In this episode of the Hidden Brain podcast, Max Bazerman and host Shankar Vedantam examine how overconfidence and egocentrism can derail negotiations. The discussion challenges the popular notion that successful negotiation requires force or intimidation. Instead, Bazerman showcases how collaboration and considering others' perspectives often yield better outcomes.
The episode explores psychological biases like anchoring and overestimating one's contributions that lead negotiators to sabotage themselves. Bazerman and Vedantam provide techniques to overcome these pitfalls, such as adopting a neutral viewpoint and acknowledging others' roles. They also underscore the value of having multiple alternatives for greater bargaining leverage.
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Iconic movie scenes, like Vito Corleone's "offer he can't refuse" line from "The Godfather", have cemented the notion that negotiations require force or intimidation. According to Max Bazerman, this win-at-all-costs mentality promoted on screen often backfires in real negotiations, suggesting more collaborative approaches yield better outcomes.
Overconfident negotiation strategies driven by ego or overambition can lead to disaster. Real estate developer Robert Campo went bankrupt after aggressively outbidding Macy's for Federated, while JetBlue's bid for Spirit Airlines caused major losses as the deal collapsed over antitrust concerns.
Bazerman discusses the "egocentric bias" where people overvalue contributions from those similar to themselves while underappreciating others'. Studies show individuals claim over 120% responsibility for group tasks.
The anchoring effect causes rigid adherence to initial offers, hampering compromise. Baseball player Harrington missed career opportunities by anchoring to his agent's unrealistic bonus demands.
Bazerman and Shankar Vedantam suggest considering how one would feel if an offer were quickly accepted to gauge its fairness. Adopting a "veil of ignorance" by forgetting one's identity promotes neutral perspective taking. Acknowledging others' contributions reduces self-serving biases.
Having backup options, per Bazerman's "fall in love with three" advice, avoids desperation and suboptimal deals. Multiple alternatives enhance flexibility and bargaining power while deterring exploitation.
1-Page Summary
Iconic movie scenes, particularly those from "The Godfather," have profoundly influenced public perceptions of negotiation tactics.
The cinematic portrayal of negotiations in films such as "The Godfather" has created a lasting impact on how individuals approach negotiations in real life.
Marlon Brando’s memorable performance as Vito Corleone in "The Godfather" has left a particularly strong impression. In the film, he assures his godson of securing a movie role, previously refused by a Hollywood executive, through the infamous line, "I'll make him an offer he can't refuse." This line has perpetuated the notion that negotiation involves a degree of force or intimidation to be effective, influencing the public to potentially adopt a similar mindset in their own negotiation situations.
This portrayal suggests a win- ...
Influence of Iconic Movie Scenes on Negotiation Perceptions
Overconfident negotiation strategies often lead to disastrous outcomes. Two cases, that of real estate developer Robert Campo and the airline industry battle between Spirit, Frontier, and JetBlue, illustrate how such strategies can implode spectacularly, leaving companies worse off.
Robert Campo, drawn by both ego and business interests, ventured into the retail space in hopes of advancing his social status and influence. This craving for recognition heavily influenced his business decisions.
In a heated face-off with retail giant Macy's for Federated, Campo engaged in an aggressive bidding war. Although Federated's market value was estimated at around $3 billion, the clash inflated its cost to a staggering $7 billion. Campo, intent on victory, continued to hike his offer.
Campo's relentless pursuit to outbid Macy's, even after a failed side deal negotiation for Bloomingdale's, led him to raise his bid by an additional $500 million. John Rothschild, a financial reporter who studied Campo's actions, suggests that ego often clouds judgment, potentially causing significant financial distress. Campo's company spiraled into bankruptcy barely two years following the acquisition of Federated, removing him from his leadership role. This scenario stands as a stark reminder that prioritizing the win over a company's economic stability can have dire consequences.
The airline industry witnessed a tumultuous takeover attempt that involved Spirit, Frontier, and JetBlue, demonstrating how overambition can backfire in the corporate world.
JetBlue, known for its superior service and stronger financial status, made an unexpected offer for Spirit Airlines, aiming to penetrate the low-cost segment ...
Examples of Overconfident Negotiation Strategies Backfiring
The psychological landscape of negotiation is fraught with biases that can cause negotiators to inadvertently undermine their own success.
