PDF Summary:Negotiation Genius, by Deepak Malhotra and Max Bazerman

In Negotiation Genius, negotiation experts Deepak Malhotra and Max H. Bazerman provide a comprehensive system for negotiating successfully in all areas of your life, whether you want to land a lucrative contract, get a raise, or split chores with your roommate. To be a “negotiation genius,” you must prepare extensively before a negotiation and learn to not only claim but create value. By applying the authors’ strategies, you can avoid common negotiation pitfalls, make attractive deals, and build stronger relationships.

In this guide, we’ll discuss how to apply the authors’ advice to prepare, create value, and maximize satisfaction in your negotiations. We’ll also look at common obstacles negotiators face and explore ways to avoid them or use them to your advantage. Throughout the guide, we’ll compare the authors’ strategies with those of other negotiation experts and supplement their advice with additional psychological insights.

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Malhotra and Bazerman give tips for creating value through logrolling:

Step #1: Identify your interests. Since logrolling requires trading between multiple items, you should first make a list of everything you value that the other side may be able to provide (when negotiating the purchase of a home, this could be price, move-in date, inclusion of furniture, and so on). Then, create a scoring system using a common metric, like a number of points out of 100 or a dollar value based on how important each item is to you. This method allows you to compare items more easily and decide whether to accept or reject their offer.

For example, if the person you’re trying to buy a home from offers to include some furniture in the price of the house (30 points) and lets you move in early (10 points), you might be OK if they don’t renovate their basement ahead of the purchase because you only value that renovation at 20 points.

Step #2: Identify your counterpart’s underlying interests. Discover their underlying interests by asking yourself why your counterpart is making their demands. This can clue you in to what they really want and help you find other ways to satisfy their needs, especially if you find their demands hard to meet. For example, if your counterpart demands a lower price, you might discover that they’re mostly concerned with wasting money on a faulty product. Instead of lowering your price, you might then offer a warranty.

Step #3: Discuss multiple issues at a time. To create more opportunities for logrolling, the authors suggest you introduce as many issues as you can into the negotiation. These might include timing, quality, price, contract length, warranties, and so on. Discussing multiple issues at a time helps you identify different priorities you and your counterpart have and allows you to make package offers. For example, if you care more about price and your counterpart cares more about timing, you could ask for a higher price for your product but offer to deliver it sooner.

How to Identify and Discuss Interests During a Negotiation

According to Malhotra and Bazerman, logrolling requires identifying both your interests and the other side’s interests to find ways for both sides to win. In Getting to Yes, Roger Fisher and William Ury also advise a flexible and open-minded approach when figuring out how to reconcile differing interests. They offer additional tips for negotiating with multiple interests and brainstorming creative ways to create value. Let’s compare their advice.

Like Malhotra and Bazerman, the authors of Getting to Yes suggest you look for underlying interests rather than focus on specific demands. When identifying your interests, they suggest you consider what basic human needs you want to meet, such as the desire for security, control, or recognition. Communicate those needs in detail to explain each offer you make. This allows the other side to understand your interests and contribute to brainstorming ways for mutual gain.

To figure out their interests, Fisher and Ury suggest you brainstorm with them. Consider setting up a brainstorming session separate from the negotiation as a time for you and your counterpart to share interests and generate creative options that can meet both of your needs. Try to create many options rather than figure out a single “best” solution.

While Malhotra and Bazerman recommend you consider multiple issues during the negotiation, Fisher and Ury suggest you generate more options before the negotiation. They give four steps to do so: Describe the problem, analyze the problem for potential causes and obstacles to solving it, list various possible strategies, and write down specific actionable steps to solve the problem. This method of thinking allows you to generate many options you can discuss during your negotiation.

Decide Whether to Make the First Offer

At some point during your negotiation, you must decide whether to make the first offer or allow the other party to make it. According to Malhotra and Bazerman, if you’re confident you know what your counterpart’s RV is, you should make the first offer. Having an accurate estimate of their RV allows you to make a good first offer that's sufficiently aggressive and allows you to capture the most value (as opposed to making an offer that's too weak or too aggressive).

