of celebrities and everything to make it appear good.
11:00 Speaker 01 And if people clicked through and it got to the part where they were going to send their money, there's a big announcement on your screen telling you that you would have been scammed, that this is a scam. So different scams lure you in. They all take advantage of fear and greed.
11:15 Mike Carruthers? I want to go back to what you said a few minutes ago about scammers getting into my computer through my smart TV. Can you go into a little more detail about that? Because I hadn't heard of that before, so I'd like to know how that works.
11:31 Speaker 01 They're going to attack your router. Remember, your router is the gateway to all of the tech equipment you have in your house.
11:38 Mike Carruthers? So they'd have to be parked outside then. I mean, they'd have to be close by.
11:41 Speaker 01 Oh, no. No, they don't even. They don't. This can be done at a distance. As a matter of fact, the FBI issued a warning about hacking into routers by Russian cybercriminal gangs. And the problem there is a lot of people don't change the default password on their router. And those router passwords are available online. Criminals halfway around the world can hack into it.
12:10 Mike Carruthers? See, I would bet that most people, or at least a lot of people, don't even know that their router has a password or that their smart TV has a password, let alone would they know how to change it.
12:23 Speaker 01 I mean, there are other issues there with our smart TVs. And interestingly enough, the prices of our smart TVs are less than what we would actually pay for it if those televisions were not subsidized by companies that are taking information that we agree, we don't realize we agree, to be gathered about us, that is gathered by our smart TV that is watching not only what we're watching on TV, but the TV can be, can pick up and be connected through your router to all of the other devices in your home. And so the privacy that you, you give up unless you know enough, and most of us don't, and they make it difficult, too.
13:08 Speaker 01 I mean, even children's toys, they come with a default password. And if people don't change those passwords, that's the Trojan horse that can lead the hackers to your computer, to your bank account.
13:23 Mike Carruthers? So a lot of these scams are, are under the radar. It isn't a matter of appealing to your stupidity or your greed or whatever. You wouldn't even know what happened.
13:33 Speaker 01 Absolutely. I mean, it's all of the above. The Jamaican lottery is still a major one that appeals to our greed. And there are gangs in Jamaica that have gathered telephone numbers of generally older Americans, and they call them, they tell them that they've won a lottery that they never even entered. And, you know, it's tough to win a lottery.
13:57 Mike Carruthers? If you don't play.
13:58 Speaker 01 It's really tough. Yeah. And so they, they have to pay fees or taxes. And that thing is huge. Now, that, you know, that depends on greed. But there are plenty of times, particularly with, with cybersecurity, that we're not necessarily taking the steps and we don't realize where we are vulnerable. And of course, even if you, you know, I'm, I'm one of these guys, even paranoid's have enemies. So, you know, being in the business, I'm particularly paranoid. And I was particularly angry in 2017 with the major data
14:33 Speaker 01 ...at Equifax where 147 million of us, and I include me in there, had our personal information stolen. And so despite the fact that I'm taking care to protect my personal information, the companies didn't. And with Equifax, what made it worse is Steve Jobs once said, "If you're not paying for a product, you are the product." And with Equifax and the other credit reporting agencies, they make their money from selling our personal information. And so the idea of protecting our information wasn't as high on their priority list as it should have been.
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18:16 Mike Carruthers? to support your bone health. Go to GetBetterBones.com/YSK. That's G-E-T-BetterBones.com/YSK. So Steve, I want to talk about medical identity theft, because I'm not sure people even understand that that's a thing. And you say it could actually be fatal. So explain how that works.
18:42 Speaker 01 Interpol once indicated there were only about 100 cybercriminal geniuses, but their business model now is they will create the malware, the botnets to distribute it, provide tech support, and they will sell and lease what they've created on the dark web to less sophisticated criminals. So they will be able to get all of our information. So your credit card, if it comes with other personal information about you, will go for about $45 online on the dark web. But your medical insurance will go for much more. And that's because they are able to turn that into medical, they can get medical equipment, they can get, sell the use of the insurance.
