Conducting Effective Negotiations

1. 0:00 – 0:34

   Why the session title changed: avoid “must-have” deal situations

   1. SPSpeaker0:00

      Be a little bit more of a class than a kind of a lecture or presentation. Um, I learned something about marketing, 'cause I was told that, uh, the title of this initially was How to Negotiate When You Absolutely Have to Have the Deal. Well, that is a great ti- I mean, that's a title that you would, uh, you'd come for. I mean, everybody would come to hear how you, how do you negotiate when you have to have the deal, you know? Everybody wants to know how to do that. And they asked me, you know, "Well, what will you teach in that?" And I would say, "Don't get in that position-

   2. SPSpeaker0:34

      [laughs]

2. 0:34 – 4:12

   Who likes negotiating (and why): ambiguity, winning, creativity, relationships

   1. SPSpeaker0:34

      ... where you absolutely have to have the deal." So it'd be a very short session. So I changed, um, the session to the one that you, you signed up for, which is Conducting, uh, Effective Negotiations. So a little more pedestrian title, a little less exciting, but I think we'll go over some things here that may influence the way you think about, uh, negotiations. Um, so who in here likes to negotiate? Raise of hands. So that's maybe 20% of the class. Who just dreads negotiation? That's even a smaller percent. So the rest of you are kind of indifferent. You'll do it. You know, you'll eat your broccoli if you have to, but you're not looking forward to it. This is v- negotiation is the vegetables of your business life.

   2. SPSpeaker1:27

      [laughs]

   3. SPSpeaker1:27

      You'll do it. You know it's good for you. You know you have to do it, but you don't absolutely love it. So who, um, and, and let's just take a second on why, those of you who like it, why do you like it? What is it you like about it? Now the hands disappear. Yeah.

   4. SPSpeaker1:44

      Well, compared to my engineering field, when I knew everything was right or wrong, black or white, in negotiations everything's gray and nobody can say I'm wrong.

   5. SPSpeaker1:53

      [laughs]

   6. SPSpeaker1:54

      Okay. So you feel better about yourself. You don't get any bad an- you don't get any-

   7. SPSpeaker1:59

      If it's a good result, I get credit, you know?

   8. SPSpeaker2:01

      Exactly.

   9. SPSpeaker2:01

      Nobody can say they could have done it better.

   10. SPSpeaker2:03

       Yeah. [laughs] Right.

   11. SPSpeaker2:04

       Yeah. Um, the reason I want to negotiate is that typically I have high expectation. I, when I negotiate, I'm going to win. I'm going to, uh, get better on the other side.

   12. SPSpeaker2:13

       So you're gonna improve your, your-

   13. SPSpeaker2:15

       Situation.

   14. SPSpeaker2:16

       The situation, okay. So you negotiate to improve whatever situation you're involved in.

   15. SPSpeaker2:20

       Right.

   16. SPSpeaker2:20

       In complex situations, it's just rarely the case that you can make a deal without some level of negotiation, so I look at it just as, as a means to the end, and getting to the end is kind of the goal. On the flip side, doing win-win deals is really a lot of fun.

   17. SPSpeaker2:35

       Okay. So you see it largely as eating your broccoli, but sometimes you do get to turn it into dessert.

   18. SPSpeaker2:41

       I'm a big vegetable fan.

   19. SPSpeaker2:42

       [laughs]

   20. SPSpeaker2:42

       Seven hell, it's not quite working for me, but yeah.

   21. SPSpeaker2:44

       Well, I keep thinking of the first George Bush, who made the comment about how he hated eating broccoli.

   22. SPSpeaker2:49

       Yeah.

   23. SPSpeaker2:49

       So I actually like broccoli too, so.

   24. SPSpeaker2:52

       Yeah.

   25. SPSpeaker2:53

       Yeah.

   26. SPSpeaker2:53

       Yeah, I, I echo that. I think the win-win thing is, uh, is fun, and it's also like a piece, it's like putting together a puzzle. It's like the way I approach it, is thinking of the other person, what, what do I want, how do you get it all together to make it work, and you look for the win-win, and that's fun if you can make it work.

   27. SPSpeaker3:05

       So win-win agreements are fun, and you, and you can negotiate, uh, the, the, the higher the percentage of deals you can get that are win-win, the more you like it. Other?

   28. SPSpeaker3:17

       I think it's a, a unique opportunity for creativity in business. It's one of the most creative aspects of business.

   29. SPSpeaker3:23

       It does allow you to fashion solutions according to usually different kinds of facts, different fact situations, so you get to be, you get to express some creativity. Um, other things? Yeah.

   30. SPSpeaker3:37

       We are building relationship also with the other person.
3. 4:12 – 7:54

   Why people dread negotiation: missing information, power imbalances, and feeling abused

   1. SPSpeaker4:12

      It just makes me very uncomfortable think, to think that I do not have enough information to get the most out of this negotiation, and, uh, more often than not, I just regret the results, th- thinking I could have done better.

   2. SPSpeaker4:26

      Okay, so you look back on it and you say, "Shoot, I got taken. I didn't get as good a deal as I might have gotten. I lost." Other things you don't like about... Yeah.

   3. SPSpeaker4:40

      Most of the time, hopefully, the person on the other side is, uh, or are, is an intelligent team you're dealing with, but you do get the, uh, what I call amateur, like, if I pound on the table, that's an effective, that can get just intellectually and emotionally tiresome to deal with.

   4. SPSpeaker4:56

      You can get abused in negotiation.

   5. SPSpeaker4:58

      Yeah.

   6. SPSpeaker4:58

      And there's a whole lot of, there are a lot of issues around power and information. If there's a disparity in power, leverage, information, and you're dealing with a party who's gonna use that and take advantage, that you can go out of the room feeling abused.

   7. SPSpeaker5:13

      Donald Trump.

   8. SPSpeaker5:14

      [laughs]

   9. SPSpeaker5:14

      Yeah. Yeah. I actually met with Donald Trump in his office in New York about 20 years ago, before he was a huge cheese, but he was-

   10. SPSpeaker5:26

       Sure.

   11. SPSpeaker5:26

       What's it, yeah. Well, no, he still had the same hair.

   12. SPSpeaker5:28

       [laughs]

   13. SPSpeaker5:30

       [laughs] And actually, he tried to sell me an interest in the Washington Generals. Any of you know the Washington Generals? This was a, a USFL football team that had drafted Herschel Walker, and, uh, so he was very proud of that, and he was trying to sell me an interest in that, and I didn't fall for it, so. That's my qualification for teaching a class on negotiation.

   14. SPSpeaker5:53

       [laughs]

   15. SPSpeaker5:53

       Really. Actually, my qualifications is I, I have negotiated billions of dollars of transactions over the years. Uh, literally hundreds if not a thousand different kinds of transactions. I was in the real estate business for 20 years. And, uh, I was actually the chief financial officer of a big real estate company for about 10 years, so I was negotiating debt deals and equity deals, and then partner departures and, uh, s- solving litigation and... So my, my life was a diet of negotia- just solid diet of negotiations. And then when I got done with that, I started buying companies and it became a different diet of negotiations. So I've seen a lot of different kinds of negotiations. I've experienced the feeling of looking forward to a day when I'm negotiating a- with great anticipation and really loving it because I like the people on the other side, I like trying to problem solve, I like being creative. I like all those, those elements, and I also have looked at certain days of negotiating where I dread it. I cannot wait to get the day behind me. So there's nothing intrinsic about negotiations that say you should like it or not like it. I, I remember teaching a real estate, uh, class here at Stanford about 10 or 12 years ago and asking the class, um, roughly the same question, but I did it in the form of, "Who of you likes to buy a new car?" And that was the most highly correlated question with who likes to negotiate and who doesn't. There are some people who absolutely hate the process of buying a new car because it feels like you come out a little dirty.

