So we are going to be talking about teams
today, and the next lecture as well, but before
we get to that, I would like to finish the
debrief of the negotiation exercise we did
last class.
So you recall that I had a table here, where
you had the buyer, well, the seller here and
the buyer, and you had the aspiration point,
and the reservation point.
And we had, essentially, typically the seller
is willing to sell for $350 as the lowest
price, and the buyer is willing to potentially
go up to $2500.
And that's what we call the bargaining zone.
So it's rational to have the price fall anywhere
between those two points.
Now, so a few principles in negotiation.
When you enter a negotiation where you negotiate,
especially a price or numerical value, and
you can assign a point system to qualities,
which allows you to quantify it.
For example, do you prefer to go to the Bahamas
on vacation or to Mexico, or to Canada?
And you can put points on this and that could
allow you to negotiate with values.
But typically often in negotiation, you have
price as an element.
So reservation point is the worst deal that
you're willing to accept.
So that means that beyond this point, you
don't want to conclude the deal.
You'll walk away.
Sometimes it's called the walk-away point.
So if you're in a free market and someone
is trying to sell you something, and you offer
$5 but they want $10, you might have a negotiation
around the price, and for you, you aren't
willing to pay more than $8, and beyond that
you're walking away.
So that's the walk-away point.
So it's important, before you enter a negotiation,
to think about what your reservation point
is.
So preparing 
before negotiation is key.
Whatever you are negotiating, you want to
research it on the Internet, try to find the
market value of it.
A great example is buying used cars.
I often buy used cars and motorcycles on Craigslist,
and I often do a lot of research.
So I start by looking at the bluebook value
of the vehicle - that gives me an idea.
That's the experts that give me the value.
But often it's not accurate, so you have to
look at comparisons of how easy it is to find
that kind of vehicle, and how many you find
at what prices.
So you do a research typically, I would look
anywhere between San Francisco and LA, because
there's not a lot of choices on the Central
Coast.
So that is the first element.
Then of course you have to ask yourself, "How
much am I willing to pay?
How much can I pay, and what's the maximum
I'm willing to pay?"
So that's your reservation point.
Then you want to try to have a better deal
than that.
So it's important to have an aspiration point
that's better than your reservation point.
And especially when you enter a negotiation,
if you tell the other party your reservation
point, you're shooting yourself in the foot.
It would be helpful for the buyer to know
this information, and the seller to know this
information, therefore, you should try to
pry information from the other party and not
give information.
If you have no idea where the other party
stands, it's a good idea to let them speak
first, because they might - the number they're
going to put out there gives you an idea of
where they stand.
So in this exercise in particular, since you
had such a wide range of potential prices,
which - each party was surprised at how much
the other was willing to pay, or how little
they were willing to sell for, it can be dangerous
to, unless you're lucky - let's say you're
a very aggressive negotiator, and you're the
buyer, and you say "I'll pay $5 for that teapot."
That would be like, "What?"
But if you do that, the other party might
get offended and say that you can't even have
a deal because it's outside of the bargaining
zone.
But if you know the other party's reservation
point, and you make an offer at their reservation
point or even close to it, that can be very
effective.
Making the first offer can be very effective.
Let's say you find a car you like on Craigslist,
somehow the seller has put their email there,
or their name, and you Google their name and
find their Facebook page.
A little devious, but imagine it.
Or imagine an even bigger negotiation than
a used car - you're negotiating for a company,
negotiating with another company, you will
research that company, what's happening, for
them.
But let's say you find information that tells
you that the person is leaving the country
in three weeks - and they have to sell their
car before then, or they won't have an opportunity
to sell.
So they are under a deadline, and furthermore
you see on their Facebook page that they really
need $3000 now.
And their car is advertised for $5000.
You could say, okay, I'll buy this car from
you for $3000.
That would be a good strategy.
That might be their reservation point.
If you don't know your reservation point or
the other party's reservation point, one technique
that you can use to try to figure it out is
called BATNA - Best Alternative to Negotiate
Agreements.
The idea is, if that person doesn't conclude
this deal, if we don't find an agreement,
what's the next best option for the other
person?
Or if you're thinking about your BATNA, what's
my next best option?
So as an example, if I'm interviewing for
jobs and nobody has made me a job offer, and
I interview for a company and it's the only
job offer I have, and they offer me a salary
of $50,000, what's my best alternative to
that, if I don't get that job?