19:27 Speaker 01 And here's the thing that makes no sense whatsoever. You become a victim of medical identity theft. Somebody has accessed your medical insurance. You find out, you report that, and you attempt to get the, this false information removed from your medical records. Well, that would violate the privacy of the medical identity thief. And so all you can do is have a notation on there that this information is disputed. But quite frankly, you could have information on your medical report that could contain a false, a false blood type, or a medicine to which you are allergic to. And that, these things could be potentially fatal.
20:12 Speaker 01 So medical identity theft is a huge, huge problem. And unfortunately, the healthcare industry has been very, very lax in protecting data, including medical insurance records.
20:27 Mike Carruthers? Wait, what? That's, that's preposterous that...
20:32 Speaker 01 Isn't it?
20:33 Mike Carruthers? That an identity thief could put information in your medical records and they protect his privacy?
20:40 Speaker 01 Yep, the HIPAA privacy law is protective. It makes, I mean, when I first found that out, I kept looking for, I must have had bad information. But nope, that's it. That's our government at work.
20:52 Mike Carruthers? And even you, I mean, somebody who's, who's pretty sharp about this, you said you've been the victim of identity theft. I've been scammed. And I mean, I don't know too many people who have not had some rub up against this, whether they thwarted it or not, that, that have been scammed.
21:13 Speaker 01 Years ago, there was a cartoon called Pogo. And Pogo had a saying, we have met the enemy, and he is us. All too often, when it comes to being scammed, and when it comes to becoming victims of identity theft, we may be our own worst enemies. For instance, we put too much personal information up on social media. So, the grandparent scam, which is still going on, and that's where the, the grandparent gets a call in the middle of the night, the grandchild is having problems, wherever they are, they've been arrested, or there's been a medical emergency. They gather, the scammers gather that information through social media.
21:55 Speaker 01 I used to like The Big Bang Theory, the show. And Sheldon's used to call his, his grandmother Memaw. And so they could, the bad guys could know from checking out your social media, you call your grandmother Memaw. And so they get a call, Memaw, it's me, I'm in trouble, I need some money, get it to me fast.
22:13 Mike Carruthers? Yeah, well, it's understandable, somebody in that situation might, might panic and send money. And in fact, I think, wasn't there just some, some woman, I think she used to be a police dispatcher who got scammed, or, or that they attempted to scam her, and they showed up at her door to get the money, and the police were there and tackled them in the front yard.
22:33 Speaker 01 Yes, I saw the videos of that. It was, it was terrific. But, you know, and along with individuals, you know, they, why did the, Willie Sutton, a famous bank robber, was once asked, why did he rob banks? And he said, because that's where the money is. So, major, major scams are perpetrated against companies and we, and government agencies. We've seen that with ransomware and other. But one of the biggest, as far as companies goes, is called the business email compromise. And What happens is the the bad guys get into the computers of a company. They find out when a particular CEO or CFO is going to be away or on vacation or something. And then they send an email that appears to come from them.
23:18 Speaker 01 Asking to wire money to a particular company that they're doing business with. Of course, there is no company that they're doing business with. It's going to the scammers. But they now have this deep fake technology, which can be used for videos as well as audio. And there was a German company in which they had a subsidiary in Britain. And the criminals were able to get the voice of the CEO of the company from some YouTube videos. And they were able to take that to do a phone call that sounded exactly like the CEO. There's an easy technique called spoofing, where you can fool your caller ID. So you can make it look like it's coming from wherever.
24:02 Speaker 01 And the scammers picked up a quick $200,000.
24:06 Mike Carruthers? Oh, what about, you know, there are these services people can buy that are supposed to protect your identity. Are they worth it? Do they do a job? Is it at least a minimal level of protection? Or is it really good or what?
24:21 Speaker 01 When I describe these identity theft protection services, I say this kind of like you're crossing the street and you get hit by a bus. And someone rushes out to tell you, hey, you just got hit by a bus. That's what these services do. They don't protect you from becoming a victim of identity theft. They alert you sooner that you have become a victim. So it's helpful. You can do these things for yourself. I think some of them are priced so that, yeah, they may be worth it. But frankly, the best place to find a helping hand is at the end of your own arm. And the one thing that absolutely none of these identity theft protection services do,
25:03 Speaker 01 which is the absolute best thing for protecting yourself, is putting a credit freeze on your credit reports and
25:12 Speaker 01 Now, since 2018, you can do it for your children and children, according to a Carnegie Mellon study, are 51 times more likely to become targeted for identity theft than than adults. This can protect you so that even if someone gets your personal information, they're not going to be able to open accounts in your name, which is a big way that that people get whacked. So a credit freeze, easy to do. If you're going to apply for credit, you can go online and lift it so that the the creditor, at least a car recently and they had to check it out, can check my credit report and then put it back on automatically. So best single thing you can do is freeze your credit and freeze your children's credit.