The authors argue that the first offer largely impacts the outcome of a negotiation because of the anchoring effect. The anchoring effect is the tendency for people to be swayed by the first piece of information presented. By making the first offer, you set a reference point that the other side must adapt to. For example, if you ask for a high salary in a job negotiation, you signal to the recruiter that you have a lot of value. This makes it challenging for the recruiter to justify a much lower offer.

(Shortform note: In How Highly Effective People Speak, Peter D. Andrei explains why we’re susceptible to the anchoring effect: Our perception of the world is relative and we need reference points to make sense of things. For example, a student might feel happy about their score on an exam only to be disappointed when they learn that the majority of the class scored higher. Andrei argues that you can even use irrelevant anchors to alter people’s expectations. If you’re trying to sell a boat, for instance, you might talk about the prices of luxury cars with the other party beforehand. After discussing expensive cars, they may perceive your asking price for your boat to be much more reasonable, even though it’s a different vehicle.)

Conversely, if you’re uncertain about your counterpart’s RV, you should let the other side make the first offer. This way, you avoid making an offer that’s too soft or too aggressive.

However, if you let your counterpart make the first offer, you must resist being influenced by the anchor by shifting the focus of the conversation away from it. The more you talk about the anchor, the more it affects the negotiation. To pivot the conversation, you can reply that you view things differently than they do and shift the conversation to a different topic as a way to find common ground. Another way you can respond is by making an aggressive counteroffer and then suggesting both sides moderate their offers. You can then take control of the conversation by explaining why you made your counteroffer.

(Shortform note: You can better resist an anchor established by the other party’s first offer by creating an anchor for yourself before your negotiation. To do this, research relevant numbers and data before your negotiation—for example, the listing prices of other homes in the neighborhood in which you’re selling a house. This allows you to go into the negotiation with a preexisting frame of reference, making you less likely to be influenced by offers made by the other party.)

Who Should Make the First Offer?

The question of whether you should make the first offer in a negotiation or wait has been widely debated by negotiation experts. While Malhotra and Bazerman suggest you base your decision on how well you think you know your counterpart’s RV, other experts argue that there are other factors at play. Let’s examine different expert stances on who should make the first offer.

You: Like Malhotra and Bazerman, many expert negotiators encourage you to make the first offer if you feel confident in doing so. Some research has shown that the anchoring effect of first offers affects nearly all negotiation situations, regardless of culture, power levels, and the number of issues being negotiated. However, you might want to time your first offer differently depending on the culture. In certain countries (such as Japan), offers serve as information sharing and are offered at the start. However, in Western cultures, you should wait a little before making your first offer as this promotes more valuable and creative agreements.

The other side: Other experts argue that there are psychological reasons for letting your counterpart make the first offer: Negotiators who make the first offer tend to feel more anxiety and less satisfaction about the negotiation, even if they receive a better deal than they would have had they let the other side make the first offer.

What Should Your First Offer Be?

If you decide to make the first offer, the authors suggest you make a bold offer that you know your counterpart will reject. If you're buying, make an offer lower than their RV. If you're selling, make an offer higher than their RV. This way, you can keep the whole ZOPA open for negotiation. If you ask for an amount that’s lower than their RV (when selling) or make an offer higher than their RV (when buying), you give up some value right away. For example, if you think they’ll pay $15,000 at most for something you’re selling and you ask for $14,000, you lose $1,000 of potential value. Instead, you should ask for something higher than $15,000, like $16,000. Conversely, if you’re buying, and you think they won’t sell for under $15,000, you might offer $10,000.

(Shortform note: Some experts argue that a first offer must be both ambitious and precise to get the best results during a negotiation. For example, instead of a price of $15,000, you might ask for $15,599. Experts argue that asking for a precise number gives people the impression that you’re knowledgeable about the true value of what you’re offering.)

To avoid making an extreme offer that upsets your counterpart, you must have a way to justify it. Find a good reason and offer relevant information to your counterpart. You should also consider the context of the negotiation. Depending on the purpose of the negotiation and your relationship with the other side, you might want to adjust how aggressive your first offer is, especially since your goal is to also strengthen your relationship in the process.

