THE TEN WORST THINGS YOU CAN DO IN A NEGOTIATION

The best negotiator I knew always acted like an idiot. He acted so well that I thought he was really stupid. I also thought at the time that he was my best friend.

That was probably an act also. Just two years later he stopped talking to me forever.

I ran into him in the street the other day. He smiled and shook my hand. I felt warm, like he liked me again. Then he was gone.

Negotiation is first about warmth. Two sides deciding if they want to be friends with each other. If they want to be in the same tribe, fighting side by side in this harsh world.

After that it’s about vulnerability. Making yourself into the type of person someone else wants to take care of.

This is not a mystery. When a baby is born the negotiation begins. It lasts until at least the baby is an adult.

My oldest turns 16 tomorrow. She negotiates with me every day. I love her. But maybe that’s what makes her such a tough negotiator.

I’m not so good at realizing where all the boundaries are.

Between the outer me and the inner me. Between the me that always loves her and the me that wants her to love me back.

I guess that’s how I am with everyone. If they don’t love me back, I’m afraid, I’ll be less happy.

If I’m honest where the boundaries are, then we can begin to set up the rules. Then love begins.

Tricky!

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I’ve probably seen over 1000 negotiations in action. I’ve probably been directly involved in 100 or so.

Every day life is a negotiation. I’m not talking in this post about the every day negotiations although the same rules apply. I’m talking about negotiations where careers and money and reputations and maybe love is at stake.

For me, that latter is the hardest. So take my advice with a grain of salt. In fact, I’d rather tell you all the ways in which I’ve messed up in negotiations. Because this is really the classroom I learned in.

A) IF YOU HAVE A SMALL LIST OF TERMS, YOU LOSE.

Let’s say you are selling a company. One side is usually focused on the final price. That side will henceforth be called “the loser”.

Make your list bigger: what are the terms of the non-compete, what is the length of the earn out, what are the salaries of the new top executives, what are the perks, what are the options packages.

Or if it’s a job: what are the responsibilities, what are similar people being paid, what is the path to higher promotions, what are the details of health, vacation, moving expenses, reviews, etc.

The side with the bigger list can give up the nickels for the dimes to the loser.

B) IF YOU DON’T GET ENOUGH SLEEP, YOUR WILLPOWER WILL BE ZERO.

Carl Icahn, one of the best investors in the world, uses this technique.

He schedules his negotiations for the early evening.

Our peak mental ability (according to Dan Ariely, author of Predictably Irrational, and many other books) is approximately 2 hours after we wake up until about 4 hours after we wake up.

And then throughout the day, our willpower slowly leaks away until we sleep again. That’s why we watch TV and eat donuts at night rather than when we first wake up.

So Carl Icahn will sleep until 4pm and then go to the negotiation at 6pm.

On the other side of the table are exhausted lawyers who have been working all day.

BAM! Who do you think will win that negotiation.

C) MOST PEOPLE THINK SHORT-TERM. BE THE VISIONARY AND YOU WIN.

Applied Semantics didn’t want to sell to Google in 2001. They had raised some money and thought they could make it.

A few months earlier I had made the mistake of turning them down when they were raising money. “The search engine business is dead!” said the greatest prophet of modern times.

Me.

Larry Page told the CEO of Applied, “I’m not getting off the phone until you say yes”.

So Applied Semantics sold themselves in exchange for 1% of Google. ONE PERCENT.

This was before Google went public. So it was a total unknown what those shares would be worth. Larry Page had the vision of where they would be.

Applied Semantics became the Adsense division of Google. Which now accounts for 99% of Google’s revenues.

Are they upset? Shouldn’t they have sold for more?

Of course not. They sold for over a billion in value and created the end goal of making one of the best companies in the world.

You can only get rich once. Don’t worry so much about maximizing your percentage of something. One percent of $250 billion is better than 100% of nothing, as the saying goes.

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I’m going to take a break for a second and say something that has saved me considerable stress.

NEVER WORRY ABOUT WHAT IS IN SOMEONE ELSE’S POCKET.

Let other people do well. Then you will do well.

Ok, back to what you shouldn’t do in a negotiation.

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D) DON’T SAY NO.

I say this even though I wrote the book, “The Power of No”. What I really mean here is, bury your NO inside of a YES.

I was negotiating with one company once. They wanted me to be an advisor. I said, “no”. But not like that. What I really said was, “You have a great company and I am happy to give advice.”

What a great way to say no! They kept calling. They really wanted me. I said, “Here’s what you should do without me” and I totally laid out the plan they should do. I did it for free. That was another way of saying “no”.

This made them want me as an advisor even more. Eventually they offered enough that I said, “yes”. They followed my advice exactly. The advice that I had already given for free.

There’s a well-known improv technique of “Yes, and…”

In improv, the first performer creates the premise. The second performer can’t change it or reject it, he can only build on it.

In a negotiation if someone says, “well, you’re only worth $1 because you have X” you can say, “yes, and we also have Y so let’s take that into consideration.”

Suddenly your value is higher because you didn’t start a fight. You agreed and added.

E) MANY PEOPLE NEGOTIATE WITH THE WRONG MATH.

This is the part many people don’t get right and it’s hard to explain. I’ll take a simple example. I don’t know if the negotiation took place this way but it describes what I mean.

Why did Facebook buy Instagram for $1 billion. Instagram had 11 employees and zero revenues.

On that basis, maybe Instagram was worth…nothing. Or close to it.