25:54 Mike Carruthers? Isn't it true that a lot of identity theft still happens by people going through your trash?
26:01 Speaker 01 Absolutely. And you know, this is that one of my mottos is things aren't as bad as you think. They're they're far worse. So what if you have a shredder and you shred the documents before you you put them out? And in Arizona in particular, there were identity thieves who hired methamphetamine addicts who would stay up all night piecing together single shredded, you know, just vertical shredded documents. And so if you're going to shred, which is a great idea, make sure you get a cross shredder.
26:35 Mike Carruthers? And I don't put I don't put my trash out until the morning, you know, until
26:39 Speaker 01 Yep.
26:40 Mike Carruthers? I hear the trucks coming because just for fear that somebody could go through that at 2 o'clock in the morning and take their time and and and maybe find something I didn't shred or
26:49 Speaker 01 Yeah, quite frankly, I don't think that's an unreasonable fear. Identity theft is high tech, low tech and no tech. It isn't just coming through your computer. It is going through your trash. This is anything they can do to get the information they will do.
27:06 Mike Carruthers? You had mentioned IRS. How do those scams work?
27:11 Speaker 01 You know, they're twofold. One of them is imposter scams. And this is, according to the Federal Trade Commission, the biggest level of scams that we've had in the last year. And this is where you get a telephone call, a text message, or an email that is coming from some, maybe it's the FBI, maybe it's Social Security, and lately it's from the IRS. That spoofing, where the scammer very easily can trick your caller ID to make it look like it's coming from the IRS. They tell you that, here's the thing that bothers me. The fact that the IRS has had to put on its website,
27:54 Speaker 01 "We don't ask for or take gift cards, but criminals posing as the IRS will do it." So, under a wide variety of pretexts, they'll ask you for gift cards, credit cards, some kind of payment that you do over the phone. The other thing is income tax identity theft, which is a multi-billion dollar problem. Someone gets your Social Security number, files electronically a tax return using your number and a counterfeit W-2, they get a big refund. If you file after them, your return will be held up. And right now, the IRS is taking about
28:36 Speaker 01 close to 300 days to process claims for your legitimate refund. So, income tax identity theft, people say, "Well, you know, they're not getting me, they're giving the government's money, but you're not getting your refund for pretty much close to a year."
28:51 Mike Carruthers? Does the IRS take payments over the phone? I thought they did not.
28:55 Speaker 01 They did not. And as a matter of fact, I'm glad you mentioned that. You know, people say, "How do I know if it's the IRS calling me? How do I know if it's the IRS sending me an email or a text message?" And the real easy way to know it is, the IRS never initiates contact in any of those three manners. The only way they initiate contact is through snail mail. So if you get a phone call, an email, or a text message indicating it's from the IRS, you know it's a scam.
29:27 Mike Carruthers? Well, there is obviously a lot to know if you want to protect yourself. And if you do want to know more, you can check out Steve's website, scam aside.com. There's a lot on that website you'll find helpful. The name of the book he wrote is 50 Ways to Protect Your Identity in a Digital Age by Attorney Steve Wiseman. And there are links in the show notes to both of those resources I just mentioned. Thanks for coming on and sharing all this, Steve. Appreciate it.
29:54 Speaker 01 Terrific. Great talking with you.
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33:21 Mike Carruthers? Negotiation is one of those things, we don't talk about it a lot on this podcast, because I think people's impression is that negotiation is a very business-y topic, or it means we're going to talk about how to negotiate the price of a car, that kind of thing. But the fact is, we all negotiate all the time, every day. And there is a very different approach to negotiation that... I have found fascinating. It comes from a guy named Barry Nailbuff. Barry is an entrepreneur and professor at Yale School of Management, and he's the author of a new book called Split the Pie: A Radical New Way to Negotiate. And I really think you're going to enjoy what he has to say and his approach to this topic
34:05 Mike Carruthers? because it is different than what you've heard about negotiation before. Hi Barry, welcome. Thanks for being here.
