Max Bazerman
Appearances
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
Publishers earn more from publishing more.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
When there's somebody who engages in bad behavior, there's always people around who could have noticed more and acted more.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
part of the path toward data fabrication occurred in part because he liked complex ideas. And academia didn't like complex ideas as much as they liked the snappy sort of clickbait. And that moved him in that direction and also put him on a path toward fraudulent behavior.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
And journalists love that stuff. They lap it up. Like signing a document at the top will make you more likely to be honest on the form?
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
So, you know, when we think about Ponzi schemes... It's named after a guy named Ponzi, who was an Italian-American who preyed on the Italian-American community. And if we think about Bernie Madoff, he preyed on lots of people, but particularly many very wealthy Jewish individuals and organizations. One of the interesting things about trust is that it creates so many wonderful opportunities.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
So in the academic world, the fact that I can trust my colleagues means that we can diffuse the work to the person who can handle it best. So there's lots of enormous benefits from trust. But it's also true that if there is somebody out there who's going to commit a fraud of any type, those of us who are trusting that individual are perhaps in the worst position to notice that something's wrong.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
And quite honestly, Stephen, you know, I've been working with junior colleagues who are smarter than me and know how to do a variety of tasks better than me for such a long time, I've always trusted them. Certainly for junior colleagues, for the most new doctoral students, I may not have trusted their competence because they were still learning.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
But in terms of using the word trust in an ethical sense, I've never questioned the ethics of my colleagues. So this current episode has really hit me pretty heavily.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
Undoubtedly, I was naive. You know, not only did I trust my colleagues on the signing first paper, but I think I've trusted my colleagues for decades. And hopefully, with a good basis for trusting them, I do want to highlight that there's so many benefits of trust. So the world has... done a lot better because we trust science.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
And the fact that there's an occasional scientist who we shouldn't trust should not keep us from gaining the benefit that science creates. And so one of the harms created by the fraudsters is that they give credibility to the science deniers who are so often keeping us from making progress in society.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
I think that my generation fought against the open science movement for far too long. And it's time that we get on the bandwagon and realize that we need some pretty massive reform of how social science is done, not only to improve the quality of social science, but also to make us more credible with the world.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
So many of us are attracted to social science because we think we can make the world better. And we can't make the world better if the world doesn't believe our results anymore. So I think that we have a fundamental challenge to figure out, how do we go about doing that?
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
In terms of training, I think that for a long time, if we think about training and research methods and statistics, that was more like the medicine that you have to take as part of becoming a social scientist. And I think we need to realize that it's a much more central and important topic.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
If we're going to be creating reproducible, credible social science, we need to deal with lots of the issues that the open science movement is telling us about. And we've taken too long to listen to their advice. So if we go from Data Colada talking about p-hacking in 2011, you know, there were lots of hints that it was time to start moving.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
And the field obviously has moved in the direction that Data Cloud and Brian Nosek have moved us. And finally, we have Samin Vazir as a new incoming editor of Psych Science, which is sort of a fascinating development as well. So we're moving in the right direction. It's taken us too long to pay attention to the wise advice that the open science movement has outlined for us.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
I do think there needs to be a reckoning.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
I would say we don't know that much about why the fraudsters do what they do. And the most interesting source you just mentioned. So Stapel wrote a book in Dutch called Outsporing, which means something like derailed, where he provides his information and he goes on from the material you talked about to describing that he became like an alcoholic or a heroin addict.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
And he got used to the easy successes, and he began to believe that he wasn't doing any harm. After all, he was just making it easier to publish information that was undoubtedly true. So this aspect of sort of being lured onto the path of unethical behavior followed by addictive-like behavior, behavior becomes part of the story.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
And Stapel goes on to talk about lots of other aspects, like the need to score, ambition, laziness, wanting power, status. So he provides us good insight. But most of the admitted fraudsters, or the people who have lost their university positions based on allegations of fraud, have simply disappeared and have never talked about it.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
One of the interesting parts is that Mark Hauser, who resigned from Harvard, And Ariely and Gino, who are alleged to have committed fraud by some parties, all three of them wrote on the topic of moral behavior and specifically why people might engage in bad behavior.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
We once even got to the point of our two families making an offer to a developer on a project to have houses connected to each other.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
You've written that universities protect fraudsters. Can you give an example other than Bolt, let's say?
