The Exchanges

Q Is there a preferred approach? I mean, there's listening, there's Asking questions of when someone makes an initial overture, does anchoring matter, all the behavioral things we know about?

A Yeah, this is a contested question in the literature and amongst the experts. It's interesting. The data is mixed. So picking up in your question, for example, do you go first or do you let them go first? The old schoolers say go first and lose. Let them go first so that you get information. And the new schoolers based on behavioral economics research and anchoring and this idea of putting ideas and framing, gaining the initiative and putting numbers in people's heads that stick, say you should go first. And a lot of the research bears that out. But I think it's actually mixed. I think you should have an idea for is the information you get when you let them go first worth the initiative you lose? In other words, if you let them go first, what are you gaining? How reliable is that information? And in most negotiations where the zone of agreement is really wide, your first offer basically tells me nothing about your budget. In math speak, your first offers in my data are very poorly correlated to budgets. Because we have 400 people doing the same case with the same budget on the same darn sugar bowl, and the offers are from 300 to 3300. So like, what have you really learned by letting them go first? At the same time, people who go first, the old schoolers say, ha ha, we're right, because they're not doing so well either. And what it looks like in the data is that the people who g…

AI assessment note: “this is a contested question in the literature and amongst the experts.”

Q So that first step is learning as much as you can about the person. Depending on the type of negotiation, what else do you need to think about before you even get started?

A You have turned that lens inward, right? What are your priorities? What do you want and why? And There's a bunch of things that are important, but I don't focus on them because I focus on the things that people aren't doing. So people generally know what they want. So I don't say, figure out what you want. They can do that already without me. But what they don't do a good job at is figuring out what they would choose if they couldn't have everything. In other words, what do you want with constraints? So like simple in a pedestrian example, you're buying a house, you want a short commute, but you want a big kitchen. Ok, but when you have to trade those off, the question you need to know before you go into that negotiation or before you go into that decision is, how many extra minutes are you willing to spend in traffic to get a kitchen from an eight out of 10 on your scale to a nine out of 10 on your scale? And there's no book that has the answer to that. You gotta get in your car and drive a commute. Oh, that would be my house right there. There it goes. How do I feel about driving another 15 minutes twice a day? Two weeks a year in a car just to get a nicer kitchen. Is there some other thing I should be doing? And so in a negotiation, it might not be about kitchens and commutes, but it'll be about how different issues trade off against each other. And you want to know your exc…

AI assessment note: “You have turned that lens inward, right? What are your priorities?”

Q If you're starting a course, or starting a negotiation, what are the first set of principles that people need to think about?

A I should be more of a framework person, but I'm not, and so I don't know in what order are the top three things, but I can tell you somewhere in the top 10 there's a few things. People Don't learn enough about the person sitting across from them before they meet them. And it's not sexy. It's not rocket science. A lot of it's just elbow grease. Like before I meet you three weeks ahead of time, if you and I are negotiating, I want to know what do you want? Why? In what order? And ideally I want to know what you'll pay for those things, but that might be a bit too much to ask from the information game. But I just kind of want to know like at least what are your top priorities? What's easy for you? What's hard for you? And the way I do that is I call people who know you or know people like you. I just spent a lot of time on the phone. And if I've gotten to you, if you are a gatekeeper of some sort, so for example, for my students, if they're dealing with a vice president of HR, it's only because they've done seven rounds of interviews with that same company and every single person has to like you or else you don't make it to the gatekeeper. So I often say, like, pick up the phone with one of those people you had rapport with, And pick their brain two weeks ahead of time. They're not going to give you the keys to the kingdom. They might not know them, but even if they have them, the…

AI assessment note: “People Don't learn enough about the person sitting across from them before they meet them.”

Q And once you frame out some of sort of what you're trying to accomplish, that's when you get into the emotions and how people behave in the context of the negotiation. And so how do you coach that aspect of it?

A I don't have a recipe there. I mean, it usually depends on the emotions and the context. I usually end up saying something like, well, they're not all wrong, right? Trying to figure out where the other side is coming from without demonizing them. You disagree with them, but like, they're not entirely, like, where are they right? They're right about something. When you're dealing with difficult people who see the world massively different from each other, an old school technique is called contingent agreements. And anyone listening will know what a contingent contract is, so if you sell more of this, you get more salary or something. In other words, my payoffs are based on different futures. But what a good negotiator does is if you and I disagree dearly and it gets emotional about, say, the future value of this company. So the founder might be overconfident. It's often, right? And the venture people might have more experience, more a sense of what base rate is. Yes. We might not do three hundred million next year, just saying. So when you have different opinions, and it gets really heated about different futures, it's similar to an earlier comment I made about not trying to predict the future, just planning for it. So a contingent agreement, what you do is, it's not, you think we're going to be this, and I think we're going to be that, and let's fight about who's right. It's in…

AI assessment note: “Trying to figure out where the other side is coming from without demonizing them.”