   16. SPSpeaker7:35

       [laughs]

   17. SPSpeaker7:35

       You know? You don't have the, it's an uneven information, uneven power, and whatever, so it can, it can be a bad experience. Um, well, who here are expert negotiators? Raise of hands.

   18. SPSpeaker7:49

       [laughs]

4. 7:54 – 10:11

   Everyone is already negotiating: from everyday life to formal litigation

   1. SPSpeaker7:54

      Every hand should go up. Every hand in the room should go up. You all are here in life because you have been superb negotiators. You would not be in... And what is negotiating? Negotiation is getting what you want at a price that's acceptable to you. So you have paid prices to be at this place in your life that you're happy with. So you are expert negotiators, and I wanna ventilate that a little bit and let you really kind of peer into what it is that you're, you've been so good at. But first of all, here's maybe a little bit of a map for you to start thinking about the terrain of negotiation. All of the conversations you have in li- if you think broadly about it, everything that you've done has been a negotiation. For those of you who are married, you're negotiating all the time with your spouse, with your children. In your job, you're negotiating all the time. In school, you're negotia- I mean, conversations are in effect a give and take, and y- and there's a give/get transaction and usually the more informal they are, the more successful people feel. When you do it with friends and family, usually they feel more successful. Then you get into these sort of sty- where we think about negotiation as entrepreneur is in this area of stylized negotiations where there are agreements, there are certain things that we negotiate. We sit down at a table, somebody takes notes, we write it up, and there are certain things that we trade off. And then finally, very formal negotiations. These are typically ones that are done in arbitration or litigation where there are rules of evidence, where it's a very structured, narrow thing. And that one is not a very fun one. Although I've now spent four years in litigation, I'm good enough at it. In fact, I had one attorney say that I was the best witness he had ever run into, and I started liking negotiation-

   2. SPSpeaker9:51

      [laughs]

   3. SPSpeaker9:51

      ... or, uh, litigation after that. [clears throat] This was an opposing attorney, too, so you feel r- pretty good about that. So what makes for successful negotiations in, a- across all of those? If y- Man, I recognize so many people from my past in here. It's gonna be hard not to cold call-

   4. SPSpeaker10:10

      [laughs]

5. 10:11 – 12:38

   Defining “successful negotiation”: expectations, perception/strategy/execution, and lasting satisfaction

   1. SPSpeaker10:11

      ... on Angie here, FA here, [laughs] Nicola. Um, so what, what makes for successful negotiation? If you think about successful negotiations, what do you think about? I've just had a successful negotiation. What's your self-talk? Yeah.

   2. SPSpeaker10:31

      Set the right expectations.

   3. SPSpeaker10:33

      Okay. Expectations are m- your expectations, you've set them the right way going in. They've been met, therefore you've achieved your objectives. That's a successful negotiation. Yeah.

   4. SPSpeaker10:44

      I would, you already asked three pieces. Uh, right perception, right strategy, and then right execution.

   5. SPSpeaker10:52

      Okay.

   6. SPSpeaker10:52

      'Cause, uh, it's also why we think, uh, negotiation is interesting that involves a lot of perception. Like, uh, how do we perceive that? How do we find out, oh, that is bottom line. Oh, that is something I should fight for. And that's what we say strategy and that was it.

   7. SPSpeaker11:08

      Okay. So some of it is how you s- how you define the terrain, how the oth- how you and the other party perceive it, and then are you able to execute in that perceived terrain. Bonnie?

   8. SPSpeaker11:19

      Uh, as it is win-win, it's easy to define what win is on your perspective 'cause you're happy. But I see win on the other side is that the person, that the residual effect after they walked out the room and as time goes on, that they're not upset and don't try to undermine the negotiate, whatever the result was. So they were happy, too.

   9. SPSpeaker11:36

      Okay, so you all are thinking more broadly than a lot of business people think about negotiation. I mean, these are what I would call enlightened comments about negotiation. Here's what most business people are negotiating. This is the essence of most business agreements, these five things. So they're focused on getting the best price, getting the most attractive terms, making sure that whatever timeframes for execution or deliverables, whatever are acceptable, making sure the warranties are in place, and then if things go wrong, they've got remedies. They may be legal remedies, they may be economic remedies, they're probably a combination of both. So most business negoti- which is in this stylized category in the middle, is so focused on me getting what I want in these five areas, and people don't think more broadly, uh, than that. If, um, people

6. 12:38 – 18:01

   Common pressure tactics (and why they backfire): planes, bathroom breaks, discomfort, and “innocence”

   1. SPSpeaker12:38

      who do a lot of negotiating around these things talk about these techniques, does anybody, um, not run into these before as sort of things that are taught in negotiation class? Are any of these new to any of you? Surprising?

   2. SPSpeaker12:56

      The bathroom. [laughs]

   3. SPSpeaker12:57

      The bathroom one is a, is a commonly used technique. Feed the person a lot of water and a lot of food-

   4. SPSpeaker13:04

      [laughs]

   5. SPSpeaker13:05

      -and then just keep talking. Keep the pressure on. So using the bath- bathroom breaks is a powerful... If you're using techniques, you know, the, and what do I mean by plane? They've got a plane to catch. Their schedule, exactly. They've gotta catch a plane, and so you just carry on the negotiation. You speak slowly. You make things drag out. You disagree at the last minute. Just as they're running for their plane, say, "Oh," you do the Columbo thing.

   6. SPSpeaker13:35

      [laughs]

   7. SPSpeaker13:35

      You know, "Oh, one more thing."

   8. SPSpeaker13:37

      [laughs]

   9. SPSpeaker13:38

      You know? Have any of you been subject to any of these? What does it feel like?

   10. SPSpeaker13:47

       Well, it's hard. You have to assess whether it's, it's, it's, uh, it's almost incompetence or is it actual bad faith, and that can be difficult, and it's annoying to have to even have that in-

   11. SPSpeaker13:59

       Either case-

   12. SPSpeaker14:00

       -question.

   13. SPSpeaker14:00

       -what do you, how do you feel? If, if you're dealing with an incompetent party or a bad actor.

   14. SPSpeaker14:05

       You're wasting your time either way.

   15. SPSpeaker14:06

       It makes you angry.

   16. SPSpeaker14:08

       Yeah.

   17. SPSpeaker14:08

       Right? Very few people don't recognize these. If you're on the other side of the table, it's not like, "Oh, my gosh. What is happening? I don't know."

   18. SPSpeaker14:17

       [laughs]

   19. SPSpeaker14:17

       "I don't understand. This is sure working on me." You know? Most of the time you perceive immediately these techniques, and you resent them or you're angry about them. So in terms of techniques that people teach, you know, I think these are anti-successful agreement techniques. You may get a deal done, but you're unlikely to get a deal that is lasting, enduring, flexible, where you build relationships, where you create solutions. But these are used all the time, mostly by investment bankers. I'm just kidding.

   20. SPSpeaker14:53

       [laughs]

   21. SPSpeaker14:53

       Sorry, sorry, I know [laughs] ... Uh, could you turn the tape off up there?

   22. SPSpeaker14:59

       [laughs]

   23. SPSpeaker15:00

       Yeah.

   24. SPSpeaker15:00

       I'd add one other technique which I run into quite a lot dealing with competitors, which is the, during a, a set of complex long, long negotiations maybe over the course of months, the, uh, you f- you discover that in the course of the supposedly good faith negotiation, the competitor, for example, has been actually promoting something completely different or talking to somebody else, and the explanation you get when you protest is, "I'm very sorry. We had no idea that was going on."

   25. SPSpeaker15:28

       Yeah, the improvisation of innocence.

   26. SPSpeaker15:30

       Deny, deny, deny, right?

   27. SPSpeaker15:31

       Yeah. Or, or just innocent. You know, "I had no idea," or, "Oh, my gosh."