Zero, right?
Nothing.
I don't have any other job offers.
So I'm not in a position of power.
That gives a lot of power to the company to
get me for the best price they can.
Now if I have two job offers, one of them
offering $60,000 and the other one $50,000,
now you can pit them with each other.
You know, "$50,000, sorry, I got another offer
that's higher.
Can you match that?
Can you make it better?
Can you offer me $65,000?"
So that's - if you already have a job and
you're interviewing for another job, your
current job is your best alternative for negotiating
an agreement.
Your salary and - salary is only one of the
dimensions in a job, you know?
You have prestige, you know?
Opportunity to travel, if you like that, opportunity
for advancement.
All kinds of other stuff - perks of different
kinds.
So you consider all of that as a package for
when you compare different alternatives.
So think about your BATNA, think about the
other party's BATNA, that might give you a
hint about the reservation point of the other
party, in the absence of information.
We've sort of covered this - one sort of,
how many of you guys have seen Inspector Colombo?
I think in Europe it was playing later than
in the US, I think this generation has never
seen it in the US.
It's an old American TV series where you have
this detective, who is essentially playing
dumb.
He's always trying to get the criminal, so
he's investigating the criminal, and he gets
the criminal to give away information about
themselves by playing dumb.
So he has this dirty raincoat and he's coming
around, "I'm kind of stupid, let me understand
like this!"
So that's a kind of good technique to pry
information from the other party - asking
innocuous questions.
Example: you're the buyer, you could come
in and say "Hey, hi.
How are you?
How is business today?"
That could be a nice introduction - it seems
to be innocuous, but what I'm doing is fishing
for information.
You might give away, "Oh, it's slow today,
business is a little slow."
"Yeah, I noticed there's not a lot of people
here, it's the summer, SLO is kind of empty,
you know?"
"Yeah, it's really hard."
So that already gives me an idea of where
they stand, how desperate they are.
I have a friend who was telling me about buying
new cars - salesmen have quotas they need
to fill, so if by the end of the month they
haven't filled them, they are really eager
to fill them.
So that's a really good time to buy a car
at a good price.
So if you go - and of course car salesmen
are very good at negotiation, so you have
to have your game on.
Because they will do that game all the time
- how many of you have had salespeople come
and ask you questions?
Like, "Hey, I see you are interested in this
car."
"Oh yeah, I've been wanting this car forever,
I love it."
And they're like "Ah, okay!"
So that's why it's kind of like having a poker
face, of not giving away too much information,
pretending that you're not really interested
in something.
Like, "Yeah.
I don't know."
This is your dream car.
"I don't know, it's kind of cool.
I'm looking around."
That's going to work out.
It's devious, but - you know, on the other
hand, ask questions.
Innocuous questions that invite the other
person to elaborate, to blurt out information.
We've talked about the notion of anchoring
negotiation - when no price has been named
yet, the first person who names a price, that
price is the anchor of the negotiation.
From that point on, you're going to negotiate
from that point.
So if there's a wide margin like this, if
the first person says $2,000, it's going to
be around $2,000.
If the first person says $400, it's going
to be around there.
You can see the double-edged power.
If I'm the buyer and the seller asks me how
much I'm willing to pay, and I blurt out $2000,
then I've shot myself in the foot because
I don't know how cheap I could get the thing
for.
Now you were all given an estimate of the
value of the vase, which was $400 to $1200,
so you could pick the most favorable end of
the continuum to make an offer - you could
say, like, if you're the buyer, $400.
That could be a technique.
So one more time, if you know the other party's
reservation point, you can make an offer at
this point.
That's a great deal for you.
So in the future, when you buy a used car,
when you buy a new car, when you get a job,
when you work at a company and negotiate with
people for various things, remember that.
If you're interested in knowing more, you
can take an elective in negotiation.
There's many more techniques that can be used.
So prepare, figure out the dimensions of the
deal, think about your preferences, think
about your BATNA, figure out your reservation
point, try to guess the other party's reservation
point, ask innocuous questions to pry information,
hide your own feelings about something, especially
if you're really excited about the thing.
Don't ever show you're desperate.
Here's an interesting thing.
A question that people ask me - is it okay
to lie?