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
And there is misconduct everywhere, from the universities.
Freakonomics Radio
Can Academic Fraud Be Stopped? (Update)
Because most people, if they're caught at all, they skate. There's misconduct at academic journals, some of which are essentially fake.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And certainly the fact that this happens year after year in the Harrington story is suggestive of the fact that the Harrington team with rotating agents continues to expect more than what the market will provide.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
Yeah, so the original offer was more in the $5 million range, and then a little over $1 million, and then $100,000. And we can see what's happening. The market is basically seeing him as a less valuable prospect as the time goes by. But first he escalates his commitment in year one, and then he anchors on prior numbers.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
and he's anchoring on numbers that the market does not see as appropriate or even worth paying in order to get him to sign. And as a result, he ends up working in a low-level retail context as opposed to ending up as a major league pitcher, which seemed to be where his future had been headed.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
Absolutely. And he seems to be a very nice human being who copes with these losses well. So you can certainly imagine that he had potential for a second career after being a major league pitcher in other aspects of sports.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
If we ask two partners in a romantic relationship, what percent of the household work do you do? Depending on the study, it seems to come in at 120 to 130 percent. More recently, Nick Epley and Eugene Caruso and I asked MBA students, who worked in study groups, what percent of the good ideas or what percent of the work came from you? And the sum total comes up to more like 140%.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
When we ask co-authors of academic papers, what percent of the work did you do? We come in at 140% when the sum total of the actual work has to be 100%. And what's going on is we all see the work we did do. We don't necessarily see the work that other people have done.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
So if we go back to my education, I was an accounting major a long time ago, which this leads to the notion that I should be able to do my own taxes. And when I spend time doing my taxes, my spouse doesn't give me full credit for that work. And meanwhile, you know, when it comes to walking the dog, you know, I'd say I average about a mile of walking a dog.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
Marla's more in the range of two or three miles a day. But I think that's because she likes walking the dog. I don't think she should actually get credit for the extra... the extra mile because it wasn't for the dog, it was for Marla. So you can begin to see the wide range of ways in which we can see our own work, our own contribution, but not see the work of others.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
So let's go back to the context where there's four people working on a project. Yeah. And we'll call them A, B, C, and D. Yeah. If we ask each of them, what percent of the work did you do? We get perhaps 140%. Yes. But if instead we ask A to write down what percent of the work was done by A, B, C, and D. Now, all of a sudden, I as A will think about B, C, and D in a more significant way.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
I'll realize that they, in fact, did do some important work. And that 140% falls. So the 140% as the sum total of what each claimed as credit for themselves seems to come down by about half of the over-claiming. They're still over-claiming, but it's down to perhaps 120%.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
So I engage in less over-claiming, but there's a problem still. And the problem is the fact that I'm thinking more about the topic, I become even more reluctant to deal with these other folks in the future because they didn't do enough work. I'm thinking more about them and my negative inferences about them go up as a result.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
So we reduce the over-claiming, but we don't create a more constructive group in this process. So one of the problems with over-claiming generally is if the other side doesn't do their fair share of the work, I don't want to work with them in the future.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
Sure. So John Rawls basically argues if you want to think about what a just society should look like, you need to put on a veil of ignorance. You need to forget about whether you're male or female. You need to forget about whether you're American or from Lithuania.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
You need to sort of drop all of your own identity to try to imagine how the world should operate if you didn't know what role you had in society. And across a number of studies, we find that getting people to try to put on a veil of ignorance allows them to think about what would be just in a much fairer and more objective way. So anytime you're in a dispute,
Hidden Brain
Relationships 2.0: Become a Better Negotiator
If you could get yourself out of the fact that you're the landlord or you're the tenant and think about what a fair resolution would be from the perspective of a third party, you're more likely to have a bearing on what would be a fair settlement to whatever dispute you happen to be involved in. And this idea of using the veil of ignorance comes up across lots and lots of different studies.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
So more recently with Josh Green and others, we even looked at the allocation of scarce resources. Like you could imagine who gets the limited health resources under COVID. And so imagine For example, there is only one ventilator left and whoever gets it lives and whoever doesn't get it dies. And the 65-year-old arrives two minutes before the 25-year-old. Yeah. And...
