Negotiation: who needs whom?
I posted the following situation a while ago, and asked readers to solve the puzzle. The answer, as promised, is provided below.
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Suppose you have 26 red cards, and you find yourself in a room with 26 other people and they each have a black card.
Every time a black card is paired with a red card, $100 is generated.
In that case, it would seem fair that you make $50 while the person holding the black card makes $50.
Since you have 26 red cards, you can easily make $1300 (or 26 X $50). And 26 people each make $50.
However, if you were really smart at negotiation, you could easily make $2070.
How would you do it?
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ANSWER: You can make $2070 by "accidentally" losing 3 red cards. In that case, you could ask for $90 while giving each person $10 for his black card. That is, $90 X 23 = $2070.
Each person holding a black card will accept a reward of $10 instead of $50, because they all know that there are three black cards that have zero value (since you "lost" three red cards). It is better for them to get $10 rather than nothing at all.
This little lesson illustrates a powerful concept of negotiation: it's all about who needs whom.
Another lesson, slightly less obvious, is that "power is simply an asymmetrical distribution of knowledge." More on that later.
A third lesson is that "he who makes the rules, gets the gold." In this case, the rules are "made" through artifice: perhaps you did not really lose three red cards, yet it is only necessary to make others believe you did lose three red cards. What if, instead of losing the three red cards, you only told them that you would NOT use three red cards? Then, you would be making a threat, not a warning. A threat is not credible, because you can always change your mind at the last minute, if it is in your interest to do so. A warning, by definition, is something that will happen and that you have no control over (in this case, you are warning the 26 people that there will be three people who will not make any money, since you lost three red cards).
Although a central principle of negotiation is "who needs whom more?", we can see from the above lessons that "who needs whom?" is more about perception than reality. He who master (others') perception, controls reality -- and hence the outcome of any negotiation.
===
Suppose you have 26 red cards, and you find yourself in a room with 26 other people and they each have a black card.
Every time a black card is paired with a red card, $100 is generated.
In that case, it would seem fair that you make $50 while the person holding the black card makes $50.
Since you have 26 red cards, you can easily make $1300 (or 26 X $50). And 26 people each make $50.
However, if you were really smart at negotiation, you could easily make $2070.
How would you do it?
=====
ANSWER: You can make $2070 by "accidentally" losing 3 red cards. In that case, you could ask for $90 while giving each person $10 for his black card. That is, $90 X 23 = $2070.
Each person holding a black card will accept a reward of $10 instead of $50, because they all know that there are three black cards that have zero value (since you "lost" three red cards). It is better for them to get $10 rather than nothing at all.
This little lesson illustrates a powerful concept of negotiation: it's all about who needs whom.
Another lesson, slightly less obvious, is that "power is simply an asymmetrical distribution of knowledge." More on that later.
A third lesson is that "he who makes the rules, gets the gold." In this case, the rules are "made" through artifice: perhaps you did not really lose three red cards, yet it is only necessary to make others believe you did lose three red cards. What if, instead of losing the three red cards, you only told them that you would NOT use three red cards? Then, you would be making a threat, not a warning. A threat is not credible, because you can always change your mind at the last minute, if it is in your interest to do so. A warning, by definition, is something that will happen and that you have no control over (in this case, you are warning the 26 people that there will be three people who will not make any money, since you lost three red cards).
Although a central principle of negotiation is "who needs whom more?", we can see from the above lessons that "who needs whom?" is more about perception than reality. He who master (others') perception, controls reality -- and hence the outcome of any negotiation.
posted by Super Peter at 12:13 AM
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