   28. SPSpeaker15:35

       Fixing my organization.

   29. SPSpeaker15:36

       Yeah, yeah, which puts you on your heels, puts you at a disadvantage. Uh, maybe there are others. Uh, uh, anybody in here experience other t- obvious techniques that are being used to gain power? Yeah, John.

   30. SPSpeaker15:47

       Uh, we were locked in a room once.
7. 18:01 – 22:10

   Regaining control when tactics appear: call it out, ask questions, and make the tactic ineffective

   1. SPSpeaker18:01

      So Joel, I have a feeling you're gonna tell us ways to actually do this that aren't these ways, but let's use these guys' examples where you actually are faced with people like this on the other side of the table.

   2. SPSpeaker18:10

      [coughs]

   3. SPSpeaker18:11

      And how do you actually take control or sort of set it on a positive tone, especially if you're in a situation where you're sort of feeling like, this is the company I really wanna buy.

   4. SPSpeaker18:19

      Mm-hmm.

   5. SPSpeaker18:19

      Or this is the job that I really wanna get.

   6. SPSpeaker18:21

      Yeah.

   7. SPSpeaker18:22

      And you don't really have as many options, but these people are actually coming at you with these techniques.

   8. SPSpeaker18:26

      Yeah.

   9. SPSpeaker18:26

      What would you advise us to do?

   10. SPSpeaker18:28

       Well, le- let's have the group... I, I'll give you my... the way I react to it, but anybody in the group. You know, somebody is using one or more of these on you. Yeah.

   11. SPSpeaker18:37

       You just call them on it.

   12. SPSpeaker18:38

       So calling them on it is one really effective thing. You know, I've actually done this in a, uh, in a litigation where, um, the a- opposing attorney was deposing me, and he stood up and got right in my face and started to shout at me. He said, "Why did you do such and such?" And, uh, you know, it really is off-putting, and you're, you're... The, the... All, all it shows in the transcript is, "Why did you do such and such?" [laughter] That's all it shows. That's all it shows, and if you answer the way you're feeling when somebody gets in your face and shouts at you in a c- in an accusatory way, you say, "Well, you son of a gun, I'll tell you the reason," you know, and you'll do it in a way that isn't effective. The most effective thing that I found was exactly what you're saying. I say, "Why are you standing up and raising your voice at me? That goes on the record." [laughter] But it's... So that's, that's the most, um- [laughter] ... you know, copied down way of doing exactly what you're saying, is you really call them on it in a nice way. Why are you raising your voice? What makes you shout about that question? Why are you standing up? Why are you pacing the w- floor as you get all of it on the record? Now, you don't need to get it on the record in a normal negotiation, but calling them on it is one thing. What's another way that you could deal with that?

   13. SPSpeaker19:55

       I, I start asking questions. That's where I start to get some answers.

   14. SPSpeaker19:58

       Questions are very effective. You know, just asking, just posing questions. You know, that's always a, a very inoffensive way of taking the volume level down, getting information, cooling people off. Another way.

   15. SPSpeaker20:14

       You gotta reach the higher planes if you're in this type of mode. The other person's not in good faith. In most of the negotiations we're gonna be doing, you need to have a relationship, and the relationship is usually a lot more important than the actual deal you finally end up with a lot of cases.

   16. SPSpeaker20:26

       Mm-hmm.

   17. SPSpeaker20:26

       So, I mean, I think you do have to call them on it. You have to say, you know, "What's your purpose here?"

   18. SPSpeaker20:30

       Yeah.

   19. SPSpeaker20:30

       And you guys... I- If he's doing one and you're doing another, it doesn't make sense. You guys have to be both wanting a deal and both wanting the best, you know, win-win. And if you can't get there-

   20. SPSpeaker20:39

       Sometimes people have, have such power and such an advantage, and you really do need the deal, that they get away with more, that it, it's tough to raise them to that level. When there's such a disparity in terms of information or power, then it can be very tough to do. I'll tell you what I try to do, is make it completely ineffective. Just make it so either I ignore it, I just don't pay attention to what it is they're doing. By that, I mean I don't drink water [laughs] , you know? I am able to outla... My bladder is better than their bladder. [laughter] You know? Or I, um, I will plan my trip with an extra night of, uh, hotel room, and I'll have an extra flight out the next day so that I'm not e- anxious. But I'll let them know I'm leaving at 5:00 tonight. The... Oftentimes they'll push the thing, and I just don't sweat it. We stay, and then, then pretty soon, it, to me, it becomes a question of, well, let's keep staying here. Let's keep working. You know, I've missed my plane. Let's work. It's 11:00 at night. No problem. I can keep working. Well, I mean, you kind of make it so that the game that they've set up hurts them, so they really pay the price for whatever game they set. So make it ineffective. So these techniques, uh, really can sometimes work marginally in the short run on some people, but they're not really very powerful long-term techniques. Now, if you look at textbook discussions in negotiation, you'll run into these terms, and I'm not gonna talk about the te- I wanna talk really

8. 22:10 – 28:02

   Practical keys to successful negotiation: right party, trust (character/competence/power), BATNA, and priorities

   1. SPSpeaker22:10

      today about very practical real world situations, but these are, this is the terminology that we're in. So I, I know some of you are gonna take classes or have taken classes in negotiation. These will not be unfamiliar, uh, terms to you in the lexicon of, uh, negotiation. So here are some practical keys to successful negotiation, and these will look just so simple-minded, which is, in fact, what most really practical things are, borne of experience. But the first thing is negotiate with the right party. I'm gonna tell you a half a dozen stories here before we wrap up, where you'll see how I learned these particular lessons, I think. But get with the right party. You would be amazed at how many negotiations go on with the wrong party, with the unempowered lieutenant, with somebody who really is not the, the decision-maker, whatever. So figure out who the right party is, and are you talking with the right party? Uh, secondly is become a trusted negotiator, and I put here that's a function of CCP, and my students will recognize it. It's a function of character, competence, and power. For somebody to be trusted, they have to be high character, they have to be competent, and they have to be empowered to make a decision. So you want it, the right party for you to negotiate with is somebody you can trust. The right party for them is that you must be also trusted. So if you wanna enter high quality negotiations, getting high levels of trust based on character, competence, and empowerment are really important things to assess. Then know your own BATNA. What's a BATNA?

   2. SPSpeaker23:47

      Best alternative to a negotiated agreement.

   3. SPSpeaker23:49

      In unison. [laughter] Best alternative to a negotiated agreement. Okay, this is a term that was developed by Fisher and Ury in 1981 out of the Harvard Negotiation Study, which they really found that if people could go into a negotiation with an idea of what is their best alternative to this suc- this negotiation working out successfully, they came out with better end results. You go in with far more confidence I've taken it to another level. When I go into negotiations now, is I figure out, I don't know it for sure, but I try to assess what is the other party's BATNA. So I really think hard about what is it they want to achieve, and what are their options, because that really helps you kind of assess the whole thing. And you're not just thinking my agenda, my agenda, my agen- Here's what I want, price, term, remedies, warranty. This is what I need. And so many negotiators are going in with their own agenda. Well, go in and think about what is the lay of the land for the other party, and that helps. Um, we'll talk a little bit later about Fisher and Ury's map, but I think there are three or four suggestions that they make that are kind of their broad map that are really very helpful. Discern the difference between battles and wars. What, what we used to call the elephant ant. Some people don't know the elephants from the ants. Have you ever negotiated with somebody for whom every deal point is something that they have to win? You know, everything is compe- everything that's brought up, they have to win every deal point. I'm h- here to submit to you that that's a really dumb way to negotiate. This is a give and ta- You're, if y- if you're gonna try to develop relationships the way Nicolas said, or if you're gonna try to come out with creative solutions or whatever, you really don't want this, "I have to win every deal point" thing. So know where the elephants are and where the ants are. Be willing to u- to lose, uh, some battles to win the war. Yeah, Richelle?