34:13 Speaker 02 Thanks for inviting me.
34:14 Mike Carruthers? So start off by explaining how your approach to negotiating is different and what it is people sometimes miss about what you think a negotiation is.
34:27 Speaker 02 Sure. Most people, it's strange to say, don't appreciate what it is they're really negotiating over. They think it's over some total amount as opposed to what would be lost if the two parties don't reach a deal. That is, they don't understand the actual negotiation pie, and therefore the arguments they make are really not over the right numbers, which leads people to be confused about power and fairness, and negotiations end up going south.
34:58 Mike Carruthers? So explain the pie, because I think of a negotiation as I want this, you want that. I don't see it as a pie to split, so explain that.
35:09 Speaker 02 The pie is how much value is created by an agreement compared to what the parties would get if they end up working on their own or doing something with other folks.
35:21 Mike Carruthers? So let's get specific with a real example that would explain what you just said.
35:26 Speaker 02 I made a rookie error. I filed for a trademark and didn't realize that trademarks are public the moment you file for them. As a result, some troll, and I'll call him Edward because that's his name, ended up buying the URL, the domain name, associated with my trademark. And he offered to sell it back to me for $2,500. Now, Edward doesn't care about fairness. He's a jerk. From him, it's a zero-sum mindset. It's like, how much money can he get? And I pointed out to Edward that there's an organization called ICANN, which is the domain registry.
36:10 Speaker 02 And for $1,300, they have a dispute resolution process. And what Edward had done is called registration in bad faith. And so I was guaranteed to get that domain name back if I paid ICANN $1,300. So Edward, look, I'm going to get the domain name either because we reach an agreement or because I go to ICANN. So the only question from my perspective is do I pay them $1,300 or do I pay you something? And there's no way I'm paying you $2,500 when I can get it for $1,300 from ICANN. And sure enough, he comes right down to $1,100. But from my perspective now, $1,100 is better than ICANN.
36:53 Speaker 02 But I'm only up $200 and he's up $1,100. And so I say, there's a $1,300 pie. That's what I can save by doing a deal with you and I'm prepared to split it 650, 650. At which point he comes down to 900, kind of halfway between my 650 and his 1,100. And he's saying, that's the lowest I'll go. I won't move anymore. And my point is, I've made you a fair offer. If you can tell me why we do something different, okay, but you know, what you're proposing is giving you more of the benefit than it is to me. And I don't see why we should do it that way. And so I stuck at 650, he was at 900.
37:37 Speaker 02 And at the end of the day, I had a principle, he was arbitrary. And he came and said yes to my 650. So he didn't care about fairness, but he recognized that I do. And therefore, if you want to do a deal with me, you have to accept the fair outcome.
37:54 Mike Carruthers? See, I would have thought he would have said, okay, well, if you're going to pay them $1,300 to take their domain away from me, give me 1,200 and you can have it right now. And you would have said, okay. But you didn't say, okay.
38:08 Speaker 02 I didn't because if I did that, he's up 1,200, I'm only $100 better than ICANN. Now, fight fire with fire would be I go back to Edward and say, I'll give you 100. And then I'm up 1,200. But in fact, I say, look, for the same reason that I wouldn't expect you to accept $200 $ offer, leaving me $1,100 ahead, you shouldn't expect me to accept your proposal of $1,100, which leaves you $1,100 ahead and me only $200 ahead. It's true that I need you to save this $1,300, but you also need me. We need each other, and that's why we should split it 650, 650.
38:46 Mike Carruthers? And you got him.
38:47 Speaker 02 And he got me. And we got each other, and we saved the $1,300, and I was 650 ahead, and he's 650 ahead. So, yes, he's a jerk, yes, he's a troll, but he also understood the logic of what I was saying, and he didn't have any countervailing logic. So my view is principles beat arbitrary.
39:07 Mike Carruthers? Well, that's a great example, a great story, and I like how you appealed to his sense of fairness, whatever sense of fairness he had, by pointing out your sense of fairness, but not everybody will agree with that. I mean, people come into negotiations often wanting to get as much as they can possibly get, and that's kind of the job of negotiation, in many ways, to get as much as you can get.
