When we head into a negotiation — whether we're asking for a raise or trying to get our spouse to do the dishes — our focus is usually on getting the other person to agree to our preferred outcome. What we don't focus on are our own biases and blind spots. Behavioral scientist Max Bazerman studies the theory and practice of negotiation, and he says that paying attention to these biases can help us to craft better deals.Do you have a follow-up question after listening to this episode? If you'd be comfortable sharing your question with the Hidden Brain audience, please record a voice memo on your phone. Email it to us at [email protected]. Use the subject line “negotiation.” Thanks!
Chapter 1: What is the common misconception about negotiation influenced by The Godfather?
This is Hidden Brain. I'm Shankar Vedantam. More than five decades ago, an iconic scene in an iconic movie damaged the way millions of people thought about the art of negotiations. In The Godfather, Marlon Brando, playing the role of mafia boss Vito Corleone, is approached by his godson, Johnny Fontaine.
The younger man wants a part in a movie, but a big-shot Hollywood executive refuses to give it to him. The mafia leader assures his godson that he will get the role. How? Vito Corleone says of the Hollywood exec, I'm going to make him an offer he can't refuse. By the standards of 1972, what follows is violent and gory.
Suffice it to say, the Mafia Don scares the Hollywood executive into giving his godson the role. For decades now, that memorable line, I'll make him an offer he can't refuse, has helped inform how millions of people think they can get their way in negotiations. If you want a raise, or a business deal, or an agreement to end a war, you do it by arm-twisting.
If you can make me hurt badly enough, I'll give you what you want. Today on the show, we explore the science of negotiation. What researchers have found about the art of crafting a good deal is more nuanced and more uplifting than the lessons of mafia movies. How to become a better negotiator, this week on Hidden Brain.
When we head into a negotiation to buy a new car, to get a refund, to figure out how to divide household chores, our focus is usually on getting the other party to agree to our preferred outcome. We focus on all the ways the other side can be obstinate or intransigent. What we don't focus on are our own biases and blind spots.
At Harvard Business School, behavioral scientist Max Bazerman studies the theory and practice of negotiation. He says understanding those biases and blind spots can help us craft better deals. Max Bazerman, welcome to Hidden Brain. Thank you. I'm delighted to be with you, Shankar. Max, I want to start with the story of a man named Robert Campo.
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Chapter 2: Who was Robert Campo and how did his negotiation style lead to failure?
In 1987, he was featured in Fortune's 50 Most Interesting Business People. He was a real estate developer from Canada, but I understand he had a burning ambition to be more than a real estate developer from Canada?
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.
I understand that some of this was not just about his business interests. He also wanted to be a somebody. He wanted to be invited to the right parties. And so part of his explorations of acquisitions was connected to him wanting to be a mover and a shaker.
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.
So Robert Campo was a very colorful character. I want to play you a clip featuring the financial reporter John Rothschild, who wrote a book about him. The reporter is talking with public radio host Terry Gross about what happened when bankers trying to execute a deal for Robert Campo once tried to contact him.
They tried to get back to Bob Campo, but he was off having a facelift. He always had other priorities besides his business. The sideshow in this story is his self-improvement, his flying around getting injections for longevity and facelifts and having people following him squeezing fresh orange juice every 15 minutes because he didn't trust it if it was older than 15 minutes.
And so he sort of had a designated orange juice squeezer for a time.
So presumably between shots of freshly squeezed orange juice, Robert Campo decides he wants to acquire a company called Federated. It's the parent company of the celebrated department store Bloomingdale's, as well as other merchandise stores and supermarkets. There's only one problem. He's bidding against Macy's, which also wants to buy Federated.
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.
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Chapter 3: What happened in the Spirit Airlines and JetBlue bidding war?
When we come back, how we self-sabotage our negotiations and how we can do better. You're listening to Hidden Brain. I'm Shankar Vedanta.
This is Hidden Brain. I'm Shankar Vedantam.
When most of us think of a negotiation, we focus on the people we are negotiating with. We ask ourselves what's going on in their minds and how we can take advantage of their flaws and foibles. Most of us don't ask ourselves about the flaws and foibles in our own minds. We don't ask how we might be making systematic mistakes as we negotiate. It turns out this is a huge blind spot.
At Harvard Business School, negotiation expert Max Bazerman has studied the many ways negotiators foil themselves. Max, you've written about the career of a very promising baseball player named Matthew Harrington. In the year 2000, he was profiled in USA Today and Baseball America. How did those articles describe him?
As a pleasant, earnest, future pitching superstar bound for the major leagues.
So he entered the draft in the year 2000, and he signed up with a major agent named Tommy Tanzer. What were the discussions before the draft happened in terms of how he was going to perform and what kind of income he could expect to receive once the draft was done, Max?
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.
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.
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.
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Chapter 4: How do our own biases sabotage negotiations?
Yeah, so just to put this in perspective, this is in 2000, so these dollars are very different than dollars today.
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.
Chapter 5: What lessons can we learn from Matthew Harrington's failed baseball negotiations?
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.
So after holding out this first year, he gets a second shot at the big leagues the following year. Matthew Harrington switched agents and entered the Major League Baseball draft again. This time, the team from San Diego chooses him as the 58th overall selection. But the final offer they make is $1.25 million over four years with a $300,000 signing bonus.
Now, that's significantly less than what the Colorado team offered him a year earlier. And it's also less than what you know, Tommy Tanzer had promised that he would get when he became, you know, this baseball star. So what happens in year two?
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.
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
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.
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.
So I understand that in year three, he comes back to the draft again. This time he's chosen as the 374th pick by the Tampa Bay team. And now he's offered less than $100,000. Now, of course, you know, he'd been previously offered, you know, three plus million dollars and then one plus million dollars and now $100,000. And each time he says, you know, how can I be offered so much less than my value?
He becomes the longest holdout in the history of Major League Baseball.
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Chapter 6: How do overestimations of personal contributions affect relationships and teamwork?
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.
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%.
In other words, you're focusing now on the contributions of the other people rather than on your own contributions. Right.
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.
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.
So one way to apportion credit properly is to follow the advice of the philosopher John Rawls. Can you explain what you mean by this, Max?
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.
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Chapter 7: What is the 'veil of ignorance' and how can it improve fairness in negotiation?
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,
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.
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...
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,
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.
I'm wondering, in the modern world in which we live, Max, there are so many ways in which we now collaborate, not just with people face-to-face who are working down the corridor from us, but people who are working remotely, people who are working in other parts of the world.
I would imagine that the challenge of apportioning credit fairly, of understanding what other people might be contributing, of understanding in a negotiation what somebody else is giving, becomes so much harder now than it was before. Absolutely.
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...
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Chapter 8: How can we overcome challenges in modern, remote, and diverse negotiations?
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.
And how do you fix that? Because, of course, I don't know if we're going to go back to a world where all of the negotiations are always going to be face to face. I mean, we are in a world now where, for better or worse, we are stuck with, you know, virtual communications and handoffs that can span many, many time zones.
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.
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.
And the failure to consider the perspective of the other side is one of the key barriers that keeps negotiators from being more effective.
I want to play you a clip from the television show, The Office. In this clip, Michael Scott, played by Steve Carell, has quit his job as the manager of a paper supply company and started a rival firm. Michael and his business partner are now negotiating with the chief financial officer of his former company about selling their startup.
Michael, in order to expedite these negotiations, we are prepared to make you a very generous offer. And we are prepared to reject that offer.
Michael, you haven't even heard that. Never accept their first offer.
$12,000.
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