Hidden Brain
Relationships 2.0: Become a Better Negotiator
if we ask the question, who should get it, we find that people tend to be self-serving in the direction of which of the two people are more like themselves. So old people are biased toward the 65-year-old, young people toward the 25-year-old. But if we encourage people to think about what would be fair if they don't consider their own demographics,
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And now all of a sudden people realize that the 25-year-old has many, many more years to live than the 65-year-old on average. And now there's a shift among the older people we ask this question to to give this limited resource to where it can do the most good, consistent with what we think roles would mean by putting on a veil of ignorance.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And you're highlighting one of the important ways in which the game has changed. We deal with more people who differ from us today than we ever did before. And so we're dealing with people in different locations, from different ethnic groups, on a much, much more regular basis. And we're often doing it without seeing them face-to-face. So the farther people get...
Hidden Brain
Relationships 2.0: Become a Better Negotiator
both in terms of our connectivity to them and our identification with them, the easier it is to not place full value on what they're bringing to the deal.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
Yeah. So to begin with, you kind of already brought up an answer. To what extent can we put on a veil of ignorance so that we're not as biased by our own lens? We have found that people are pretty good at taking a neutral perspective if we ask them to, and to put on a veil of ignorance and think about that problem. So it's not that we're incapable of thinking about the other side. We simply don't.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And the more they're distant from us, the easier it is to ignore their critical role in a negotiation. So simply stopping and adopting in the perspective of the other side not only makes you a nicer person, but it strategically makes you a more effective person to understand who they are in the negotiation.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And the failure to consider the perspective of the other side is one of the key barriers that keeps negotiators from being more effective.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
There is something kind of over-the-top obvious about not listening to the other side. But so often in real life, we think of negotiations simply as a haggling session when we could be so much more effective if we think about it strategically by asking, how can I best understand the perspective in which they're making me an offer? To what extent do they need me in their firm?
Hidden Brain
Relationships 2.0: Become a Better Negotiator
What are they going to do if I don't accept their offer? This helps me to formulate how far I can push things to my advantage. It also provides a basis for understanding where there's interesting opportunities for trades.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
Yeah, he seemed to be on the search for his new adventure, and he explored a variety of turfs, eventually landing in the retail space.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
That's right. So sort of a wonderful example of what you just described is the work of Linda Babcock and George Lowenstein. They basically study people in a legal dispute. So everyone agrees that there's been an accident.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And what they find is that the plaintiff's role, the role representing the injured party, think that the case is worth roughly twice what the party representing the defendant thinks it's worth. And some people say, but it's only a simulation.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
It may only be a simulation, but once we put people in those roles, they begin to believe their side has some kind of moral justice to it that the other side lacks at a remarkable level.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
Sure. So first of all, why Sunday night? And the answer is the American institution of the open house in the residential real estate market. So Sunday is the most common day for people to post a time online about when their house will be open so you can go take a look at the house without having an appointment, house, condo, whatever.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And as a result, an awful lot of house visitations on the real estate market occur on Sunday. This means that agents are busy on a late Sunday afternoon, early evening as people sometimes decide to make an offer. So in an example of this story, I'm at home on Sunday night and it's 9.30 and my phone rings. And I pick up the phone and say hi.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And on the other end of the line is somebody who introduces themselves as a friend of a friend of mine.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And I like our mutual friends, so I want to be polite despite the timing of the phone call. And after introducing themselves as a friend of a friend of mine, they explain why they're calling. They looked at a house this afternoon. In fact, they've been looking at houses for the last three months. They've looked at over 20 houses. But today they found an amazing house.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And they proceed to describe it to me in intricate detail. They seem to be under the illusion that on Sunday night I care what it looks like. But they proceed to the reason for the call. So the house is listed for $599,000. Earlier in the day, at 4.30 in the afternoon, in fact, they made an offer for $550,000. So $599,000 offer, asking, and they offered $550,000.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And that evening, they went to our mutual friend's house for dinner. And about 10 minutes ago, the agent called back and said that the seller had countered at $5.85. Yeah. And they want to know what they should do next because they had been talking with their friend who said, I know what to do. Let's call Max. He teaches negotiation.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And when I get this call, and I promise you I've received some version of this call so many times, the first thing I ask them is, what are they going to do if they don't buy this house? Yeah. They typically respond with some notion of, Max, we didn't call you for how not to buy the house. We called you for advice on how to buy the house.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