Q What are the common mistakes that people make at the stage of the game?

A I see two that ironically young, inexperienced negotiators don't walk away enough. And so sometimes Yale puts me in front of very successful audiences, and you're literally coaching billionaires. I went to Beijing, I'm coaching billionaires on how to negotiate, and I'm kind of wondering, like, wow, y'all could teach me something right now, and they do. They are very successful people, and experienced negotiators are very comfortable walking away. They'll walk away no problem, and it's something I'm trying to teach my students, and it's a fact, I think it's my biggest failure as an educator, I can't get them to do it. Cannot. And the only thing I can do is tell them how much I'm pleading. So I once made it a requirement to get a grade in my course that you had to walk away. I was teaching a seven-week course. You had to walk away at least once. And the other person just had to verify that you walked away. You don't have to walk away forever. You don't have to get no deal. Just leave the room. Be thoughtful. And I would give them coaching. I'm like, this is not nuclear. I'm not saying You don't have to say, you're a jerk, I'm out, I'm never coming back. Just saying, I don't know if I can do those numbers, let me go think about it. Have a Kit Kat break. Think about it. And as the class progressed, I'd say, show of hands, who's walked away? Nobody. One or two people. One of the two…

AI assessment note: “young, inexperienced negotiators don't walk away enough”

Q What teaching from your parents has most stayed with you?

A Got a bunch of step parents, so there's a list here. Stepfather, Didn't teach, but exemplified, like, wasn't a jack of all trades, but he'd done a lot in his life. Bush pilot, real estate person, and I once found his collection of ex-business cards, and just blew my mind as like, life is long, like you can taste a lot, and my mom wouldn't put it this way, but I say that my mom taught me to not pay 20 dollars for a 20 dollar bill, not even pay 19, If you're deal constrained, we're in real estate. If you can only do a few deals a year, you can't afford to pay 19 because there's better deals coming along. You just got to do them. And so she taught me, and I mean taught me, I would construct real estate deals that looked amazing, and she would say, that's amazing. Good job, son. We're not going to do that deal, though, because they're super amazing. And my father wouldn't even remember this, I doubt, Shout out to him. It was his birthday yesterday. He got a speeding ticket. I said, did you ask? Did you tell him it was your birthday? He said, oh, I forgot. I was like, well, okay, for your birthday, I'll pay for it. Anyway, one time we were in the grocery store, and there's a long line everywhere, and everyone was rolling their eyes and humming and huffing and puffing, and he said, he put his hand on my shoulder. He goes, look at all these people, how unhappy they are. He goes, why a…

AI assessment note: “my mom taught me to not pay 20 dollars for a 20 dollar bill”

Q What are the other things you need to think about in preparation?

A Well, you want to know what you want, why in what order, and exactly the exchange rate. You want to figure out in their side what they want in what order and why, and you can only hope to estimate their exchange rate. One thing that people do wrong is when I look at their planning documents that I make them write up, Their plan is more of a victory lap. Any good business person will kind of resonate like an inexperienced planner is just like, I'm going to do this and then that, then I'm going to dunk on this person and posterize that person. And, or they spend too much time predicting what will happen during the negotiation. So when thoughtful people prepare, one of the things that my colleague, Paul Bracken at Yale nicely points out is that people spend Far too long predicting what will happen in an exchange. And so in other words, you and I are negotiating in two weeks, and it could go X, Y, or Z way, and people will sit there and try to plan and think, like, is it going to be X? Is it going to be Y? And rather than predict which of the many possibilities we'll realize, just plan for, like, what will you do if X happens? What will you do if Y happens? So kind of contingency planning, and They have cliches, they hope for the best, prepare for the worst, and all of that, but just having a few medium, high, low plans of how things could go, and if you're really good at this, and…

AI assessment note: “you want to know what you want, why in what order, and exactly the exchange rate.”

Q All right, so now we've hopefully gotten this preparation done, and we're entering into the beginning of a negotiation. How should someone sort of think about what those first steps should be to present themselves in the right way?

A So it's not a very sexy metaphor, and the answer is so obvious it's basically a rhetorical question, but it turns out to be a powerful moment for many of my students. One of the very first thing I do before I teach anything is I just give them a page to read. So half get buyer, half get seller, and they're buying a gas station or a convenience store or whatever, hypothetically. And the way the class goes is they're going to go out in the hallway, and you've been in classes like these. You negotiate and get coaching and see how you do. Before I teach them anything, what I say is I'll pick someone randomly. Let's call her Susie. I say, this is basically rhetorical, but if Susie cheats, please don't, but if Susie cheats and reads Mark's sheet and Mark doesn't know, who's going to win? Everyone points and looks at Susie. And what's interesting about that is, and we don't have to know anything about Susie. We don't have to know if she's an introvert, an extrovert, if she's a slick talker, how firm her handshake is. All these useful things that would be probably good to have in a personality for a negotiator will pale in comparison to what she has, which is so clear. Massive information advantage. And so that silly little example, very pedestrian example, I say is, I want you to see negotiation This way as figuring out their sheet. And that simple metaphor can be a guiding light for …

AI assessment note: “if negotiation is figuring out their sheet, I asked, should you be talking or listening?”