39:39 Speaker 02 And so you're right. The reason for a negotiation is to do better than what they would get without an agreement. And the question is, how do you measure that? So let me give you a real-world example. My mother had the opportunity to buy the house that she was renting from the person who she was renting it from. And if she did the transaction with him, there would be no real estate agent involved, and therefore, they could save a 5% real estate commission, which in this case was around $40,000. So the question is, how much of the $40,000 should my mother get, and how much of it should the seller get?
40:22 Speaker 02 The seller could say, well, if you buy this kind of house from anybody else, you'd end up having to pay $800,000. So I should get the full $40,000, or you can pay $799. And my mother could say in response, if you sell this house to anybody else, after the real estate commission, you're only going to get $760. So I'll give you $761, and I'll keep almost all of the $40,000. My view is that the negotiation here is over saving the $40,000 real estate commission. Each of them are equally powerful, equally necessary, and so they should split it 20,000, 20,000.
41:01 Mike Carruthers? And so what happened?
41:03 Speaker 02 He agreed to that at the end of the day. Essentially, he said, "Well, it's a hot market, and so therefore, you know, I should be getting more of it." And the answer is, the hot market is what determines the price from which we subtract the 20,000, not how it is that we divide up the 40,000.
41:22 Mike Carruthers? So every negotiation has to start somewhere, somehow, and often, I think, people throw out a number. You know, that's the starting point. That's where we begin our discussion. Is that a good way to start, do you think?
41:37 Speaker 02 I like even more the idea of starting off with the rules for how we'll negotiate, to say to the other side, "Can we agree that our objective is to create a large pie together and split it equally? And understand, is this the person who's going to be a jerk and says, 'No, my view is, I want to engage in a zero-sum negotiation where I get as much as possible, take advantage of you, and in the process, shrink the pie.'" Or, or they say, "Yes, great, let's figure out how we can make a big pie together that we can split and equally benefit from."
42:11 Mike Carruthers? Something that often seems to derail negotiations is emotion, personality, ego, that, you know, wanting to win or feeling the other person is trying to cheat you, and that those emotions get in the way.
42:26 Speaker 02 It's true that a lot of people find emotions to be dominant when they're doing a negotiation, so I'm a little bit like Spock, in the sense that I'm trying to bring some logic back into negotiations, and if you can combine Spock logic with Captain Kirk's emotional intelligence, you've really got it made. So I appreciate that you should be empathetic and curious about what the other side's interests and positions are. In fact, one of the things I like people to do is to make the other side's arguments for them. You see, we can't always win on every point, but we can always be understood.
43:09 Speaker 02 And a great way to demonstrate that you understand the other side's perspective is to make their arguments for them.
43:15 Mike Carruthers? Why would you want to do that? What would be the benefit to you to make the points for the other side? Seems like you're helping the other side get what they want.
43:26 Speaker 02 What I'm trying to do is figure out what it is that they want. Because my goal in negotiation is actually to give them what they want. The reason is, if they get what they want, then I can get what it is that I want.
43:42 Mike Carruthers? And so when people enter into these kind of discussions, negotiations with other people, what do you think are the things that derail? What do they do wrong? What are the mistakes they make?
43:54 Speaker 02 That's a long list. So one classic mistake is that they try and anchor with a low-ball offer or a super-high ask, and they try and soften up the other side. But the problem with doing that is that you make yourself untrustworthy. If I'm selling something that's worth $1,000 and you offer me $200 for it, are you trying to take advantage of me? Do you not know what this item is worth? If I were to say yes to that deal, what kind of person are you? And then you have to come up, say, from 200 to 600 to 750 to 900. And next thing you know, you've demonstrated that you are just like Gumby.
44:39 Speaker 02 You're totally flexible, that you have no principles in terms of the way in which you're negotiating. And so by starting at a point that's unreasonably far away from the appropriate number, causes all sorts of troubles in negotiation thereafter.
44:57 Mike Carruthers? And so how would you do that otherwise? If someone says, "Well, make me an offer. Here, I'm selling this $1,000 thing," but without mentioning the number. "I'm selling this thing. What will you give me?" And you know it's worth $1,000, wouldn't you want to try to get it for less?