In modern collaboration, particularly remote and amongst diverse individuals, it becomes challenging to fairly evaluate and value others' contributions. Max Bazerman discusses the "egocentric bias," where people tend to attribute greater value to individuals who are similar to themselves, inadvertently failing to recognize others' contributions accurately.
Bazerman presents a phenomenon where individuals in partnerships or group settings overclaim their contributions. Partners in romantic relationships claim to perform over 120% of household work, and MBA students in study groups allege over 140% contribution to the work or ideas. Co-authors of academic papers each assert that they did more than their fair share. Bazerman suggests that individuals see their own efforts with clarity while overlooking others’ work, leading to insufficient credit being given to others involved.
Extending beyond mere contribution claims, Bazerman highlights that the failure to consider the other side's perspective is a key barrier to effective negotiation. By understanding and valuing who the others are in a negotiation and considering their perspectives, negotiators can become more strategic and, potentially, more successful.
Negotiators often become fixated on their initial offers, a phenomenon known as the anchoring effect. This can lead to rigid adherence to demands that may be unrealistic or inflexible, hampering the ability to reach a compromise.
A case study involving baseball player Harrington and his agent Tommy Tanzer illustrates the dangers of anchoring. Harrington was unsuccessful in securing a contract with the Rockies due to his agent setting an excessively high initial demand of a $4.95 million signing bonus. As negotiations broke down, Harrington went unemployed for a year.
Despite receiving substantial offers, including $5.3 million over eight years or $3.7 million without a long-term commitme ...
Psychological Biases That Lead Negotiators to Sabotage Themselves
Understanding the importance of considering others’ perspectives is crucial in many aspects of life, such as in negotiations. Bazerman’s anecdotes and Vedantam’s commentaries highlight different techniques for avoiding self-centered behaviors and fostering more equitable interactions.
Considering how one would feel if an offer is accepted can be a useful tool to gauge the fairness and reasonableness of the deal proposed. Bazerman's anecdote emphasizes the need for negotiators to evaluate the reasonableness of an offer, suggesting that a quick acceptance by the seller might indicate the offer was too attractive, possibly hinting at the item’s lesser quality or authenticity. He shares a story of a person who is offered a seemingly reasonable deal on a ruby ring in Thailand without much haggling. Bazerman recommends considering how you would feel if your offer were accepted quickly, which might show that the offer was not adequately thought out and that further research is necessary. Vedantam reiterates that a prompt acceptance could signal a lack of understanding about the purchase on the buyer’s part and the importance of educating oneself further.
Bazerman suggests that preparing thoroughly for negotiations makes one more effective because they have a better idea of what the zone of possible agreement might look like. For instance, obtaining information like the dealer cost of a car online allows one to make a more informed and reasonable offer during negotiations.
Max Bazerman elaborates on the concept of adopting a “veil of ignorance”, a principle proposed by the philosopher John Rawls. This technique involves consciously forgetting one’s own identity to consider justice and fairness more objectively. In practical disputes, this concept helps individuals think about what an impartial third party might deem fair. The use of the "veil of ignorance" in studies such as those concerning the allocation of scarce health resources, like ventilators during the COVID-19 pandemic, illustrates its application for impartial decision-making. Bazerman outlines the concept as a means to not ...
Techniques to Overcome Egocentrism and Consider Others' Perspectives
Max Bazerman and Shankar Vedantam articulate the importance of having multiple alternatives when entering into negotiations.
Bazerman explains a common scenario: the Sunday night real estate call, where potential buyers who have visited open houses seek advice on making an offer. They often become fixated on purchasing a specific house after receiving a counteroffer to their initial bid. However, Bazerman stresses the importance of having multiple options and avoiding the fixation on a single target. He suggests that having two or three alternatives empowers buyers to negotiate better terms, as they can counteroffer without the fear of losing the only option they have in mind. This positions them to avoid desperation, which could otherwise lead to accepting suboptimal deals.
Bazerman further mentions the concept of falling in love with three options as a sound strategy for most negotiations. Shankar Vedantam expands on Bazerman's points by discussing integrative bargaining, which involves negotiating multiple issues simultaneously. This method can enhance a buyer's bargaining power and provide the flexibility needed in negotiations like real estate. It spares the buye ...
Value of Multiple Alternatives For Leverage in Negotiation
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