But maybe the negotiation went something like this:

Instagram: Let’s agree to a formula first on how we should value our company.

Facebook: Err…Ok.

Instagram: Forget about our revenues for a second. But let’s just assume we can earn $X for every user you have (call that number $Y). Pay us $X * Y.

Facebook: Err.Ok.

Instagram probably then showed how they could add $1 in value for every customer Facebook had. Facebook has a billion users. So a billion dollars.

Come to the negotiation with your formula. Know how to fill in the variables before the other side does. Every good negotiator does this.

The reason I know this? Because this is how I’ve lost many negotiations to good negotiators. I’ve had very good mentors on this one aspect of negotiation.

Because we all negotiated the formula, but not the price, in advance, then everyone has already said “Yes” to something and they basically have to stick with it.

(Well, they don’t have to. But it’s high stakes and you don’t want to seem like you don’t live up to your word.)

F) IF YOU HOPE FOR ONLY ONE OUTCOME, YOU NEVER GET IT.

I really wanted my company, Stockpickr, to be bought by Google. I threw everything I could into the basket. I would send them love notes in the middle of the night.

Seriously, I was in love with the woman doing the negotiating.

I didn’t have a technical team was the problem. We built the whole site for a few thousand dollars. I had one partner. We had 99% margins on our revenues but Google likes technical teams.

Oh well.

I then focused on getting alternatives. I called AOL, Yahoo, Reuters, Forbes. Then thestreet.com bought us.

Sometimes people write me and say, “I sent my ten ideas to my favorite company but they haven’t called back. Should I call them again?”

That’s the wrong question. The right question is: “What’s the next 100 companies I should write to?”

It’s no secret that being able to walk away from a negotiation is the best starting point in a negotiation.

G) SMARTER PEOPLE LOSE.

This is what I like to say: you guys are the experts at this, we’ve just been focused on building our product, company, art, whatever.

Then I say, “if you were me, what would you ask for?”

I ask them advice. Because they are the experts. It’s not a lie.

If you are applying for a job with someone more senior than you, why not ask the more senior guy for advice? He knows more than you.

Very often they give very good advice.

H) IF YOU NEGOTIATE WITH A LOSER, YOU LOSE.

If two sides are negotiating, you need at least one champion for what you are doing on the other side.

One time I was working with a company and GE offered us a billion dollars for the company. Yes, a BILLION.

They laid out the time frame. “The deal will be closed by November 15” said the highest ranking person in the room from GE.

I went back to the CEO of the company I was advising and told him that.

He said, “Who were you talking to?” I told him.

He said, “100% chance this deal doesn’t happen”.

But they offered! I told him. They actually made an offer.

“Trust me. No way. There’s no real champion for you on the other side who is close to being a decision maker. She is 5 rungs below the decision maker and she’s your only champion.”

And he was right. That deal did not happen. They found a better way to get what they wanted for 1/200 of the price.

You can only cross the bridge to the other side if someone strong is there holding out their hand to pull you in.

I) THE DEAL IS NOT THE FINAL DEAL. DON’T RELAX!

People think when they agree on a deal, that’s the end of the negotiation.

I’m sorry to say, that is only the beginning of the negotiation.

There’s agreeing, there’s signing, and there’s closing.

The final two steps are equally important and everyone assumes they are easy.

They aren’t. They are excruciatingly painful. The honeymoon period lasts for two days after you agree. Then there can be another six months to go.

Agreeing is easy. “I’ll buy your product or business for $X.”

Signing a deal involves all the little things that are the nickels and dimes (see above).

Closing a deal means both sides delivering everything they represented in a deal.

At each stage of this is buyer’s remorse and seller’s remorse and often things have to be renegotiated.

So every day after agreement, make it a point to stay in touch, be friends, keep focusing on the vision (particularly with the champion for your deal on the other side), have just as much energy to close all the details, keep in touch with the lawyers to make sure paperwork is going through, keep working on the alternatives (since the negotiation is not done til it’s DONE), and so on.

So many deals fall apart after agreement. You don’t need this pain in your life.

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LOVE IS A NEGOTIATION.

Taking another break here in the post. Please forgive me for not laying it out all perfect.

When I used to go on a first date I was both scared and excited. I’d get excited first, “she wants to date me!” And then I’d get scared. “Ugh, what do I do now?”

I’d literally do homework for the date. I’d find out her interests and read books on them. I’d watch comedy beforehand. I’d think of things to say and questions to ask. I’m not saying preparation is bad.

One time I was an expert on Kaballah. Another time I had to be an expert on Al Gore (long story). Another time I had to bribe the counter girl to pretend she knew me before my date arrived.

I’d be too scared to show my real self so I’d have to get her to like my fake self long enough for me to feel comfortable showing the real me.

Sometimes that never happened. In many cases I never had a real me. I was always jumping through hoops to keep the fake me going. I had to keep bribing the counter girl everytime we went for yogurt.

This is the difference between agreeing on a deal (the first date) and closing (trust, love, real compassion). This is a problem I’m afraid I will always have. I hope I am getting better bit by bit.

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J) MOST DEALS DON’T WORK OUT.

You agree, you sign, you close, and STILL it’s not the end.

Don’t be the guy (or woman) who falls apart now that all the energy of the deal has been expended.

It’s a negotiation and a deal because NOW there is work to do. There is a common vision to be achieved. There is a fantasy that must be made into reality.

Be that person. Be the one who delivers. You have a new baby in your hands as the result of this negotiation.

Now the hard work begins. Raise that baby to be a good adult.