45:13 Speaker 02 Absolutely. So I'm not saying you start off with a thousand dollars, but I also don't want you to start off with two hundred. I want you to start off with a number that you can justify. If they ask you how you came up with that number, a good answer isn't, "Yeah, I tried to pick this low number because I read in a book somewhere that's a good way of softening you up, and that I can anchor you with that number." Instead, it's, "Uh, look, when I see prices on eBay for this, the price is eight hundred and forty-seven dollars. Uh, and I know that you might be able to find somebody who will perhaps overpay. Uh, they're really desperate for it, but, uh, I'm prepared to give you the same price as I could find it on eBay."
45:58 Speaker 02 Uh, would be one way of doing it. So providing some other possibility, giving them a reference, giving them an argument and a reason for why you're making the number you're making.
46:08 Mike Carruthers? What else do people do wrong?
46:09 Speaker 02 One thing people tend to do is fight fire with fire. But as Smokey the Bear will tell you, you want to fight fire with water. So that when somebody does something that's escalating, that is inappropriate, don't respond the same way. Find a way to put out the fire. In one of my negotiations, I once asked for a price that was way too high. And the person on the other side, the buyer, uh, looks at me, says, "Great, where do I sign?" And then, watching my smile grow on my face, says, "Oh, just kidding. If you really think that's what is needed,
46:55 Speaker 02 I'm afraid we don't actually, it's not going to work out." And it was the nicest possible way of letting me know that what I had done was just not really appropriate. As opposed to coming back and making a lowball offer in response. So that's one example of how not to respond in kind. When somebody makes an ultimatum, don't make an ultimatum in response. Figure out how to walk them off the ledge. When somebody acts like a jerk, say, "Look, here are my principles. I'm prepared to split the pie with you. I'm not prepared to do a deal that's unfavorable, that's unfair to me.
47:39 Speaker 02 So if you can give me a principle in response to show me why my argument's wrong, I'm flexible on that account." Or somebody will lie to you. And that doesn't mean that you should be lying in response. So there's a lot of fight fire with fire as opposed to figure out ways to put out the fire.
48:02 Mike Carruthers? Do you think it's a good idea when you're negotiating something with someone else that you keep the discussion strictly on what it is you're negotiating and what the value of this thing is to you and what the value is to them? Or should you bring in other things like the reasons why you want this? Is that relevant to the conversation? Or is it better to just stick to what you're talking about and don't elaborate too much?
48:32 Speaker 02 So imagine a person is selling their family business, and it's a gas station. And the reason they're selling it is because they want to go on a sailing trip around the world. Should they reveal that or not? Well, you could say it's a frivolous reason, and so let's keep it hidden. Let's just say, "I'm planning to retire and spend more time with my grandkids." But when it comes down to it, there are good reasons and bad reasons for selling. The buyer knows that you've got a for-sale sign, so they're wondering, "Why are you selling? Is it that there's a leak in one of the storage tanks? And the gas station is about to become a super fun cleanup site? Is the highway exit ramp about to close so there will be no more cars coming this way?"
49:16 Speaker 02 In fact, the idea that you want to take a trip around the world is a good reason, not a bad reason from the buyer's perspective. And so, yes, go ahead and let them know why it is you're selling the station.
49:32 Mike Carruthers? What about though, if I'm selling something? I just did this not long ago. I had a piece of equipment that was no use to me, no value to me. It was a piece of recording equipment that is no, it's obsolete. Nobody wants it. Except collectors. Collectors collect this type of equipment. Consequently, it has value to them. It has virtually no value to me, other than I know it's worth something to a collector. But I don't want to tell the person it's worthless to me. I want them to pay me what it's worth to them.
50:10 Speaker 02 That's true. So that's a great case. That's like I said, when the seller values it less than the buyer does, there's a pie. And that's the time to do the transaction. So you valued it near zero, the buyer values it at $1,000, great. Now it turns out that there are lots of buyers, and one values it at 800, one values it at 900, and one values it at 1,000. Then you want to sell it to the $1,000 person, and I think the right price there is more like 950. Because your alternative is I can sell it to the $900 person. And so that's really my fallback. The reason I'm selling it to you is to beat the 900. I can't beat 900 without you.
