"Mentol Erros" summary




Photo by Bethany Legg on Unsplash


  1. Escalation
According to Max Bazerman and Margaret Neale, “irrational escalation” is an error committed by otherwise level-headed businesspeople when they get into difficult and competitive negotiations.

It might also be called “over-commitment” : when you don't change your mind or approach regardless of what facts and situations show you. Even a good strategy will turn out to be awful if it is escalated beyond the point where it no longer makes sens.

Reasons:
  • people's egos make them feel it is unbearable to lose, they can't stand it, so they pay more money to get what they want even if this leads them to bankruptcy;
  • auctions and other situations that pit people against each other encourage this kind of behavior;
  • principal/agent problem (people dealing with other people's money tend to not care as much about it).

Solutions:
  • get a firm handle on the alternatives to the deal before you negotiate; money we save on one deal will be available for another deal, perhaps a better one;
  • be objective and empirical in setting a price beyond which good sense dictates walking away. Check with your team, this will reduce the temptation to escalate;
  • set clear breakpoints, to discuss and re-evaluate;
  • align the negotiator's rewards with the economic interests of shareholders. But sometimes this is hard to do because the board of directors is represented by CEO's who are sometimes irrational.
  1. Partisan Perceptions
A partisan perception is a psychological phenomenon that causes people to perceive the world with a bias on their own favor or toward their own point of view.

Effective negotiators know how to stand outside a situation and see it objectively. They can get into someone else's shoes.

Techniques:
  • recognize this exists;
  • put yourself in the other side's positions;
  • pose the issue to colleagues (without revealing your p.o.v);
  • as the other party how they view it;
  • use an analogy or hypothetical situation to frame the problem ;
  • opposing sides should reverse their roles and be forced to argue for the other side;
  • bring a neutral third party or expert to provide unbiased guidance.

  1. Irrational Expectations
Agreement is hard to find when parties have expectations that cannot be fulfilled. This eliminates the ZOPA.

When your expectations are out of line with reality and you don't have the bargaining power to change this fact it is difficult to come to an agreement.

Solutions:
  • education dialogue: explain why it can't be like this; provide proof and exemples;
  • new information: this gives you bargaining power.

  1. Overconfidence
Overconfidence encourages us to overestimate our own strengths and underestimate thos of our rivals.

When it comes to legal disputes, parties tend to reject to settle because they are sure the court will decide in their favor.

It can blind you to dangers and opportunities.

It is related to groupthink: a term coined by Irving Janus, of Yale university, that means “a mode of thinking that people engage in when they are deeply involved in a cohesive ingroup, when the members' strivings for unanimity override their motivation to realistically appraise alternative courses of action.” In this context, opposing views are crushed and people who think otherwise are reeducated or pushed out.

Symptoms:
  • illusion of invulnerability;
  • leaders are protected from contradictory evidence;
  • members accept confirming data only;
  • those holding divergent views are censured;
  • alternatives are not considered;
  • members of the “out” group are discarded or demonized.

Solutions:
  • empower a team of bright and respected people to find and objectively represent the relevant data;
  • they should also examine and report back on every key assumption.

  1. Unchecked emotions
Unchecked emotions also occur in business - “business divorces” is a thing for a reason: they involve a lot of anger and insults.
When anger rises, parties stop focusing on logic and rational self-interest.
The goal is now inflicting damage on the other side, even if that causes damage to our own interests.

This happens often in the case of family-owned business, when the founder resigns and wants to pass the position to one of their children. Sibling rivalry might even destroy the business.

Solutions:
  • establish a cooling-off period;
  • enlist an objective moderator;
  • be fair (don't count on the other person's objectivity).


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