   4. SPSpeaker25:46

      Does, doesn't that depend on what points are out there in the first place, though? Isn't, wouldn't it be to my advantage just to put points there that I know I'm, I don't feel so strongly about?

   5. SPSpeaker25:54

      Yeah.

   6. SPSpeaker25:54

      Wouldn't the other party be doing the same thing?

   7. SPSpeaker25:56

      They should be, and you should ... I mean, in really effective sort of win-win negotiations, you share with a, what you're trying to achieve. Lee Iacocca has a great line, um, you know, he was the guy that turned around Chrysler, and he said, "You know, when I want to achieve something, I tell the other party exactly what it is I'm trying to achieve and what price I'm willing to pay to achieve it." And that's really kind of the starting point, where it's, it's sharing infor- So there's a lot more sharing of information in that kind of a model of negotiation. It doesn't always, it's not always something you can do. Um, and then I, you know, getting back to these techniques, I would say don't worry too much about techniques. You have to be aware of them. You have to be ca- And it tells you something. If somebody's using ... I, I always think when somebody's shouting at me or walking out of the room or throwing things, there's information in that. It's like I, I had a partner one time in the real estate business who looked at a joint venture document that was this thick, and he looked at it and he picked it up and he says, "In any document that's that thick, there's something in it for me." [laughs]

   8. SPSpeaker27:00

      [laughs]

   9. SPSpeaker27:01

      And in a way, anybody who's throwing things and screaming and shouting and slamming doors or locking you in rooms or anything like that, there's something in that for you. You know, you can get the high moral ground, you can at least get information. So don't worry too much about them, but be aware of them. And then really understand what the other party, this is kind of back to the figuring the other person's BATNA, but if, the more you can understand their values, and I'll tell you stories in a minute that illustrate each of these. But the more you can understand really what it is that drives them, what's important to them, the more likely you are to craft a solution to things that satisfies what it is that's important to them. Um, so here, you've s- all seen this before, just to pause on it for a second. Those of you who dread negotiations probably have experienced some of this win/lose experience. Those of you who said you really enjoy them have probably experienced more

9. 28:02 – 32:30

   Seven stories from the field (Part 1): how a “win” mindset changes outcomes + negotiating with the wrong party

   1. SPSpeaker28:02

      of the, uh, the left-hand column. Okay, so here's, uh, seven situations that have sort of illustrated these points for me. And I, and I only tell you these not because I've had some unique negotiating experience, but because you may recognize in some of these things your own experience. You may be able to tie it into your own experience and internalize it in your own way so that it really does belong to you. The first one, I, I taught a negotiation session in the real estate course here at Stanford a number of years ago, and I had a version one and a version two of this. In version one, the instructions were, "I want you all to have fun." So this was a three-party negotiation. There was a buyer, there were two or three properties, a buyer, a seller, and a lender, and they had to come up with a tripartite agreement. And, uh, so everybody went off in these negotiating teams and made deals. The instructions were, "Have fun, be creative, learn everything you can about real estate and everything, and then just report back on your experiences." Well, here's what happened. There were reasonable deals made. They were made quickly. They were relatively easy to understand and document, and there was a lot of camaraderie. People came out of it saying, "Man, this is, this was a fun exercise. We like each other. Aren't Stanford MBAs cool?"

   2. SPSpeaker29:22

      [laughs]

   3. SPSpeaker29:23

      "Well, I just really love my classmates." So that was kind of the outcome. So that was negotiation 1.0. So then we changed the instructions. Okay, the objective is to win. You know, you're going into this negotiation, the idea is you want to win. Your grade's gonna be influenced by it, and the results are gonna be published in rank order, and you need to make a report on how you feel about it. What would you guess the change in results was?

   4. SPSpeaker29:48

      [laughs]

   5. SPSpeaker29:49

      Fewer deals made.

   6. SPSpeaker29:51

      Yeah, fewer deals were made.

   7. SPSpeaker29:53

      Slowly.

   8. SPSpeaker29:54

      They were made more slowly. A lot more time was expended. I mean, tons more time. People said this negotiation exercise took longer and was tougher than anything they had done at Stanford.

   9. SPSpeaker30:04

      [laughs]

   10. SPSpeaker30:06

       People were frustrated.

   11. SPSpeaker30:07

       People were frustrated, and they hated their classmates.

   12. SPSpeaker30:10

       [laughs]

   13. SPSpeaker30:12

       They said, "I will never do business with these turkeys again. I had no idea these people were such jerks." You know? And so it fundamentally changed the, by the mindset, and I set up the mindset, it was, I mean, it was my fault. But the economic outcomes weren't any better. They were fewer, as somebody pointed out. A lot more complex deals, a lot of them were unworkable, undocumentable, unenforceable, and the interpersonal relationships were strained. So you can see by having this mindset of we've gotta win and it's zero sum, and it was defined. I mean, there were so, I mean, there's so few things in most business negotiations, there was so little data, that was price, terms, time frames, warranties, and remedies were about the only thing people could work with. Well, I mean, they went in and just pummeled each other, just beat each other to bloody pulps. [clears throat] So that's, um, the first story. And I'll let you draw your own conclusions from these. The second one is, uh, when I was first starting in business, I had a deal that I was working on in Osca, or they say Osca, Spain. Did I do that right, any of the Spanish speakers? Osca. Um, and we were going into a bank there to borrow money, and we walked in and it was clear within a few minutes that they really weren't quite expecting us there, so they ushered us into this office with a guy that, you know, said, "Oh, well," you know, and so he sat down to listen to us. And as we were sitting there negotiating over, uh, financing this office building, two guys in white coats came in and they took the painting off the wall. Then a few minutes later, they came back in and took the credenza, and then they unplugged the phone and walked out with the phone.

   14. SPSpeaker31:51

       [laughs]

   15. SPSpeaker31:51

       Pretty soon they came in and took the desk, put it on a dolly, and went out with it. We're sitting there in these chairs talking, and all of the furniture's been moved out.

   16. SPSpeaker31:59

       [laughs]

   17. SPSpeaker31:59

       Well, it turns out this guy was not really the person who had anything to do with loan. He was just a courtesy party who said, "Well, these guys are here. They're from the United States. Make them feel good." And so the negotiation went on. Well, this kind of-- I will tell you that my point on this is it goes back to make sure you're negotiating with the right party. We had absolutely the wrong-- This guy could not have made any deal with us whatsoever, but we didn't check it out, so we sat there talking across an empty office about a deal that was never gonna happen. Well, that's an extreme example

10. 32:30 – 37:44

    Seven stories from the field (Part 2): power, “rules of the road,” and structuring fairness without shared valuations

    1. SPSpeaker32:30

       of something that we all do a lot of time. We end up negotiating with parties without power, without the ability to make a decision. So you really wanna think that through. The third one, uh, was also early on in my career. Um, I was a chief financial officer in my late 20s of a big, uh, big company, and I was supposed to, uh, make a joint venture with a life insurance company. And, um, so I'd studied all the joint ventures there'd been. I had figured out what I wanted on this deal and what a win-win. I mean, I had all-- I was steeped in all these things. And so I sat down with the, the very senior 50-ish life insurance executive and s- we started to go through the deal points, and there were eight or 10 of them. And about, after I'd been said, "No, we're not gonna do that," on about the eighth deal point, I rose, I rose from the ninth deal point and said, "You know, we really need to have this one. You've said no on eight of them." And he said, "Joel, sit down. Just take notes. Your job here is just to take notes."

    2. SPSpeaker33:28

       [laughs]

    3. SPSpeaker33:30

       You know? "We're not negotiating anything. Just take notes. We're the life company. We've got all the money. You're just the developer. Take notes."

