Bargaining for Advantage

By G. Richard Shell

Bargaining for Advantage (1999) is a guide to becoming a more efficient and intelligent negotiator.
Combining insights from negotiation research with tried-and-tested tactics by some of the world’s
leading business experts, this is a book for anyone who wants to improve their bargaining skills.

Who is it for?

🔅 Businesspeople whose work involves negotiating

🔅 Dealmakers looking to improve their bargaining skills

🔅 Fans of self-improvement and corporate strategy

⏱ 15-minute read

📖 10 blinks

#blinkist free daily

Bargaining for Advantage

Blinkist Free DailyAugust 22, 2020

G. Richard Shell

1/10

What’s in it for me? Learn how to bargain your way to better deals at work and in life.

Negotiating. No matter who you are, it’s something that you’re almost certainly going to have to do both
at work and in life. Whether it’s negotiating with your boss over a new contract, with a vendor in a
crowded market, or with a business partner as you embark on a new enterprise, a bargaining situation
can spring up anytime.

Negotiations, though, can be perilous terrain. Sometimes you’ll reach a dead end, and a promising
agreement will be torn up and thrown in the trash. Sometimes you’ll face unscrupulous tricksters who’ll
try to squeeze every last cent out of you. Other times, you’ll find yourself reflecting on your own moral
standards as you debate whether or not to deceive someone in order to get a better deal.
These blinks show the way forward in lots of different bargaining situations. You’ll learn from masterful
negotiators, from the famous banker J.P. Morgan to Sony’s Akio Morita. Following their advice, you’ll
find that anyone can learn to bargain for a better deal.

In these blinks, you’ll learn

How Gandhi used other peoples’ rules to achieve his goals;

Why leverage is the most powerful negotiating tool; and

What Egyptian president Anwar el-Sadat did to secure peace for his country.

2/10

Better negotiating starts with embracing your authentic strengths.

There’s a Danish folk saying that goes, “You must bake with the flour you have.” In other words, make
use of what you have at your disposal rather than wishing for something else. It’s a good principle to
keep in mind when it comes to stepping up to the negotiating table.

The key message here is: Better negotiating starts with embracing your authentic strengths.

Everyone negotiates differently, both in business and in life. That’s no surprise, since we all have
different levels of competitiveness.

Take Steve Ross, for example. He founded Warner Communications and was later CEO of Time Warner.
One day, Ross was playing canasta, a card game, on a Warner corporate jet. He’d lost the last game
before the plane was due to land, but, rather than conceding, he ordered the pilot to continue circling
the airfield until he’d won a hand. This wasn’t unusual – Ross often brought this level of intense
competitiveness to his business dealings.

At the other end of the spectrum, there’s popular American talk show host Larry King. In the middle of
King’s career, his agent tried to manipulate CNN’s owner, Ted Turner, into giving King a large raise. The
idea was to seek out offers of better pay from other networks, then use them as leverage in contract
negotiations with Turner. In the midst of negotiations, however, King told Turner he’d stay at CNN,
accepting just a modest raise. Driving a hard bargain simply wasn’t in his nature.
A basically nice person, like Larry King, will find it hard to act the aggressive huckster. And similarly, if
you’re highly competitive, like Steve Ross, you’ll find it difficult to come across as an easygoing
collaborative type. That’s why it’s important that you’re true to your own character; otherwise, your
negotiating strategy will be an incoherent mess. Plus, people recognize and respect authenticity.

Not a naturally assertive person? Well, you don’t need to pretend to be like Steve Ross to be a great
negotiator. You should embrace your particular strengths. Those might include an ability to carefully
listen to the other side and understand how their needs coincide with yours. Or maybe you have a knack
for finding an agreement that works for everyone. And if you do happen to be a natural competitor,
develop a strategy around that trait.

Now, natural character aside, there are some general tips that all negotiators can take on board. We’ll
check them out in the following blinks.

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The best negotiators set optimistic but justifiable expectations.

Back in 1955, a small Japanese company developed a new product: a $29.95 miniature transistor radio.
It proved popular in Japan, but the company’s energetic leader, Akio Morita, wasn’t satisfied with just
domestic success.

Morita had high expectations for his product. He wanted to introduce the little transistor radio to the
world’s biggest consumer market, the United States. Morita’s small company? Sony.

The key message here is: The best negotiators set optimistic but justifiable expectations.

Confident that Sony would one day be a household name, Akio Morita traveled to New York to see if he
could interest potential retailers in his new device. At first, he faced skepticism. As Morita would later
recall, many American companies couldn’t understand the appeal. “Everybody in America,” they told
him, “wants big radios.”
Eventually, though, the persistent Morita attracted the interest of Bulova, one of the era’s most
respected names in electronics. Bulova agreed to buy 100,000 Sony transistor radios on one condition –
Bulova’s name would be on the product, not Sony’s.