(Shortform note: Making an extreme offer can also damage your credibility. If you're unsure about whether your offer is realistically ambitious or too extreme, consider giving a range of numbers but attaching different terms to different price points. For example, you might offer to pay more for a product that has an extended warranty.)

Make and Invite Fair Concessions

After voicing your initial offers, you and your counterpart will begin haggling—taking turns making concessions until you reach an agreement.

To ensure both parties take turns making concessions, you must invite reciprocation: Clearly communicate when you’re making a concession and state that you expect reciprocation. Practice being comfortable with silence and resist making further concessions if your counterpart doesn’t reciprocate.

When concessions progressively get smaller, it may mean that you’re approaching your counterpart’s RV and they’re less flexible about how much they can concede. However, be wary of the other side using this as a tactic to confuse you about their real limits.

(Shortform note: In Never Split the Difference, Chris Voss points out another technique negotiators use to signal that they’re at their limit: throwing in a non-monetary item. This method seems to primarily work when you’re haggling over price.)

What Concessions Should You Make?

Malhotra and Bazerman provide a broad framework for how you should approach concessions, but how do you start making concessions and what kind of concessions should you make?

Ideally, you should make a list of concessions before your negotiation, sorting them according to what’s important to you and recording your estimate of how valuable each might be to your counterpart. However, avoid making it obvious that you prepared your concessions ahead of time or else your counterpart will feel like they’re not genuine sacrifices and therefore less valuable to them.

Like Malhotra and Bazerman, other negotiation experts write that it’s crucial to make it clear that your counterpart must concede something in return. If, early in the negotiation, you concede without communicating that you expect something in return, you signal to your counterpart that they can get free value from you.

Use Influence Tactics to Make Your Offer More Attractive

Now that you’ve learned to gather information, create value, and overcome obstacles, let’s look at how you can make your offer seem more attractive by using psychology-based techniques and taking advantage of cognitive biases.

1. Highlight potential losses. People tend to fear losing things more than they care to gain things. To make your offer sound more attractive, focus on what your counterpart stands to lose rather than gain.

(Shortform note: You can further highlight potential losses by making what you’re offering seem rare and scarce. According to Robert Cialdini in Influence, how scarce an item is usually reflects how valuable it is, so people will be more strongly motivated to jump on an opportunity that seems scarce.)

2. Bundle negatives and split up positives. People prefer to face one big loss rather than many small ones and receive many small gains over one big one. For example, when asking for concessions, you might ask for them all at once. When giving concessions, split them up and offer them separately throughout your negotiation. This minimizes the pain of losses and maximizes the joy of gains.

Hedonic Adaptation and Loss Aversion Affect Our Perception of Losses and Gains

Hedonic adaptation might explain why we get more pleasure from many small gains over fewer large gains. Hedonic adaptation describes our tendency to grow accustomed to positive changes and return to a baseline level of happiness. It takes us more time to get used to numerous small gains than a single large one, which is why separating positives into smaller portions increases pleasure.

When it comes to losses, however, some studies show that people don’t experience loss aversion (or the heightened sensitivity to losses versus gains) for small losses, which runs counter to Malhotra and Bazerman’s belief. Therefore, it may be worthwhile to consider discussing losses separately if they’re small as this may make people less averse to them.

3. Use the “door-in-the-face” technique. Make an initial extreme demand that your counterpart will likely refuse. Then, ask for something less extreme—what you really want. Your second demand will seem like a concession and sound much more reasonable in comparison, which makes your counterpart more willing to comply.

(Shortform note: Getting your counterpart to say “no” to your initial extreme demand also gives them a sense of control, which Chris Voss writes is one of two basic emotional needs people have that affect how comfortable and cooperative they are during negotiations. After they say “no” to your extreme demand, they may be more willing to agree to your real demand simply because they feel more in control and believe they’re freely choosing to comply rather than being pressured into it.)

4. Use the “foot-in-the-door” technique. Conversely, you can make a small, easy demand your counterpart will likely agree to. Then, ask for what you really want from them. Because they already complied with your previous demand, they’ll feel committed to continue helping you.

