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Thursday, November 29, 2007

Negotiating Florida Marlins' Style:
Beinfestival of Torture  

I'M PRO-TORTURE, AND I VOTE!
--bumper sticker seen by a college bud
on an H2 in suburban D.C.


[Podcast version link]

One of the foundation principles of negotiation is that many of the the rules change if you're unlikely to engage the other party in a collaboration or negotiation again. If you're not, then the ultimate win-win outcome, the fuel for face-saving and positive feelings that make starting and finishing the back-and-forth rasslin' closer to frictionless, isn't as necessary. Win as much as you can now, diminish or totally devalue the long-term returns you might get by giving away something you don't have to because you can get returns on it later.

In general, the exxxtreme opposite of the win-win negotiation, I'll call it The Beinfest, happens when:

  1. The pool of buyers and sellers is so vast that you can afford to kiss off any individual collaborator, 

    AND
  2. The natural likelihood of repeating a transaction is low.

So if you go to buy a car from a store on a strip of used car dealers, you're likely to go lot-to-lot, like a bee checking out a row of bottlebrush blossoms. The salesfolk know this, but they use it to their own advantage -- not only are you not likely to repeat a transaction with them if you're that kind of shopper, staff turnover tends to be pretty high in that field, so even if you want to go back to that lot, you may not find the negotiator who might have won your custom. So because of Angus' First Law of Organizational Behavior (All human systems tend to be self-amplifying), customers expect to be strip-mined and either resign themselves to it (amplifying the rewards, ergo the seller behavior) or riposte by playing strip-miner themselves. Even though the used car buyer is likely to buy another used car, the system is set up to prevent repeats by design.

Other purchases are close to once in a lifetime, like aluminum siding or a new roof for your home. The natural replacement cycle for those kinds of jobs makes it very unlikely a repeat collaboration/transaction is in the cards, so the sales behavior tends to be cheesier than normal. Regardless, if you like or don't like your siding job, it's not likely (not impossible, but probabilistically...) to affect another personal buying decision. Word of mouth might have some effect, but the seller puts that on the scale and it doesn't weigh enough to tip him to different behavior.

The assumption in the negotiation field that smaller systems and likely-to-repeat collaborations create gravitational fields that make strip-mining (I win, you lose) negotiation is widely-held, especially among followers of the cult of Economics.

Big systems, and socially-magnetic fields that make repeat collaboration unlikely is the standard environment for ugly negotiations that leave one party with a bad aftertaste evocative of Baltimore Memorial Stadium deep-fried burritos.

THE MARLINS IMPALE THE MODEL
But a story in this week's Miami Herald (via Baseball Think Factory) is showing that an innovative negotiator can reverse the magnetic field in the opposite environment, one conventional negotiating wisdom would say would never lend itself to win-lose.

The innovator is Florida Marlin front-office honcho-maximo Larry Beinfest, and the report of the innovation by Herald reporter Clark Spencer came out thusly:

The Los Angeles Angels nearly reeled in Marlins third baseman Miguel Cabrera not once, but twice recently. But both times, the Angels said Wednesday, the Marlins raised their trade demands and the deals fell through.

''We felt we had a deal with them twice,'' Angels owner Arte Moreno said at a news conference to introduce outfielder Torii Hunter and pitcher Jon Garland. ``They came back and asked for more. They're doing it to everybody.''

And Moreno said the Angels aren't the only team the Marlins are using that negotiating strategy with to trade Cabrera. He said it is his understanding the Los Angeles Dodgers also nearly had a deal in place for Cabrera, only for it to unravel at the last minute because of the Marlins' increased demands.

A standard foundation of Western negotiation methods is the narrowing-difference, where the back-and-forth works something like this:

I'll give you 20. 

I can take nothing less than 35

Twenty-five.

If you'll pay cash, I'll give it to you for 30.

Throw in a volume buyer discount on my next purchase, and I'll give you 28.

Deal.

Each party declares an opening offer, then works towards the other's point, sometimes offering something besides price to allow each side to compromise without losing face. ┬┐But what happens when one party simply enjoys seeing the other lose face, or doesn't have to fear serious consequences, or simply doesn't buy into the Western standards?

Nothing is as irritating as to come to a point in a negotiation that is a rough agreement and have the opposite party make a counter that ignores previous components of the agreement, something like: I'll give you 20. I can take nothing less than 35. Twenty-five. Forty-five... 

If you feel your opposite is desperate, or you don't have to make the deal, or if there are other buyers, you might try The Beinfestival of Torture. If the person across the table is desperate or merely impatient enough, she might let you get away with it. Baseball is a closed enough system that conventional wisdom would argue it's a losing proposition to try a Beinfestival of Torture, but the extreme closed-system nature of Baseball (limited-supply of excellent talent, limited number of possible needs patterns) means a negotiator might be willing to burn others, calculating that if he has something valuable a few years later, the burned party would be more likely to overlook the prior tort and do business again.

BEYOND BASEBALL
I saw the Beinfestival approach unfold up close about seven years ago and I'm still getting even with the opposing party. I was helping a family member negotiate the sale of her condo. She lived in one of those near-suburb apartment complexes that has a bunch of identical, adjacent big buildings, and the market was a bit soft. The agent she signed up with to represent her lived in her building, a super-nice old guy I'll call Beauregard, and he basically only worked on properties in the complex. I was concerned he was "too nice", but I thought I could counterbalance that with some unemotional involvement.

They got a very quick offer for the apartment for the selling price. My relative was thrilled, which, it turns out, was the plan of the buyer's agent (let's call him Walter Briggs). In Briggs' mind, that's when the negotiation opened, not closed. He stalled for time, coming back with a lower offer combined with a demand for repairs, some useful, some just random, all aggressively delivered in a way designed to be intimidating, and every time he did this, the agent on our side, Beauregard, encouraged us to comply in full to get the deal done, knowing that his dollars-made per time allocated to the deal was as likely to stabilize by acceding as it would trying to get a better price (plus, as it turned out, Beaureagrd thought if Briggs "liked" him enough, Beauregard would make it up for this bloodbath on with further sales) . This cycle happened either three or four times, my relative getting more and more desperate not to start from scratch, feeling her time/energy investment in the deal slipping away (In for a dime, in for a dollar). And, of course, Walter Briggs recognized that smell. Against my counsel, she met the increasing demands 100% of the way 100% of the time, and while she didn't actually lose money on the deal, she had a serious life need to make some on it, and she didn't.

And Beauregard has sold a few more condos to Briggs clients (with no better results for his own clients), but, like GMs negotiating with Beinfest, he knows what to expect and how to limit the pain of the torture (to himself, anyway). He can go back and collaborate on a deal with Briggs again; the market for condos in that complex is constrained enough -- limited supply, limited number of potential buyers' needs patterns -- that he's willing to jump through flaming hoops he knows will be there.

On the surface Briggs' calculation worked out for him just as, I suspect, Larry Beinfest's ploy will work for him in this negotiation for Miguel Cabrera's services. The only difference is Briggs has been suffering an inexplicable multi-year parade of minor but costly and irritating business problems ever since that negotiation, a torturous counter to his Beinfestival methods.

As Joe Sarno said: "Karma's nothing but justice without the satisfaction. And justice doesn't exist."

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