    4. SPSpeaker33:39

       [laughs]

    5. SPSpeaker33:40

       And so it was clear to me that what that negotiation was about. That negotiation was not gonna be won in, in that series of discussions. But I was really going to just document it in a way that we had, um, a chance to do our business and we had options in the future. You know? So that wasn't the only option that I had. [clears throat] Limited partners. Um, I, I recall early on thinking that I wanted to develop a, um, a brand. I wanted to be seen as a certain kind of, uh, negotiator. And, uh, I-- Part of my brand was going to be that I would calculate exactly what a deal was worth and then I wouldn't budge on the pri-- I was, I wanted to be known as somebody who knew the value of what it was I was offering. And so if I said, "This is a million-dollar investment," I didn't wanna settle for nine hundred and fifty thousand. You know, I really wanted to say, "It's a million dolla-" And I guess if you want to trade two nickels for a dime, I'll do that, but I'm not gonna trade a dime for one nickel. So I really wanted that to be my brand, 'cause I realized I was gonna be in this business a long time and do hundreds of deals. So in l- in negotiating with these limited partners, I became very stiff on this, and it was only when I got options... A- and what happened to me in this, in, in one case was a guy said, "Well, I'm not gonna do the deal. I need to do the deal at nine hundred and fifty thousand, not a million." I went out that night and called another limited partner investor group and said, "I'll tell you what. If you'll do this deal at a million dollars, I can document the deal tonight and I can give you all these other things, but I need the agreement tonight." So when the guy called up the next day to resume negotiations, I could say, "I'm sorry, I've already done that deal." So I was able to establish that I don't move on price, and it worked for a while until the, the guy and I became really good friends. We ended up doing 300, uh, deals together over a 20-year lifespan, so a lot of transactions. About 50 deals or so into it, he said, "Joel," he says, "I just gotta tell you, I like to negotiate price. I don't feel good unless I can negotiate price. So if you want it to be a million dollars, tell me it's a million fifty."

    6. SPSpeaker36:03

       [laughs]

    7. SPSpeaker36:04

       "Just tell me it's a million fifty. I'll come back with a million, and then we'll both feel good."

    8. SPSpeaker36:09

       [laughs]

    9. SPSpeaker36:11

       And so we negotiated that. The last 250 deals we did, I would go in about five or eight percent higher than what I would accept. He would knock it down. He'd feel good and I'd feel good. So y- you're kind of going in and having sort of a- Sort of a reasonable ba- a, a r- what I'm calling ROR, or rules of the road. If you're gonna have serial negotiations with somebody, develop rules of the road. Senior partner, uh, departure. This is a situation, there was a billion dollar transaction, so it was a big deal, and this was 15 or 20 years ago. So it was a, a very significant transaction, and the partner came to me and said, "You know, I want to as- let's agree going into this negotiation, let's agree on values. Let's agree what these properties are worth, and then we'll make the trade." And on this particular case, I thought, "You know, the biggest mistake we could make was, would be to agree on the values. Let's disagree on the values. So you set up whatever, you know the properties better than I do. You value them however you wish, and then I'll select." And the very fact that we didn't agree on values allowed me to select deals where I thought I was getting more than my fair share. He then was able t- because he set values, he was fine, uh, with the, with the deal, 'cause he'd represented what the values were, and it was just applying the percentage to the values he'd set. So we were able to get a transaction, uh, done.

11. 37:44 – 39:45

    Brand and reputation: when being “too reasonable” invites exploitation

    1. SPSpeaker37:44

       My departure. So I left the Crowe organization with the reputation of being a conciliator, with the reputation of being reasonable, with the reputation of being a win-win dealer. I'd settled all the litigation that Crowe had had for 20 years, departing partners. I was seen as somebody who was litigation averse. And because that had become my brand, my negotiating brand, when it came to that, they filed litigation against me, realizing that, "He'll never fight. This guy's such a pussy, such a conciliator. He's such a giver, and he'll make everything," but that I really had no place to go. I had set myself up with my brand. So I want, from that, I want you to think very carefully about the brand you want to have. The last story is one that I think you'll remember.

    2. SPSpeaker38:33

       So what happened?

    3. SPSpeaker38:34

       Uh, we ended up in four years of litigation.

    4. SPSpeaker38:36

       Oh, okay.

    5. SPSpeaker38:37

       That, so I now have a new brand.

    6. SPSpeaker38:38

       [laughs]

    7. SPSpeaker38:40

       I'm now known as the ferret. [laughs]

    8. SPSpeaker38:43

       [laughs]

    9. SPSpeaker38:44

       No, it's, it's interesting because I, I think what my brand has become is I am somebody who is very reasonable, who will do win-win negotiations all... But if you get to the point where you cross me and my principles, or if you do something that I really think is completely unfair, then I become very stiff. So you don't wanna get into litigation with me, but you don't need to. So that's, that's a better brand than the brand I had before, which was, "The guy will never sue. He will never get into litigation." So you really wanna think carefully because that brand, and part of my message here is that there are no episodic negotiations. You may think it's an episode. You may think you're going in and having a one-off deal with somebody. That person talks to somebody else, who talks to somebody else, who talks to somebody else, and pretty soon everything is c- we live in a very connected world. So think carefully. If you're doing a lot of negotiation for a living, think very carefully about the brand you wanna have. Now, I apologize to my students,

12. 39:45 – 50:33

    The ‘rat’ email negotiation: elephants vs ants, inside negotiations, and redefining winning

    1. SPSpeaker39:45

       uh, former students for this next one because several of you have seen this, but I had a, a negotiation with my daughter over this last topic. So I'm out here teaching at Stanford, and I come out for basically 10 weeks, uh, when I teach here, and so she's back in another state and we correspond by email. I get back a couple of times. She and my wife get out a couple of times, but we're basically away from each other. So here I get this email from her. "Dear Dad,"

    2. SPSpeaker40:15

       [laughs]

    3. SPSpeaker40:17

       "Do you hear that I'm getting a rat? Won't that be cool? The pet store lady said that you can train rats to fetch and stay. I wanted to get mice because they're cuter and don't have dis- a disgusting tail, but mice just run away, and they never become your friends. Rats will sleep on you, and I'm sure, Dad, you'll become great friends with my rats."

    4. SPSpeaker40:35

       [laughs]

    5. SPSpeaker40:37

       "I'm thinking of naming them Ritzy and Scraps. Won't that be cute? And you can even see them when they're tiny babies. Take deep breaths if you're getting nervous."

    6. SPSpeaker40:46

       [laughs]

    7. SPSpeaker40:47

       "I will pay for them and the cage with my very own money. All you and Mom have to do is buy the food, which really doesn't cost much. I've already done everything else. I think I'm ready. It's okay. I can take care of them. I've proven I can take care of animals. I even sweep up the cat's barf."

    8. SPSpeaker41:02

       [laughs]

    9. SPSpeaker41:03

       "I can handle it, so you can trust me to take care of Ritzy and Scraps." They already have names.

    10. SPSpeaker41:09

        [laughs]

    11. SPSpeaker41:11

        "I hope you're doing well at Stanford." Isn't this warm and fuzzy?

    12. SPSpeaker41:14

        [laughs]

    13. SPSpeaker41:14

        "I'm doing well here, same normal things, practicing soccer, whining to Mom about getting rats. Just so you know, she already said yes."

    14. SPSpeaker41:22

        [laughs]

    15. SPSpeaker41:25

        Is this a negotiator? This is an 11-year-old kid. I mean, so some of this stuff, when, when I ask y'all, "Who are the expert negotiators?" I promise you, we are born knowing something about negotiations. "Just so you know, she already," oh, yeah, "I'm sure she's sick of the same conversations, 'Can I get a rat, Mom? Please? I'll do my practicing.' That's my secret in life, promise to do my practicing. Love, Elise." So here's this, th- this is the initial volley. This is the negotiating position. She's kind of laid out her negotiating position. So you're sitting out here 1,500 miles away thinking, "No way."