This was actually a common business practice, and the offer promised huge profits. But Morita refused.
Bulova’s purchasing officer was stunned. Bulova’s famous brand name had taken over 50 years to
establish, he told Morita. Why not take advantage of that, since nobody had even heard of Sony? Morita
replied calmly, “Fifty years from now I promise you that our name will be just as famous as your
company name is today.” The rest, of course, is history: Sony secured a more modest offer from another
American distributor – one that kept the Sony logo on the radio – and went on to become a world-
famous brand.

Morita’s story shows us that it’s best to enter into negotiations with an optimistic expectation rather
than a goal. The difference? A goal is a more abstract ambition, while an expectation is something that
we think we can reasonably accomplish.

At the negotiating table, an expectation gives conviction to your statements. Believing that what you’re
asking for is reasonable, given the facts at hand, is a powerful motivating force that makes you much
more likely to succeed. And the more research and preparation you do, the surer you can be that your
expectation is justifiable and legitimate.

Akio Morita expected that Sony would grow into the company it is today. Having seen the transistor
radio’s success in Japan, he understood its full potential in a large consumer market. When, like Morita,
you bring expectation to negotiations, you’ll have total conviction that what you’re asking for is
reasonable.

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Appealing to norms helps win negotiations.

Let’s say you’re a nursing executive involved in budget negotiations at the hospital where you work.
You’re looking for money to hire more nurses, but the competition for funding is stiff.

To win the negotiation, you’ll need to appeal to the decision-makers’ own understanding of what’s in
the hospital’s best interests. You’ll have to appeal, in other words, to norms that they respect.
The key message here is: Appealing to norms helps win negotiations.

We all respect certain norms. The most obvious are laws, which are the norms that hold society
together. However, there are internal norms, too – these are things like a business’s philosophy or code
of conduct, which only apply within a certain context.

Think back to our hospital negotiation. Let’s say hospital administrators have made it clear that their
number one standard for the hospital is high-quality patient care. That makes it a norm, one you can use
in making your case for more nurses. So do your homework, gather the right data, and make your
budget request chime with the hospital’s patient-care priority. The decision-makers’ own standards will
then obligate them to approve your request.

Mahatma Gandhi employed this tactic in a vastly different context. After studying law, Gandhi traveled
to South Africa to advocate for the rights of Indian people living there. Soon after his arrival, he was
thrown out of a first-class train carriage simply because of his ethnicity – an action made legal by a racist
law at the time. The incident affected him deeply.

To challenge the law, he decided to use the South African administration’s own norms against them. At
the time, one social norm dictated that well-dressed and well-behaved people should be able to travel
first class. So Gandhi dressed to the nines and made an appointment to buy a first-class ticket. The
clothing made the stationmaster see Gandhi as someone from his own social class, and he sold him the
ticket.

Aboard the train, Gandhi sat next to a smartly dressed Englishman. When the ticket collector came
around and attempted to throw Gandhi out of the first-class carriage, the Englishman protested on his
behalf. After all, he agreed with the norm of well-dressed and well-behaved people being able to travel
first class, and he could see that Gandhi conformed to that norm. Gandhi stayed in his seat and
completed his trip.

Whether it’s political activism or a boardroom dispute, once you identify the norms at play, you’ve got a
proven and effective tactic at your disposal.

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Fair, reciprocal relationships are conducive to negotiating.

The key message here is: Fair, reciprocal relationships are conducive to negotiating.

Just because you have the power to take advantage of someone doesn’t mean you should. After all,
generosity often begets generosity, and a good relationship can be valuable to both parties long into the
future. This was certainly the case with the business friendship between the banker J.P. Morgan and
tycoon Andrew Carnegie.

During the financial panic of 1873, Carnegie found himself desperate for cash to meet his obligations.
Sensing an opportunity, Morgan approached Carnegie and asked him if he would be interested in selling
his share in a partnership that he had with the Morgan family. Desperate, Carnegie agreed: he’d gladly
sell his share for a fair price, which he estimated at around $60,000. Morgan agreed, and the deal was
on.

The next day, Carnegie called on Morgan to collect his money. But instead of $60,000, Morgan handed
him $70,000 – $10,000 more than they’d agreed on. Carnegie, he said, had been mistaken about how
much he was owed; the amount was more than he’d thought. This gesture made a powerful impression
on Carnegie. From that point on, the two men entered into a friendship and business relationship that
would pay off in sums that dwarfed this little gesture.