Q And how about as someone, you know, different in mid-career or later career?

A Those people are usually in job crafting mode, like they can write their own ticket, especially if they get headhunted or poached by another firm. As you know, if another hedge fund approaches you, wow, you can really write your own ticket. And that's when the XYZ technique I was talking about earlier, like it's not naming your minimum price. That's not what I mean. It's naming your dream job, which is probably should be less about price and more about roles and responsibilities and progression through the org chart. In fact, for mid-career people, even young people with startups, when there's org chart flexibility, like if you're doing an internship, there's one place for you in the org chart. But as you progress through your career, or as you deal with young, flexible startups, I think that the people I coach focus way too much on money, and then sad at the end of the conversation, they're like, you know, right, Delian, I shouldn't focus on salary. It's signing bonus, right? No, no, no, that's not what I meant. You're looking for things that are valuable to you and cheap to them and where you are. And even if the deal is not negotiable at all, you should understand what the roadmap to success looks like and set yourself up in a position down the road. So title, I find that mid-career people negotiating the title is the number one thing I've seen. So if you're EVP and you want…

AI assessment note: “mid-career people negotiating the title is the number one thing I've seen”

Q Why don't we just quickly go through your background and how you got into this line of work?

A I've been teaching at Yale since 2007 full time. I co-teach with Barry Nailbuff, the core negotiations class that all MBAs have to take. And he's like the game theorist entrepreneur. And I come with a psychology sales side and we co-teach it. And Yale does this insane thing, which we We videotape all students negotiating the entire incoming class, and he coaches half of them, and I meet in my office and coach the other half, so I meet in January, a 180 some odd students in my office. It's insane, and so we watch their videos and see what they do right and give them coaching what they do wrong, and I teach my own stuff. I have some advanced electives. I do sales workshops. I've been doing this for a while now.

AI assessment note: “I've been teaching at Yale since 2007 full time.”

Q How much of the variability of outcome can get driven just by the preparation?

A I don't know what the right number is, but anecdotally, it seems like a lot of it, I should run the data, but it'd be so confounded with massive co-correlated variables. It's always the case that the person who's voted most prepared is also has one of the highest performance case ratings as well. And They just out plan it, and they talk to me, and they get advice ahead of time. I'm shocked at how few students do that. Hey, Daly, I've got this case coming up in your class. Any advice? You know? I'm not supposed to give too much advice, but yeah. Oh, geez, I've opened up a can of worms now. Maybe edit that out. But the people who prepare thoughtfully ahead of time just crush it. And one of the things I talk about in the class on day one, I have to give kind of a speech on not lying to classmates. On a case that's not even graded, right? Like, even a smart sociopath wouldn't do that. Because the grade doesn't matter, and the network does. And so don't reveal yourself yet. The stakes are too low. And so I talk about how people can crush this negotiation with integrity. And they don't have to misrepresent their interests. They don't have to lay them out on the table either. They can be honest when they talk to their partner. But if you ask me, what is your budget, Dalian? I will say, go pound sand. I'm not telling you that. No misleading there. So you can be honest with this, but us…

AI assessment note: “I don't know what the right number is, but anecdotally, it seems like a lot”

Q Let's go back to you now tried to structure contingencies. You're getting through the negotiation. What happens when there's another party involved? There's someone else who could derail the one-on-one agreement.

A Let me spin it. There's a million ways I could go with that question. Let me go this way. A lot of people ask me for negotiation advice, and I give it freely. I just ask for two weeks warning, and often they face a decision between, it's not quite the three-party dynamic you envision, but it's they face a choice between two parties, and they're wondering what to do, and it's a hard decision. It could be their dream job in Boston, strategy consulting, but they live in Darien and have Kids in private school, and they have to uproot their family, and what should they do? And they're upset about this, and excited about that, and it's just a mixed bag. They're torn. It's like an apples and oranges, and maybe the apple's a little shinier and newer or something. And I often say, like, can you negotiate a hard decision into a no-brainer? And that sounds kind of like cheesy fluff talk, but I'll give you some examples. It's really helped a lot of mid-career executives who get an offer, let's say, from Boston, It's a VP level offer. They're really excited, but they're sincerely hesitating. What I like to say to them is you tell that other offer, you say, this is amazing. This is my dream job. I went with you in grad school. I'd love to work with you, Ted. I'm so excited. How long do I have to decide? They really need to know by September. Then what you want to signal is you don't tell the…

AI assessment note: “Let me spin it... it's not quite the three-party dynamic you envision”