    16. SPSpeaker42:04

        [laughs]

    17. SPSpeaker42:06

        "She has crossed a barrier I'm unwilling to cross." So here's my response, and I want you to notice this because this is a nego- this is a real-life negotiation, and I'm gonna have you predict how it came out.

    18. SPSpeaker42:19

        This was right after you became the ferret.

    19. SPSpeaker42:22

        What's that?

    20. SPSpeaker42:22

        [laughs]

    21. SPSpeaker42:22

        Yeah. [laughs] Good point. Dear Elise, are you nuts? [laughs] I've been killing rats at the house in Woodside. They are not cute. They're not nice. [laughs] They're not controllable. They stink. They eat everything. They make little black poops everywhere. [laughs] And I have to clean up the mess. Just this week I bought some D-Con to put out where the rats live. [laughs] The next day I found a dead rat near the pool and another one trapped in the garage. Just to be clear how, about how I feel, I must inform you that we smashed its head in with a shovel. [laughs] I'm a negotiator, come on. [laughs] It was fat and ugly. By the way, I think its name was something like Ritzy. [laughs] In any event, one of the big reasons I was getting so excited about coming home was to get away from the rats out there. [laughs] Now I may as well stay, huh? [laughs] See how hurt? I'm just hurt. I'm appealing to this young daughter. Um, now what would you like next, a python? Or how about some Ebola virus? [laughs] Or maybe you could raise maggots. Anyway, I still love you and miss you and will see you next week. Love, Dad. [laughs] So how did this negotiation come out? Predict. She gets the rats. What's that? She gets the rats. She gets the rats, exactly. [laughs] She got the rats. Now, why would an expert professional negotiator with $10 billion worth of deals under my belt give in to this 11-year-old kid on some stinking rats? [laughs] Imbalance of power. [laughs] Oh. [laughs] That's a great point. [laughs] And besides, her mom had already said yes, so a real imbalance of power. To me, this is the difference between knowing the elephants and the ants. You know, I was willing to lose a battle to win the war, and the war, what I wanted to win-- winning for me, defining winning for me was raising a child who's responsible, who loves me, who will listen to me on things that really do matter. And so I was really willing to kind of take a different view of this. Now, get, now, the really gratifying part about this story is in the end, she gave the rats back to the pet store lady. [laughs] After the pet store lady had told her she would be feeding them to the snakes. So she disliked the rats as much as I did- [laughs] ... in the end, and she came away saying, "Dad, you were right about the rats." So now- What was the subsequent exchange like? Um, she, I arrived home and the rats were there. [laughs] That's what she said. Bother negotiating. No, no, no, it was done. You've got your daughter on your side. It was a done deal. Mom had already said yes. [laughs] It was, "Do you wanna hold them, Dad?" [laughs] No, I think I'll pass on that. So I think we've covered most of these, this idea of episodic versus serial. Think serial in your mind as you think about your brand. Outside versus inside. This last was a very much of an inside negotiation. You'll have negotiations with third parties and with people who are really close, whether they're employees, partners, brothers, sisters, children, spouses. The inside ones are by far the toughest negotiations. They're the least forgiving, and they're the most important ones to lose. So this idea that every negotiation is a competitive game that you have to win, it really helps you get over, the more inside negotiations you do in your life, the more that you realize you don't have to win, certainly not every deal point, and you don't have to win every negotiation. So don't think of it as a competitive game. This idea about select, I just like this quote, "Don't wrestle with pigs. You get dirty and they enjoy it." [laughs] So be very careful who you negotiate with, and that means generating options. That means always having other people to talk with and to, to do business with. It is the worst thing in life is to get in business with people that don't have the same values you have, who you don't respect. I mean, it is misery. It's a different kind of misery from just about everything you know except being married to somebody who makes you miserable. Um, then this idea of being reputation building. I've given you my examples of that, but here are some, uh, alternative reputations you can have. One is I'm tough, I'm unbending, the legal documents govern. I've known a lot of people who are that way, and often they're people who have a lot of money and a lot of law, uh, attorneys, and they really believe that's the smart way to do business. Guess what happens? In the end, they may not have a lot of money, they may not have the same position of power, and they may not have a friend when things go against them. Um, live by the sword, die by the sword. You can be flexible, be re-open, open to reworking. The, the life company joint venture partner I told you about who just said, "Take notes, Joel," turns out he was one of the most flexible partners you could ever have. So the documents were the documents were the documents. He couldn't negotiate them. He didn't want you to negotiate them. Just take notes. But when it came to working out the problems of living in the real world of doing business, he was extraordinarily flexible. And so I kept doing business with him. I probably did 25 deals with him over my life in real estate because he was such a great partner. He was a tough negotiator documenter, but he was a great partner. You can have this, um, reputation of being eager to make deals, where you just say, "I do a lot of singles and doubles. I don't do home runs." The other is that people, there are some people in the negotiating world who just say, "I only do home runs. If I don't get a four-bagger, if I don't hit a home run, if I don't win the thing, that's, those are the only deals I'll do." So you need to decide what your reputation is there. We've talked about these last couple. The, the last one is, uh, this Fisher, uh, Fisher and Ury, uh, trained problem solver, and we'll talk for a second about Fisher and Ury. Yeah, Connor.

    22. SPSpeaker48:37

        About one minute.

    23. SPSpeaker48:38

        Sure.

    24. SPSpeaker48:38

        You're talking about, um, basically being selective about who you negotiate. What do you do when you're in a situation where, um, let's just say there is a vendor that you need to negotiate with-

    25. SPSpeaker48:49

        Mm-hmm

    26. SPSpeaker48:49

        ... and they are, you, you really need their thing. There's, there's n- not another alternative out there. You don't agree with their values.

    27. SPSpeaker48:57

        Yeah.

    28. SPSpeaker48:58

        What do you do in that kind of situation?

    29. SPSpeaker49:00

        In some cases you just have to suck it up and negotiate with them. In some cases you can get another party in the organization you negotiate with. In other cases you can talk to them and say, "Okay, here's where I think our conflict is going," and get to a deeper level and talk with them about that. I used to have a partner that would say, um, to people, "You know, we're not making a deal on this. What would it take to make a deal?" And that was effective in certain circumstances, you know. What would it take to get this relationship on a better footing or to develop a, a more long-lasting give-take relationship? I mean, sometimes you can get that real with people. My, my view is, going back to the very beginning, is, uh, generate options so you don't have one vendor that you really rely on or one alternative source of financing or one... I mean, I like having a lot of options. So, um, and I, I realize that's a bit of a Pollyanna. You can't always do that. I mean, that, we just did a deal in one of the companies I'm involved in where the, they were about 40% of our business, and they were really import- We had to get that deal done. So consequently, we took notes [laughs] and got the deal done. So you're gonna do some of that. There is not a panacea to every negotiating problem. You are gonna deal with difficult people. You're gonna have win-lose negotiations. You're gonna have some things that you dread. Whatever. But I'm just saying you can nudge it so that it's a happier experience, it's a more of a win-win experience, and the better you choose parties. So here, here are, um, mindsets

13. 50:33 – 1:03:30

    Mindsets for better negotiation: conversation, durability, accountability, calm language, and likability