So I've been trying to figure out, what are these people actually asking? And I think what they're asking is, Max, how do we get a great deal? And by the way, we don't want to run any risk whatsoever of losing the deal. And that question I know the answer to is, you can't. To get the best deal possible... you probably need to run some small risk that you'll lose the deal.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And if instead of feeling like I have to have this house at any cost, you had a second house or a second and third house that you liked almost as well, but you needed to repaint the kitchen. then all of a sudden you're empowered to counter in a way that runs some risk but allows you to get a significantly better price. So if the world ends if you don't buy this house, you should pay the $5.85.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
If there's another house where buying the other house would make you indifferent between that and paying $5.70, well, now you can counter at $5.60 knowing no tragedy is going to happen. You can always go to the other house instead.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
A lot of stories that we see in the acquisition world have people who have some ego interest in being on the front page of the newspaper and making the acquisition occur. And this can often lead people to depart from what we might think of rational action or what's best from a financial perspective.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And for most negotiations, falling in love with three rather than with one is a pretty good piece of advice.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
So I'll tell you a story based on my travels. So I've taught in Thailand a fair amount. And Thailand ends up being kind of a center for sapphires and rubies. So I'll ask you to imagine that you take a trip to Thailand.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And you're walking down Ceylon Road, a major market street in town. Yeah. And for some reason you know a little bit about sapphires and rubies. And you're walking down the street and in the window you see a beautiful ruby ring. And your first guesstimate is that it's worth about $5,000. Okay. But you don't want to pay anywhere near that because your knowledge is rusty.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
So you go in, you have a conversation with a store owner, and finally you ask to see that ring, and she pulls it out, and you ask how much would this ring cost, and she says, you know, that ring just showed up yesterday. I haven't even put a price on it. But in Thai culture, the first sale of the day brings you luck. So Shankar, make me a reasonable offer, and I'll do my best to accept it.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
and you're wanting to protect yourself and get a good deal, you pull out $1,000 out of your wallet. And you say to her, I can give you $1,000, but not a penny more. And she says, OK, I'll take it. How do you feel? Well, most people feel unhappy. Yeah. Because her quick acceptance tells them something. Yes. Like perhaps that isn't a ruby, but rather a red piece of glass.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
Now, perhaps before you offer $1,000, it makes sense to think about how would you feel if she accepted it? And this might tell you that I need to have the ring assessed by an independent party. before I part with my $1,000.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
Now, what's intriguing about this is had she haggled with you and allowed you to pay $1,700, you might have been happier, but that wouldn't improve the quality of the glass any more than with the story where you pay $1,000. Now, this may sound remote, being about a ring in Thailand, but many of us
Hidden Brain
Relationships 2.0: Become a Better Negotiator
end up being busy when we take a job in a new city and we have limited time to look at the real estate market. So we fly in and we make what we think is a slightly low offer and the seller says, okay, well, who knew more about the market, the buyer or the seller? Yeah, the seller did. Exactly. And again, this is an example, a different kind of example of what we earlier called the winner's curse.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
they're more likely to take your offer when you least want them to.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
Absolutely. And when we think about things more deliberatively in advance of negotiation, we prepare more thoroughly and we're more effective in negotiation.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
One of the aspects of the modern world is that there's so much information online. And this means that we can so often do our homework to have a better idea of what the zone of possible agreement might look like before the negotiation ever begins. So one of my favorite examples is the negotiation context that so many people find terrifying, which is going and buying a new car.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And what I find fascinating about the fact that people are terrified by this task is that it's so easy to get good information about the dealer cost of a car online. There's probably better than a dozen websites that will allow you to punch in the details of what you want to buy and find out the dealer cost. And once you do that, it allows you to have a very good idea of what the...
