Wilder, Wealthy, and Wise

“We have been negotiating with men in UFOs for seven years. If we don’t get to Washington by Friday, the whole deal will be off.” – Real Men

Johnny Depp is sorry he doesn’t have Amber Heard immunity.

Elon has been negotiating for Twitter®, recently.  I thought I’d dust off some old comments about negotiation that I had laying around.  He is looking for a deal.  In most of his career, his deals have been very much of the “there’s no way that will ever work” type of deal.  He made $3billion off of PayPal™ and then risked it all on SpaceX®.  That deal and his hair plugs have worked out very, very well for him, so I bet he’ll be able to close the Twitter™ deal.

So, I thought a post about negotiation was in order.

Why talk about negotiation now?  As society changes, there are going to be many, many points where deals will be made.  I can’t predict what deals will be available, but you’ll never know when you might need to swap some pickled yak funk for a tub of dingo chum.  Mmm, fresh dingo chum.

I have observed that the people who get wealthy off of deals look at many more deals than they ever make.  The last time I played poker (years ago), I played 30 hands for the evening.  I won two.  I walked out of the place with thirty bucks – I had started with twenty.  I would have made more, but I kept trying to lose after a certain point so I didn’t walk out of my neighbor’s house $80 up.  I would have considered that rude because it was the first time I played poker there.

Lots of bad deals, two winning deals.

That lesson leads to the zeroth rule, mainly because I realized I was done with the rest of them and am too lazy to renumber everything.

Rule 0:  The Stakes

It’s easier to win or create great deals when the stakes are so small that you can think calmly and rationally.  Hence:  rich dudes (say, Warren Buffet or Jeff Bezos) can make lots of small bets that were white-knuckle negotiations on the other side of the table.  Jeff Bezos probably uses living human kidneys (still in the human) as table stakes at his poker games.

The Mrs. wanted to play strip poker, but I figured she just wanted to do laundry.  So I folded.

Rule 1:  BATNA

The first rule of negotiation is that you don’t have to end up with an agreement – you need to know your BATNA – Best Alternative To a Negotiated Agreement.  In the poker example, I folded and was out a buck or two on each hand I walked away from.  Several times in my life I’ve walked away from job offers because they weren’t right, and no amount of negotiation could have made them right.

Sometimes, (really most times) the best deal is no deal.  Take my ex-wife.  Please.

Rich people generally walk away from most deals.  People like Warren Buffet could literally do almost any deal he wanted to do, since most companies are smaller than the available cash that Warren keeps in the sweaty folds of his skin.  Buffet reminds me of the story about the guy on the golf course who kept talking about how much money he was worth.  Another golfer, an old Texan, couldn’t stand it.

“How much are you worth, son?” asked the Texan.

“Fifteen million dollars,” the other golfer said, proudly.

The Texan responded . . . “Flip you for it.”

The question you have to ask is . . . what happens if you don’t come to an agreement?

If you’re Buffett, there’s no deal you have to make.  But me?  That’s a different story.  Sometimes there are consequences from missing deals – sometimes significant.

One particular negotiation that I had to make involved negotiation over some land with a guy worth about $80 million bucks.  That leads to rule 1A (yup, being lazy again).

A lion would never play golf, but a Tiger Wood.

Rule 1A:  If you can help it, NEVER negotiate with someone worth $80 million because they don’t care, so there is no BATNA-level leverage.  Unless the deal is ludicrously good for them, they have NO reason to even speak with you.  Unless, your kid is in the same calculus class and football team as their kid, which my kid was.  So, the rich guy talked with me.

He offered my company his land at ten times the going rate.

Our alternative as a company?  It was spending several million more than his offer on another patch of land.  We almost bought the other land, on principle, but my boss decided that he didn’t want to explain why he spent several million dollars because he had no leverage in a deal.