(Shortform note: This technique is effective because people naturally want to behave in consistent ways. After agreeing to the first response, people may feel inclined to agree to the second simply to be consistent with their self-perception.)

5. Justify your demands. The authors cite studies showing that people are more likely to agree with a demand if you provide a reason for it—even if the reason itself isn’t very convincing. This is because our brains are hardwired to help others with legitimate needs to form mutually beneficial relationships.

(Shortform note: In Poor Charlie’s Almanack, Charlie Munger refers to this phenomenon as the reason-respecting tendency, which says that people tend to work and learn better when given reasons why they should do something. However, this tendency works even with illogical reasons because we naturally dislike doubt, so even bad reasons are better than none at all.)

6. Use social proof. People tend to base their decisions on other people’s actions and opinions. To make your offer sound more appealing, show your counterpart how other people are interested in what you have to offer. For example, if you’re negotiating a salary at a job interview, you might discuss offers you’ve received from other companies.

(Shortform note: Sometimes, showing that there’s high demand for what you have to offer can have the opposite effect: The reverse bandwagon effect, or the snob effect, causes people to avoid things because other people are interested in it.)

7. Give gifts to encourage reciprocation. The authors add that the size of the gift doesn’t matter. Any concession tends to make your counterpart feel more inclined to return something of value to you.

(Shortform note: In The Happiness Hypothesis, Jonathan Haidt writes that we have a strong obligation to repay others for evolutionary purposes: It encourages cooperation and increases our collective chance of survival. However, many people feel uncomfortable receiving gifts, precisely because of this strong compulsion to reciprocate. They may even feel like your gift is an attempt to control or manipulate them. Therefore, if you are offering a gift, it may help to do so more subtly or genuinely to ensure that your counterpart feels comfortable rather than suspicious of you.)

Overcome Obstacles That Affect Negotiations

Now that we’ve discussed the negotiation process, let’s look into some common obstacles during negotiations that can impede your ability to understand and communicate with your counterpart.

Cognitive Biases

According to the authors, cognitive biases are common errors in how we think, interpret information, and make decisions that can prevent us from negotiating effectively and recognizing ways to maximize value creation. To be an effective negotiator, you must learn to recognize and confront your biases, as well as those of your negotiation counterpart. The authors argue that it’s much easier to achieve a good outcome with a good negotiator than one who’s thinking irrationally.

(Shortform note: Malhotra and Bazerman focus on the ways cognitive biases can harm our negotiations, but other experts point out that these biases are, on the whole, necessary and even helpful in our daily lives. In Influence, Robert Cialdini explains that these biases are mental shortcuts that allow us to make quick decisions and thereby navigate the world effectively. Without them, we’d simply get overwhelmed trying to process every situation we find ourselves in. For the most part, these shortcuts lead us to accurate conclusions—that a crowded restaurant has good food, for instance.)

First, to recognize and overcome your biases, the authors suggest you try to adopt an outside perspective. You can do this by discussing your negotiation with an impartial expert or friend. You could also ask yourself how you’d view the situation if you weren’t involved. Also, the authors recommend you avoid negotiating under time pressure, which prevents you from thinking clearly. Consider separating the negotiation into multiple sessions to give yourself a better chance of catching potential oversights or flaws in your reasoning.

(Shortform note: Malhotra and Bazerman provide tips for getting different perspectives so you can make better decisions during your negotiation, but Ray Dalio writes in Principles: Life and Work that you must first adopt a truth-seeking mindset. He writes that your ego can discourage you from getting other people’s opinions, which is why you must commit to finding the truth even when you think you’re right. Because you won’t know what’s in your blind spot, you must practice humility and be fully receptive to other people’s viewpoints.)

Next, you should also help your counterpart deal with their biases so you can cooperate and agree on a mutually beneficial deal. Sometimes, the other person may act in a way that seems irrational to you—they may reject an attractive offer or get angry during the negotiation. In that case, you should try to give them more facts that they don’t know and try to understand why they feel or act that way. Likely, they simply don’t have enough information, are overwhelmed with emotions, or are influenced by factors you’re unaware of. Try to address the source of the problem and talk about how you can work together to meet their needs and interests.