Hidden Brain
Relationships 2.0: Become a Better Negotiator
of what the zone of possible agreement should look like. And going back to your question, if you're going to put the number on the table, you want to put a number that's favorable to you, but yet reasonable enough that you're not so far worse than the other sides that they end up walking without wanting to talk to you anymore.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
So every morning, class started the same way. I was teaching a group of Thai students, and I was teaching negotiation. Of course, they want to know, does this professor actually know anything in the real world? And their favorite way of assessing this is to say, professor, where did you go last night?
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And after I would tell them, they would say, and how much did you pay the taxi driver to bring you home? Now, I need to put this into perspective. So this is before the taxi system changed in Bangkok to using meters. And before taxis used meters, you basically haggled. with the taxi driver.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
You'd tell them where you want to go, and they would make me an offer, which would be too high, and you'd haggle, and typically in about 40 seconds, you'd converge on a price. You know, the first few days, they laughed at me, and they would basically tell me that I paid 40 cents too much or 80 cents too much, and that gave them a great chuckle, and they were happy. But I would say within two weeks,
Hidden Brain
Relationships 2.0: Become a Better Negotiator
I had some increased credibility based on my sort of mastering the art of negotiating with the taxi driver. But then the problem showed up, and that was my spouse. She flies into town. We go for a long walk the first evening to go to a restaurant across town, come out of the restaurant, and – My wife, Marla, she's a bit tired from having flown from the U.S. to Bangkok that day. Yeah.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And I held down a taxi. And in my best tie, I say to the taxi driver, which I think means something like, can you take me to the Shell station by the corner of Jurongpon? And in response to this, he holds up seven fingers for 70 baht, which is basically worth $2.80 at the time of the story. A dramatically high price for the ride I was asking him about.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
So I respond by holding up three fingers, or $1.20. Okay. To which he responds with five fingers, or $2.00. Eventually, he comes down to four fingers or $1.60. I'm holding at $1.20, which I've already taken this ride for $1.20, so I know I can get it for $1.20. And he responds by driving away. So I held down another taxi driver who starts at a much more reasonable five fingers or $2.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
I respond $1.20. He comes down to four fingers or $1.60. And I respond with three fingers and he drives away. At which point, Marla, my tired spouse, says, what's going on? And I explained to her that they were both asking for $1.60 when the fair price is $1.20. And she says, so you're telling me I'm standing here because you're too cheap to pay an extra 40 cents?
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And I said, well, you have to understand, I have to explain to my students tomorrow morning how much I paid. And this did not impress my spouse at all. And so in this story, you have this notion of sort of is it worth the cost of disputing? So I was literally keeping my tired spouse awake on the streets of Bangkok, Thailand over 40 cents.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And you can easily argue that I could have paid the additional 40 cents. So you can see how getting a good deal can take over things.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
Absolutely. And to this day, I'm still guilty of when I'm looking for a hotel online or an airfare online. I over-search. to the point where I'm working for a wage that I wouldn't remotely accept if someone offered me work at that wage. So this notion of getting a good deal can become obsessive in ways that don't make a whole lot of sense.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
As soon as we have two or more issues in a negotiation, The parties are likely to have different valuations on those issues. And if we can find out who cares more about which issue, we can make wise trades that create value and make both of us better off.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
He basically ends up making a bid, but there ends up being kind of a bidding war. And in lots of different acquisition stories, we often read about the fact that company A buys company C at a very high price. And what we often don't think about is the role the company B played in it.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And that is that A and B ended up in a bidding war on who's going to get C. So we could think of the Campo story that you're telling where Campo ends up bidding against Macy's for Federated. And I can't see directly into the brain of Mr. Campo, but it sure looks like he wanted to win at any cost rather than make a financially successful acquisition.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
Yeah, so Campo approaches Macy's and basically says, I'll let you win as long as you in turn agree to sell Bloomingdale's to me. So it's basically a side deal between the two bidders, something that today's Federal Trade Commission might not look fondly at at all because there's a potential for antitrust collusion going on in the story. But Macy's basically turns down Campo.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