    1. SPSpeaker50:33

       that I've got when I go into negotiation. What time do we end, Marcella? Where'd Marcella go? Till 12:00. At 12:00? Till 12:00. So we have till 12:00. Are you happy until then, or, or are people wanting to get out of here? [laughs] We're okay? Then let's talk a little bit about these. And one of the con- one of the mindsets that I think is a really good mindset is that a negotiation is just a conversation. It's just an exchange. You're, you're good at conversations. You talk to people all the time. So this idea of, oh my gosh, we're going into a room, we're closing the doors, we're sitting on opposite sides of tables, you know, that feels a lot more threatening than I'm just gonna talk about our various interests and try to have a conversation to come up with something that's mutually satisfying. So think of negotiations as conversations, and you're good at them. Think of negotiations as a series, we've mentioned. Think that agreements, uh, suc- winning, it's go back to this idea of what is winning. The idea is that your agreement should be durable. There's no point in coming to an agreement that it terminates in a lawsuit six months later. You've not negotiated a good agreement. So you want them to s- there to be some elasticity, some sense, and usually that is a function of how much trust you've developed with your opposite party. If you've developed very high trust with your opposite party, once you come to an issue, the first instinct isn't, "Oh my gosh, let's go to the documents. What do the documents say?" Most of the good deals I've ever made have never once referred back to the documents. Not once. And some of these things have lasted 25, 30 year- I mean, my whole business career. We never, ever once go to the documents. Why? Because we like and trust each other, and these are real issues, and we sit down and we talk it through. So you want a durable agreement. So that's, that's another mindset to have. Another mindset is this thinking win-win. Another one is to recognize that you're accountable to o- A lot of times people think as the negotiat- they're only accountable themselves. I'm winning for me. There are very rare negotiations where you don't have broad accountability. It's to your employees, it's to the community, it's to shareholders, it's to a board. Sometimes this can be a very effective not-in-the-room party that you can use to give you, you some breathing room, to pause and say, "Well, I can't, I wouldn't feel right about this vis-à-vis the community. I don't really feel good about dumping this sludge into the river," you know? I mean, you really have an accountability. So this idea that there's an accountability outside your own interests is a good mindset to have. [clears throat] Watching your language. I don't think it works to curse, scream, swear, slam doors, walk out of rooms, even bluff. I think bluffing is a fool's game. 'Cause all you need to do is bluff once and have it not happen, and you have spent your reputation. You are forevermore seen as a bluffer. So my, my view on that is just never bluff. Never use what I call high velocity words. Just, you think of the words that just sort of raise people's emotional, uh, tension and their temperature. Just stay away from them. And if somebody uses them on you, ignore it. Don't let it work on you. Don't let your temperature rise. So watch your language and watch, um-

    2. SPSpeaker54:00

       What if it's genuine? What if you're, like, genuinely upset and you get frustrated? You know, you're not doing it for effect and you're not using a technique, but, uh, do you try to control it at all costs or-

    3. SPSpeaker54:10

       I, I think you should try to control it, and here's why. You know, if you, a- and part of it is you're setting a baseline. You know? What- whatever your baseline is, it's the variation from your baseline that will get effect. So if I say to you, "I will never agree to that," that's pretty powerful. If you know m- if you've negotiated with me a lot of times, for me to say, "I will never do that," I mean you really believe-- I've just screamed That out. Whereas if I'm throwing things around and cursing and, you know, a lot of histrionics, I can shout, "I'll never do that," and you'll say, "Yeah, yeah, yeah, okay, he'll come back tomorrow." So I think keeping the baseline, keeping the baseline really low is a very smart thing to do, plus it keeps your own blood pressure down. I did walk out of this billion-dollar deal that I did out here, where we were swapping a billion dollars worth of property. I sat with the partners in the room. There were six of them and one of me, and the most senior of them just said something that was just completely off the wall and unfair. And I just stood up and I said, "Gentlemen, it's been a pleasure to be your partner all these years. I'm so sad that it has to end this way. I'm catching my plane, uh, and I'll be gone. Give me a call in Dallas if you wanna talk about this." And it was that simple. Before I could get to the airport, I had a call from three of these partners to say, "Please come back. We wanna negotiate this." And it wasn't that I'd ... I, I had gotten up, I'd stood up when they said it. I'd left the room, but my speech was really that calm, and I think they took that as, oh my gosh, he is serious. He is really serious. And that's the message, that I'm really serious. That's the one I wanted to get across, not that I'm chapped and I'm out of control or ... Because people don't trust that as much. In the end, this idea of being trusted, you know, if you really wanna be an effective negotiator, be trusted. If the other party can trust you, over the long run you'll develop that brand and you'll develop durable agreements, high-trust relationships, creative solutions, relationships with others that you like, et cetera. So i- I'm just recommending it as a, it's a different mindset than a lot of people have towards it. Yeah.

    4. SPSpeaker56:28

       I'm just gonna reinforce that by saying also [coughs] in North America, and to some degree less in Europe, I've worked all over the world, getting angry may or may not work, but it's, it's not a big surprise when it happens. The rest of the world, I mean, if you're always calm, it translates across all cultures.

    5. SPSpeaker56:44

       Yeah. Yeah, it's kind of a universal language. Clarity-

    6. SPSpeaker56:49

       Flipping out over something in some cultures is just an absolute no-no, and you've lost them completely and you've burned all your credibility.

    7. SPSpeaker56:55

       You lose credibility. Yeah, you're seen as an unstable person.

    8. SPSpeaker56:58

       Here, people might or might not forgive you.

    9. SPSpeaker57:00

       Depending on the industry.

    10. SPSpeaker57:02

        Yeah.

    11. SPSpeaker57:02

        Some industries are full of wild people. [laughs] Yeah.

    12. SPSpeaker57:08

        Often we negotiate through a, through an intermediary, an investment banker, an agent, or an attorney who's actually negotiating a, an agreement. Would, would you use this as a model for find- for selecting an intermediary? Because that person can often have a tremendous impact on your brand as well.

    13. SPSpeaker57:27

        Absolutely.

    14. SPSpeaker57:27

        Because they might act completely, and they're off on their own, you don't really know exactly what they're doing either.

    15. SPSpeaker57:32

        I think you have to be very careful in who you select, 'cause they carry your brand. I've seen more attorneys foul up deals than actually facilitate deals. In fact, I select my attorneys in terms of are they deal facilitators, are they deal makers, problem solvers, or are they sort of egomaniacs who thr- who have to be right on every deal point, who have to draft the toughest document? A lot of times what you'll do in deals is you'll get attorneys fighting, and the attorneys will fi- and it'll destroy the deal and the relationship. So I, uh, number one is I try not to have very many intermediaries on the front line. I don't like to have agents, brokers, investment bankers, or attorneys negotiating my deals. I like to establish a one-on-one relationship with the other principal in deals. I really think that's the safest way to maintain your brand, and it's the way to create, uh, better relationships, to create better outcomes. It's more work in the short run. It's less work in the long run. Um, I think, um, there is a reason that people use these intermediaries, and I think they can be valuable, and I think it's always smart to have somebody outside the room, because negotiations are these real-time things where you're exchanging things back and forth, back and forth, back and forth, and you can make mistakes, and it really helps to have somebody, whether it's a board, a partner, an attorney or whatever, who can come in, refine, correct, smooth over. So I like to use them in all those things. And a, a lot of times I'll say, "I ju- I need to run this by my partners," or I'll need to, I'd be, "This makes sense to me, but let me check with the attorney or tax counsel or my accountant on this." So, you know, I like to have a little bit of a background, so I use them that way. But I never put them, say, "My attorney will negotiate with your attorney and make a deal." I think it's very dangerous. It's not to say it doesn't work. Yeah, but.

    16. SPSpeaker59:24

        I had a question regarding this idea of, um, um, just not, not really going above or below this kind of median. And as someone, I'm, I'm very emotive. That's who I am.

    17. SPSpeaker59:36

        Mm-hmm.

    18. SPSpeaker59:37

        And what, what I'm hearing is, you know, poker face, try not to get hooked into these things, try not to be emotional, which to me is really like if you said, "The best way to negotiate is if you're six foot tall," and I'm five feet tall.

    19. SPSpeaker59:49

        Yeah.