The important thing about Morgan and Carnegie’s relationship was that it was reciprocal. Reciprocity is
a necessary part of developing a good negotiating relationship. So when negotiating, make a move – and
then wait until the other party reciprocates before you move again.

Also, remember that real reciprocity isn’t imbalanced; don’t let small gifts from the other side lure you
into much larger concessions. Generous and cooperative people are often manipulated into conceding
when they don’t need to because they feel compelled to respond. It’s like when a con artist approaches
you in the street, looking for money in exchange for a small service. Though you know better, you feel
obligated to pay them. Watch out for con artists like that in the world of negotiation, too – they can be
found in the CEO’s office just as often as they can in the street.

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You need to know what motivates the other side in a negotiation.

Henry Ford said, “If there’s any secret to success, it lies in the ability to get the other person’s point of
view and see things from that person’s angle.” When it comes to negotiating, stepping into the other
person’s shoes can offer a real advantage.

The best negotiators find out what really motivates the other side. They ask themselves, “Why is the
other person sitting there?” and make an offer that tries to satisfy those interests.

Here’s the key message: You need to know what motivates the other side in a negotiation.

If you want to make headway in a negotiation, it helps to offer something valued by the other side. This
is exactly what enterprising young saleswoman Kelly Sarber did while trying to win a contract for her
waste-management company in Oceanside, California. A surfer in her spare time, Sarber understood
how important the beaches were to Oceanside and its economy. She also knew that those beaches were
facing serious coastal erosion and could well disappear before long.

So she put two and two together. How? Her company’s dump site was in the Arizona desert, where
there certainly wasn’t a shortage of sand. So Sarber offered to bring a load of fresh, clean sand back with
each garbage run to replenish the beaches. By sweetening the deal and offering something that would
definitely appeal to Oceanside administrators, she won the contract.

No matter how much you appeal to the other side’s needs in a negotiation, however, you also need to
know who it is you’ll be negotiating with. That’s because even if companies and institutions have policies
and goals, it’s people who actually negotiate. Their needs, including their status, self-esteem, and
incentives, drive the negotiation.

When you know who you’ll be negotiating with, see if you can work out where those interests coincide
with yours. Let’s say that you’re being interviewed for a new job. If you discover that your prospective
boss is about to open a new office and wants to keep the payroll down while it’s under construction,
then you could offer to start the job a little later. Attention to details like this makes all the difference.

7/10

Leverage is critical to negotiation.

The key message here is: Leverage is critical to negotiation.

How is negotiating like a game of poker? In both, everything depends on perception. Successful
negotiators and poker players with no real leverage can give the impression that they have it in spades.
That’s because leverage is a dynamic quantity, constantly shifting, and there are ways to capitalize on
these dynamics.

Now, leverage means all of the particular advantages you have over the other side; these can come in
many forms. And you can apply leverage in several ways – one is to arrange for the other side to lose
face if there’s no final deal between you. For instance, you could call on a third party to adjudicate or
witness the negotiation while offering conspicuously fair terms. Under the gaze of the other party,
there’d be extra pressure to come to a deal.

Another way to apply leverage is to find a good alternative option. Take the story of Janie Mitcham, the
head of purchasing for Houston Lighting & Power Company, or HL&P. HL&P was paying the Burlington
Northern Santa Fe Railway to carry coal to its giant generating station. The rate was extortionate – $195
million a year – and unsurprisingly, Mitcham was fed up with it. But Burlington Northern had a
monopoly on rail access to the HL&P plant, so what exactly could she do?

First, Mitcham tried to negotiate lower rates with an appeal to fairness and by reminding the railroad of
the long-standing relationship between the two companies. Burlington Northern was unmoved. But
then Mitcham had an idea. Rather than relying on Burlington Northern, she would build her own
railroad, connecting her plant to tracks owned by Burlington’s competitor, Union Pacific Railroad. She
mentioned the idea to Burlington Northern, giving it a chance to lower its rates, but the railroad’s
executives scoffed at her plan.

With approval from her bosses, Mitcham proceeded. The rival railway, Union Pacific, bid for her
business at a 25 percent discount off Burlington Northern’s rates. In effect, Mitcham had applied
leverage to both railway companies, pressuring each to lower their rates. Today, her railway, nicknamed
“Janie Rail,” is a reality, and it saves the company over $10 million a year!

That’s the power of leverage.

A little objectivity and one small step can get you out of an impasse.

So, you’re sitting at a long boardroom table. Just across from you are some stony-faced executives.
They’re whispering to each other, occasionally shaking their heads. One of them stares glumly at the big
Rothko print on the wall.