And I would say, I don't condone lying.
But you can have white lies - you can not
answer.
So let's say an employer asks you, and sometimes
they do, like at the end of Cal Poly and you're
searching for a job - what other job offers
do you have?
How do you respond to that?
I would respond like, "Oh, I'm definitely
in the process of talking with a number of
companies right now."
You could send in resumes, that could be considered
connecting, you could use the term "connecting"
with a number of companies.
So that's an acceptable lie that shows that
you're not - if they're going to really press
you, and ask what offers you have, I would
say, "Oh, I don't have offers yet but I'm
working on it."
But that's sort of a white lie.
Now, one caveat.
This type of negotiation invites you to be
very competitive, very - you remember the
different styles we talked about.
Here.
The different conflict handling styles.
The competing style is very successful.
It is the most successful style in the Sugar
Bowl negotiation.
Not the compromising and collaborating style.
And that's - in the used car salesman scenario,
the used car salesman is not your friend.
He wants your money and he wants to get as
much money from you as he can, and sell you
the worst possible car that's on the lot.
That's mainly the game, which is why I don't
buy used cars on used car lots, I go to Craigslist
instead.
Competing is the game there.
I had another exercise which we didn't have
time to do, to show you another kind of negotiation.
It was called the Ugli Orange, where, we aren't
going to do it, but I'm going to summarize
the idea.
And it's kind of a trick.
Because I prepare you for this kind of negotiation,
and then I make you fail on the next step
of negotiation to show you that there's different
kinds.
In this type, you have two researchers who
both are competing to get a very rare kind
of orange called the Ugli Orange, and they
both need it for very important causes.
One of them needs it for a vaccine that's
going to help cure a horrible illness that's
appearing in some region of the US.
The other one needs it to neutralize a nerve
gas from a World War II bomb that has started
leaking in the Los Angeles area and is going
to kill a bunch of people.
So - they both need the entire supply of oranges
that have been produced by one producer, 7,000
oranges.
And they both are given a $250,000 budget
to get them.
Logically, if you follow the logic of this
kind of logic, you are going to have a bidding
war between the two of them.
And they aren't going to have an agreement.
But the catch is that one of them needs only
the rind or the peel of the oranges, and the
other one needs the juice of the oranges.
So in fact, they could collaborate and both
have a win-win.
They could not have a bidding war, they could
buy together the oranges at market price.
One of them takes the peel, the other takes
the juice.
So that's just to show that there's two types
of negotiations.
There are distributive negotiations, which
are characterized as win-lose, where the two
parties are opposed.
And the prototypical example of that is the
used-car salesman transaction.
Or you can think of it as a stock market transaction.
A transaction with an anonymous person - on
the stock market you're not trying to be nice
to anybody, you're trying to get the best
prices you can.
But you have other kinds of negotiation that
are integrated.
So typically when you have repeated interaction
with the same party, let's say your romantic
partner, you might have different moments
where you want different things.
You aren't trying to always win over your
partner, because that's not how relationships
work.
And furthermore, the other person is eventually
going to start retaliating if you don't give
them a fair deal.
That's true in business - if you keep having
the same repeat business with a supplier,
for example, or with a client, you realize
you have to give them a fairer deal - you
have to let everyone have some win, otherwise
the client is not going to give you their
business anymore.
So integrative negotiations are where there's
a potential for win-win.
I can't summarize all the dimensions that
make a negotiation more integrative or more
distributive, but repeated interaction is
one of them.
The structure of what is negotiated, like
the example with the peel and the juice, how
much of a win-win is possible to have.
I was mentioning earlier, in games like competitive
sports, the game is designed to be win-lose.
You can't really have a win-win.
One party has to win, the other party has
to lose.
And you could say that there's such a thing
as fair play, but you can restructure things,
saying "Could we change this and make it a
win-win?"
And I have given you the example of the couple
that wants to see a different movie, a romantic
comedy vs adventure, then inquire into why
they want that, and then find a way to have
a win-win by changing the thing they are negotiating
for.
This gives you the idea that life is black
and white.
And as you know, life is not black and white,
it's grey.
So it's not as if there's some negotiations
that are distributive and others that are
integrative, it's that you have more or less
integrative potential in a given negotiation.
That's a way to think about it.
How much integrative potential is there in
this negotiation?