The rich guy?  He literally wouldn’t have cared.  Our deal, as awful as it was, was worth more than the average family makes in years, and was literally a favor because his kid went to school with my kid.

Sometimes your alternative sucks.  But we had one.

Another big mistake is buying into the frame of reference of the other party.  If his opening position is that he’ll trade you a handful of magic beans for your two children, negotiating him down to just one child isn’t awesome negotiation (unless you really want him to take both).  No, the deal is bad and probably isn’t worth negotiation.

Rule 2:  Don’t negotiate against yourself.

I worked with a guy who I’ll call Moe (because that was his name) who was a genius at negotiation.  We would drive around on company time and he would take me, the new kid at work, out to look at “jobsites”.  This may or may not have involved beer on several occasions.

Sometimes, these trips would involve Moe’s personal shopping, as well.  He was a golfer, and one time we walked into a golf shop and he asked about a specific club.  He then proceeded just to walk around the store, and the clerk would follow him around, constantly lowering the price.  The clerk was negotiating against himself, while Moe looked disinterested, and cut the price of the club in half without Moe saying a word.  I tried the same tactic later that week at a furniture store – same result.

Rule 3:  When you get to yes, shut up.

This one is pretty simple.  I constantly tell that to Pugsley after I’ve agreed with his latest crazy scheme.  “You got to yes, shut up.  Keep talking and it might turn to no.”

I’ll just shut up now.

How do we know that aliens aren’t vegan and don’t do Cross-Fit®?  Because they would have told us.

Rule 4:  The deal isn’t done until the deal is done.

When I bought my first car from a dealer (which was a huge mistake in itself), I was surprised that negotiation wasn’t done.  We had just negotiated price.  Then there was financing.  And undercoating.  And floor mats.  And add on maintenance contracts.  And a timeshare in Bermuda.  And about half a dozen other things.  The deal wasn’t done until after another dozen “deals” were done where I had to say, “No” again and again and again.  They tend to push these deals on me after hours of negotiation, when I was tired.

Rule 5:  The more information you have the better you can understand what a good offer is, and whether to accept it.

Whenever you negotiate for a job, the employer has more information – how much they can offer for the job, and what other things they can do to sweeten the deal.  One colleague I know started a job in management at a company after accepting their offer.  Three months later, a new employee of his started, a new employee he had hired.  The new employee had gotten a signing bonus:  my colleague hadn’t.    Heck, one time my boss offered to give me a bonus if I acted like a frog.  I jumped at that opportunity.

Oops.  He was forever upset about it, and it later cost him his job because he was always griping.  Goes to show the moral of that old joke is right:  Why did my chicken cross the road?   The road betrayed him first.

Rule 6:  Know what is important to the other party.

It might be money.  It’s probably money.  But it also might be looking good to their boss.  Understand what they want, and then see how to best give it to them. It might be something simple like being able to leave early every other Thursday at 3pm.  It might be that they won’t stop until you give them a coat made from bigfoot hair stained from a pigment derived from the colors Rudy Giuliani leaves on his towels..  Or maybe it might even be something unreasonable.

Rudy was my attorney on a speeding ticket once.  He successfully got it pled down to second-degree murder.

Rule 7:  If you live longer than age five . . . you will run into unethical negotiators.

They might lie.  Which looks and sounds a LOT like bluffing.  But it’s not, and you know the difference.

They might threaten.  One salesman always talked about all the people that got fired for buying the competing product from his competitor.  How did that affect me?  It made me want to never buy his product (I’m contrarian that way – push me on fear and I never trust you).

They might try to impact the negotiation by “accidentally” letting information slip.  Information carefully prepared to skew your decision or offer.

My best advice?  Be honest.  No one can cheat an honest man.

Always be ready to walk.  Most of the time there are other deals.

Except for Elon.  I think he’ll negotiate so hard against the Twitter® board that they’ll need tweetment.

Real Life isn’t exactly like Twitter™.  Women seem to get upset if you follow them.