Clearly, things aren’t going so well. This negotiation has ground to a halt – your guys think the other side
is asking for too much, and they think you’re being stingy. You can feel your patience fraying. What
should you do? Well, first clear your head; then take one small step.

The key message here is: A little objectivity and one small step can get you out of an impasse.

Most negotiation is about finding compromise, but that’s not easy when you reach a stalemate and your
mood begins to sour. When that happens, it’s time to find some objectivity. First, pause for a moment
and step outside yourself. Without becoming inexpressive, check your emotions. Are they appropriate in
a professional context?

Next, examine your perceptions. You need to understand that the other side’s behavior has nothing to
do with their innermost character; it’s contingent on the negotiation. Forget this and it’s likely that you’ll
view them as a selfish, unreasonable enemy and yourself as a victim of aggression. That way of thinking
risks sending the negotiation into a downward spiral that will be difficult to recover from.

Once you’ve avoided this, you’re ready to start employing a procedure known as one small step. To do
this, make a small, unambiguous move in the other side’s direction. This could be a concession to one of
their needs or an acknowledgment of past mistakes. If the other side responds in kind, you can then
take another small step. Repeat the cycle until tensions have eased, and you’ll be back in business.

Egyptian president Anwar el-Sadat famously employed this procedure when he visited Israel on
November 19, 1977. Israel and Egypt had been at war for decades, so this visit was a dramatic occasion.
Sadat’s small step, in this case, was simply getting off the plane, which demonstrated his willingness to
recognize Israel’s existence. This gesture eventually led to the Camp David peace accords and Israel’s
return of the Sinai peninsula to Egypt. To cap off the success of the small steps both sides had taken,
Sadat and Israeli prime minister Menachem Begin shared the 1978 Nobel Peace Prize.
We might not all find ourselves in situations as dramatic as that. But whether it’s a personal
misunderstanding or a professional negotiation, the one-small-step strategy can be a lifesaver.

9/10

There are three different schools of bargaining ethics.

Imagine you’ve wandered into an antique store. Just by the window, amid the dated, unwanted
furniture, there’s a beautiful old globe. You see a price tag and turn it over.

Ah. It’s just a little out of your range. Now the elderly shop owner is slowly making her way toward you.
She smiles and strokes the globe lovingly.

How do you respond? Do you say, “Yes, I’ll take it?” Do you attempt to haggle, using whatever tall tales
are necessary? The response you choose reveals a lot about you. After all, it demonstrates the
fundamental ethical standards you bring to negotiation.

The key message here is: There are three different schools of bargaining ethics.

In the real world, there are lots of negotiation strategies. However, most of them are ultimately one of
three main types. The first is the Poker School. Those who adhere to it see negotiation as a game – one
with well-defined rules. These rules are set by the law and are there to prevent fraud, coercion, or
breaches of fiduciary duty. Within these explicit rules, though, anything goes.

That allows for a lot of ethical gray area. For instance, in the visit to the antique store, a member of the
Poker School would see no problem with lying to extract the best price for the old globe. In fact,
deception is to be admired in this school, as long as it’s effective.

A certain amount of deception is seen as fine in the Pragmatist School as well. In this school, however,
adherents prefer not to use misleading statements or outright lies if there are better alternatives. Unlike
Poker Schoolers, they’re concerned about the damage their reputation could suffer if they’re caught. To
preserve good working relationships and their reputation in the market or community, they look to
protect their credibility.
Finally, there’s the Idealist School. This school agrees with the philosopher Immanuel Kant, who believed
that people should never lie, whatever the circumstance. Like him, they reason that if everyone lied, our
social life would be chaos. Idealists believe that negotiations are serious, consequential acts not to be
treated like a game. A great example of the Idealist School is the most successful capitalist of modern
times, Warren Buffet, who always conducts himself with a commitment to truth – proof, then, that you
don’t have to be a Machiavellian trickster to be successful, in business or in life.

10/10

Final summary

The key message in these blinks:

Anyone can become a good negotiator as long as they’re fully themselves, whether they’re super-
competitive or more cooperative. However, there are a number of strategies that can improve anyone’s
bargaining skills. Chiefly, these are entering into negotiations with high expectations and fostering
strong relationships through mutual respect and reciprocity. That doesn’t mean being a pushover,
though – it’s crucial to understand the power of leverage at the negotiating table, too.

Actionable advice:

Try using a prop during negotiations.

To get things off to a good start, you could place an object on the table that signifies your commitment
to – and understanding of – the other side. Perhaps that’s a cuddly toy that mirrors the company logo,
or a food offering that is also a clever pun on their name. This will preemptively defuse any negotiation
that promises to be a tense affair.