(Shortform note: While Malhotra and Bazerman suggest you share information to resolve conflicts, others suggest you be more proactive and regularly seek feedback from your counterpart to make sure they understand what you’re trying to say. You can seek feedback and prevent misunderstandings in several ways: by asking questions, clarifying and reflecting back what they’re saying, and practicing active listening.)

Deception

Apart from recognizing cognitive biases, you must also learn how to handle deception during a negotiation. First, discourage lying by signaling to your counterpart that you’re well-prepared and have the ability to obtain and verify information. If you suspect that the other side’s lying, ask questions that you already know the answer to or ask multiple related questions that make it difficult for someone to keep their lies consistent. Depending on the situation, you should then decide whether you want to continue the negotiation or not.

(Shortform note: Some studies reveal that deception is shockingly common during negotiations, occurring, depending on what is considered deceptive behavior, between 30% to 100% of the time. Beyond signaling that you're well-prepared, you can also discourage deception by reminding your counterpart of their reputation. Other experts note that many negotiators resort to using underhanded tactics because they’re too focused on getting advantageous results in the short term. Perhaps, then, simply reminding them of the long-term implications of unfair tactics can discourage them from using them.)

If you distrust your counterpart but want to continue negotiating, consider proposing a contingency contract. A contingency contract is an agreement that leaves parts of your deal dependent on what happens in the future. For example, you may agree to buy your child a new gaming console but only allow them to play on school nights if they maintain an A in all of their classes.

(Shortform note: To make a contingency contract, each party must describe the event they expect will occur in the future and define the actions they will take in response. For example, you and your child may outline two scenarios: They will either maintain all As or get a lower grade. If the first scenario is true, they can play on school nights. If the second is true, your child will study an extra hour instead of gaming. Ultimately, while contingency contracts can help you thwart deception and mitigate risks if you’re uncertain about your counterpart’s promise, experts suggest you always consider whether the other party has information you lack. If your prediction of future events is inaccurate due to a lack of information, you might end up paying the penalty for the contract.)

A Weak Position

Sometimes you may find yourself negotiating with an extremely weak position with little to no bargaining power. In these situations, you might have a weak BATNA (few or no good alternatives) while your counterpart has a strong BATNA. The authors describe ways you can negotiate from a position of weakness:

Method #1: Focus on their weaknesses. Don’t reveal how weak you are to your counterpart but, instead, make their weaknesses apparent during the negotiation. The other side might also have a weak alternative, and they may need you as much (if not more) than you need them.

Method #2: Identify what differentiates you from your competitors that your counterpart also finds important. In doing so, you may overcome your weak position simply by highlighting your unique value.

Method #3: Leverage your weakness. If your position is extremely weak, the authors recommend you simply ask the other side to help you out of generosity and grant you some of your requests. By acknowledging your lack of power instead of negotiating aggressively, you might convince the other party to give more to you.

Method #4: Reduce the other side’s power. If possible, form alliances with other weak parties and negotiate collectively so that you can’t be pitted against one another. You can also directly combat the source of the other side’s power. For example, if you struggle to negotiate house rules with your roommate because they pay the larger portion of the rent and feel entitled to make more decisions, you could take on a side job to increase your income and contribute more to the rent. This way, you can reduce their power advantage.

Ask for Advice When Negotiating Without Power

Malhotra and Bazerman recommend several ways to increase your power during a negotiation, suggesting you only acknowledge your lack of power if you're in an extremely weak position. In Give and Take, however, Adam Grant writes that there’s no need to try to reduce the other side’s power or to increase yours. Instead, he suggests you lean into your powerlessness when communicating with all kinds of negotiators. He argues that you can better negotiate without power by asking for advice from the other party.

According to Grant, this form of powerless communication has several advantages: First, it encourages the other party to think more deeply about the negotiation so they can give quality advice (which might be a way to get them to reflect on their own weaknesses and the unique value you bring to the table, as Malhotra and Bazerman recommend). Second, it makes them more willing to help you. Advice-giving requires the other party to view the negotiation from your perspective, which establishes empathy rather than opposition and makes them more committed to helping you.