50:55 Speaker 02 You can't get this value, this extra value, without me. And so we have an extra hundred to split, and that's why I think it should be 50/50.
51:04 Mike Carruthers? What else do people maybe miss? Because it often seems that people, when they talk about negotiation, what they're talking about, or what they're thinking about, is money. That it's all about the money. But as you just said a moment ago, you like to think there's more than just money. So what else are people missing by thinking this is just dollars?
51:28 Speaker 02 They miss the opportunity to have creative solutions come into play.
51:35 Speaker 02 So if I go back to my couple selling the gas station. Turns out that when they come back from their trip, they don't have a job. And as a result, they needed a big reserve fund to help tide them over until they find work. But the person buying the station thinks they're great managers and they're always short on good managers. So they will be delighted to have them come back and work at the station as a station manager upon their return. So offer them a job. And now the person really wants to sell the station to you rather than to sell it to somebody else. So figure out what the person really wants and give it to them.
52:19 Speaker 02 Or when you're buying a house, how likely is the closing to happen? Is the person getting a mortgage? Is there a mortgage contingency? Is there an inspection contingency? What are you going to do with the furniture that's in the house? Does the buyer want it? Does the seller want it? Is the closing date, uh, you want it to be soon? Or would you want to delay it to help the person have a little bit of time to move? So look for things that can create value that are besides money.
52:47 Mike Carruthers? Talk about what happens when you're in the, the position of you don't know as much as the other guy. That he's more of an expert on whatever it is you're negotiating and you feel a kind of stupid. How do you work that to your advantage if you can?
53:03 Speaker 02 Well, let's, let's try to at least work that not to my disadvantage because I am in the challenging position. One of the things I like to do there is make what's called a contingent agreement. So imagine the art dealer comes in and sees this painting that I inherited from my father and says, uh, all right, I'll give you a thousand dollars for it. And I have no idea if this painting is worth 2,000, 10,000, 100,000. And the problem is it could cost me $2,000 to get it appraised, which could be more than this painting is worth. So what do I do?
53:44 Speaker 02 I could come back and just say $2,000 or $5,000, pick some arbitrary number, which could lose me the deal if it's really only worth 1,000. Or perhaps I'll get 2,000, but the painting is still worth 50 and I've missed the big opportunity. Instead, I prefer saying things like, here's what I'm prepared to do. I'll sell it to you for 1,000, but any money you make above 10,000, we split evenly. So now, if the painting is worth somewhere between 1 and 10, okay, fine, they can make some money on this. But if this thing is really a hidden masterpiece, now I've protected myself.
54:24 Speaker 02 So if you don't know what something is worth, make a deal where you get some share of the upside, if it turns out to be worth a lot.
54:33 Mike Carruthers? And that way, you get a piece of the bigger pie. And it's all about splitting the pie. It's really a unique way to look at negotiating. I've never really looked at it this way before. Barry Nalebuff's been my guest. He is an entrepreneur and professor at the Yale School of Management, and his book is called Split the Pie: A Radical New Way to Negotiate. And there's a link to that book in the show notes. Appreciate you being here. Thanks, Barry. Have you ever heard of the baker-baker paradox? Basically, it's the result of research that says it's much easier to remember a person
55:16 Mike Carruthers? whose profession is a baker than it is to remember someone whose name is Baker. Why? Psychologists believe it's because when people hear about a man who works as a baker, it conjures up images and tastes and smells from our past and creates a very vivid impression. On the other hand, the name Baker doesn't mean much. There's nothing about a generic name to latch on to, so people forget it more easily. The lesson here is that when you meet someone, find something visually memorable about them that connects with their name. When you meet Mr. Baker, imagine he is a baker.
55:56 Mike Carruthers? When you meet Bob, imagine his head bobbing up and down like a fishing bobber on the water. That kind of thing. You get the idea. It sounds silly, but it's very effective if you want to remember names. And that is something you should know. As someone who enjoys this podcast, the best thing you can do to support this podcast is to tell someone else about it who doesn't listen, so it helps us to grow our audience. I'm Mike Carruthers. Thanks for listening today to Something You Should Know.
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