    20. SPSpeaker59:49

        So that, to me, it's like, okay, that, I, I agree. I can see how that would be effective. How would you-

    21. SPSpeaker59:55

        But you're just not six feet tall.

    22. SPSpeaker59:57

        Yeah. I'm, I'm not six feet tall, so how, how do I-

    23. SPSpeaker59:59

        And I think you start out by being yourself. Authenticity is something that will be measured by the opposing party, which i- which we'll go back to trust a lot. I'm just saying that the, the, that you can modulate. You can, you can keep the swings from being so wild. And, and that will help you. You know, it won't make you six feet tall, but it may make you five foot two.

    24. SPSpeaker1:00:23

        So it's okay to go up and down. You just can't spike or dip.

    25. SPSpeaker1:00:24

        I, I think you need to be yourself. I mean, I'm demonstrative, too. I mean, I speak with my hands. I wander around. I get, I get excited about id- I mean, it's who I am. So I be, I am that. But I just say there are certain things, there are thir- certain thresholds that I don't wanna cross because I spend a lot. If I cross those thresholds, I've spent something that doesn't return to me what it's worth. So if you're all over the map and around like that, you just need to realize you're spending something that's pretty valuable. And, and you don't have any place to go. You know, once you've cranked the volume up all the way, there's no place to go. So leave yourself a place to go, and I, I think moderating. Then the final one is, um, be likable, and I know this is, uh, I mean, you didn't come to Stanford to hear be likable.

    26. SPSpeaker1:01:08

        [laughs]

    27. SPSpeaker1:01:09

        Um, but I, when I went through litigation, I remember, uh, talking with I think it was opposing counsel after it was all over again, and, um, he said something like, "You know, I wanted to disli- I wanted to hate you. I really wanted to be as angry at you as, uh, the plaintiff was." He said, "Uh, but I couldn't help but kind of liking you," and he said, "And it influ..." He said, "I didn't want it to influence me. I'm a professional, and I did my job, but it still had an impact." So I talked to my attorney about it and he says, "You know, I've had the same experience where I've gone..." And he'd, he'd, uh, deposed Ivan Boesky. He'd, I mean, you go down the list, people. He'd been through a whole bunch of them, and he said, "You know, certain of them were really likable scoundrels,"

    28. SPSpeaker1:01:58

        [laughs]

    29. SPSpeaker1:01:59

        "And it made a difference. And others, you know, you just wanted to fry." And so this idea, there is something in all, even the most jaded, professionally trained litigator who does gladiating for, for a life, you know, says it makes a difference if you like the other party. So I think there is almost no upside in being a jerk, in being a turkey. I just don't think it gets you anywhere. Well, we're about out of time. I, well, let's just see if we've got any more of these. We've talked about agents, uh, being a principal. We've talked about lawyers as memorializers or agents, disputes. Um, you know, this is in the far end of the formal end of negotiation, whether you mediate, arbitrate, or litigate. Um, I guess my advice on that is they're all kind of bad outcomes, and you really want to avo... You really want durable, flexible agreements and trust relationships. If you have to get to these, uh, litigation and arbitration are not that different in terms of, l- arbitration may be a little shorter and a little less expensive, but you're still presenting information under rules of evidence, typically to a special master or a rented judge or something. So it's, uh, very much the same kind of thing. Mediation, that negotiation is a split-the-baby negotiation, so if you're right, you're gonna lose

14. 1:03:30 – 1:08:38

    Fisher & Ury: the ‘Getting to Yes’ framework and why it maps to relationships

    1. SPSpeaker1:03:30

       half. Uh, so I think you, you just wanna be, uh, so this is, again, in this very sty- uh, styli- formalized way. The rules of those negotiations very much narrow your outcomes, so just to be aware. Implementing the agreement, flushing out hidden agenda items, outbursts of front material that, that we've kinda talked about all of those I think. Um, so Fisher and Ury. Has everybody in here read, g- how many have read, uh, Getting to Yes? Only a few of you. It may be so old that people don't read it anym- It's still the classic book on negotiation. I would recommend it to all of you who wanna become a better negotiator. Written in 1981 by, uh, Fisher and Ury, two Harvard lawyers, and, uh, they talk about their negotiation in the salt talks and a lot of data on really sort of what works and what doesn't. They wrote another book called Getting Past No, so Getting to Yes is the first one. Getting Past No is the second one. Actually, the, the second one, though much less read. In fact, is there anybody in here that's read Getting Past... Okay, great. Not very many people have read it. It's actually, I think, even a better, more insightful book if you've done a lot of negotiating. Those are two really sort of good, practical academic texts that give you a good map, and I can usually tell when I'm negotiating with somebody who has studied Ury and Fisher. It's a different kind of a negotiation. It's actually quite pleasant. Um, so here's the, if you don't wanna read it, here's the Reader's Digest version.

    2. SPSpeaker1:05:01

       [laughs]

    3. SPSpeaker1:05:01

       [clears throat] I'm saving you time. You thought you were s- wasting an hour with me. I'm gonna save you a couple hours. Basically, the idea is separate the pe- so here are the four fundamentals. Separate the people from the problem, which a lot of people don't do. They merge them, you know? The problem's thorny, therefore I don't like the people. The people who have this issue that is brought before me, because I don't like the issue or it's putting me in an awkward position, I also don't like those people. You know, so there's a lot of confusion, so they say separate those two. Then focus on interests, not position. In other, in other words, what would you like to see happen? Not what position are you going to take or is the other party gonna take. Because positions are not necessarily related to what are really in your interest. People express positions that may not be the actual endpoint that reflects their interest. Then invent options together for mutual gain, where you think outside the box, you invent options. And then insist, if you can, this is the hardest one for me, is figuring out objective criteria. You know, what, what would be a winning deal? What would work? And then assess your deal against these objective criteria. That is the hardest one for me, but it, I, I've seen it work. And then finally for me, I'd say know your BATNA. Figure it out. Write it out. Know it going in, and my corollary to that is calculate the other party's BATNA so that you really know that it's not life or d- There are alternatives, and you'll be more likely to have successful negotiations. Um, now I'm gonna show you there, th- these are the f- again, more Fisher and Ury things. But, uh, if you'll just, th- this is how they deal with some of these dealing with problems and framing things, so I'm gonna flash this slide up and one other slide up and then have you think about what else this relates to. You know, discuss each other. Don't blame the opponent. See the opponent's intentions. See the situation, you know, uh, from their perspective. Give them a stake in the outcome. Um, you know, don't react to provocation. Step away. Don't respond reflexively. Be an active listener. Agree when you can. I used to have a friend that I negotiated w- a guy that became a friend that I negotiated with, who would start out every negotiation with all of the things we agreed on, so that you'd go through 10 items. He'd say, "Okay, we agree on this. We agree on this." And you got in this reflexive habit of just agreeing. "Okay, I agree to that. That works. I agree to that. That works. Okay, that's good." And you'd get down to then number 11 and 12 and 13, which were the tough ones. So, uh, these are things that Ury and Fisher, uh, discuss. Now what it, you know, I, I guess I'll just tell you, 'cause we are out of time, my take on this is this is marriage.

    4. SPSpeaker1:07:44

       [laughs]

    5. SPSpeaker1:07:46

       You know, this is how I've made a marriage work for 35 years, [laughs] is basically doing these things, and, and most of the relationships you're in are subject to negotiation. If you'll kind of listen to these best practices, your life will work better, your relationships will work better, and your conversations will be happier. Your agreements will be more durable, and most of the time you'll feel like you won. Most of the time you won't feel dirty, like you need to take a shower. Um, and negotiations won't be just eating your broccoli but will be something that gives you life, lets you express creativity, and build relationships. So, um, I'll hang around here after if any of you want to discuss this or have any questions, but thank you very much. [clapping]

Episode duration: 1:08:38