Macy's had already sort of doubled the value of Federated in the bidding war, yet Campo, being annoyed by Macy's rejection, turns around and bids another $500 million above Macy's budget. It's basically a completely irrational action where Campo is bidding to win at any cost rather than making any kind of wise financial assessment of whether this upping the bid makes any sense at all.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
He won. I once wrote a paper, I won the auction, but I don't want the prize. And it's an easy strategy for winning any auction. Keep on bidding until no one else wants to bid anymore. Yeah. He got federated, but he paid too much. And two years later, his own firm goes bankrupt, and he's ousted from his position as the leader of the firm.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
So it very much is a story of, I won the auction, but I don't want the prize, because the overall story that he inherits as a result of winning is not a very positive story. And it's now looked back on as sort of an example of irrational negotiation.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
Frontier made an offer to acquire Spirit Airlines. These are two poorly rated airlines. Financially, they weren't doing great. JetBlue... A airline that often had very good ratings for customer service and was doing fine financially decides that it wants to enter the low-cost market in a more serious way to potentially challenge Southwest Airlines, a leader in the U.S. low-cost space.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And they make an offer for Spirit that's more attractive than the Frontier offer. We get multiple rounds of bidding over an extended period of time in this story. And eventually, JetBlue seems like it won the auction. But in the process, the stock value of JetBlue plummeted by more than 50%. JetBlue kind of repositioned itself to be more of a low-cost airline, lowering quality of service.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
Customer ratings fell. And then... Eventually, the government doesn't allow the merger to go through based on antitrust issues. So the deal falls apart. And Spirit and all this confusion and turmoil did not do well either. And in November of 2024, filed for bankruptcy.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
As a pleasant, earnest, future pitching superstar bound for the major leagues.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
Yeah, so basically the agent convinces young Mr. Harrington and his parents that he's worth a very large amount of money. They agree to put a price tag at a very high number that they're – assuming that the baseball team will eventually cave in, and unfortunately, they don't. And Tanzer basically encourages Harrington to be patient and wait for them to cave.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And under the rules of the Major League Baseball system, a potential employee can only negotiate with one team in any specific year. And basically, Tanzer and Harrington pushed the team to the limit, and the team eventually says no.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And when that occurs, that basically means this superstar, who's been offered many millions of dollars in a variety of different forms, ends up being unemployed for the following year.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
Yeah, so just to put this in perspective, this is in 2000, so these dollars are very different than dollars today.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
But still, we're talking about a lot of money being on the table, and we're talking about somebody who doesn't have a college education, doesn't have a terrific alternative career outside of baseball, who's being offered around $5 million in a variety of different forms depending on the number of years that Matt Harrington would sign for.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And Tommy Tanzer, the agent, pushes the Harringtons to be patient and wait for more. Unfortunately, the Colorado Rockies, the baseball team, wants Harrington, but not at the price level that Tanzer and Harrington are demanding. And basically, no deal is created.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
So we have a very similar kind of phenomena here in terms of Harrington being disappointed that his market value has fallen so dramatically. So we can easily imagine that there is an anchor set by the prior year and Harrington's hoping for something in the range of at least what he passed on the year before. But during the year, he has not shown his potential. And his value has fallen.
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And basically, with over a million dollars on the table, and again, this is in year 2000 or 2001, he basically passes on the opportunity holding off for more. And he continues to not be able to pursue playing baseball at the level of the major leagues. And as a result, his value goes down and down and down over time. And
Hidden Brain
Relationships 2.0: Become a Better Negotiator
And Harrington never gets the opportunity to be a Major League Baseball player, perhaps because Tanzer and Harrington and then the following year, Harrington and his new agent are basically overconfident that they can obtain an amount that wasn't – in the first place.