The Mental Models For Negotiation
Updated: 11 hours ago
Learning a small number of big ideas from the field of negotiation will help you on a daily basis however there are a few instances where improving your negotiating skills will have a huge impact on your life.
Perhaps the most significant gains that you can achieve from negotiation is with your income. Your ability to negotiate a higher hourly rate coupled with the power of compound interest could be worth hundreds of thousands of dollars over your life. Learning the core principles of negotiation could be the single highest value thing that you do.
I have taken the top 10 books on negotiation and created a latticework of mental models for the topic. This framework allows for better understanding and I have found it makes it easier to remember the ideas.
49 Mental models for Negotiation:
1. Agenda Setting Theory
Our culture has conditioned us to look for the best deals, to not waste money, to avoid penalties/fines and to finish everything on our plate. Sometimes these ideas cause us to lose value, don't be so focused on winning that you forget that your time has value.
"Alienating communication stems from and supports hierarchical or domination societies, where large populations are controlled by a small number of individuals to those individuals, own benefit. It would be in the interests of kings, czars, nobles... that the masses be educated in a way that renders them slavelike in mentality. The language of 'wrongness', 'should', and 'have to' is perfectly suited for this purpose: the more people who are trained to think in terms of moralistic judgments that imply wrongness and badness, the more they are being trained to look outside themselves, to outside authorities, for the definition of what constitutes right, wrong, good and bad."
As humans, we often run on autopilot and use heuristics to navigate life. The word "because" is often enough to get people to do what you want because what follows the word is less relevant than the word "because" itself. As a negotiator use "because" when making a demand.
Conditional (if/then) statements are often believed because of the speech patterns and habits that we have grown up with. For example:
"If you give me a chance in this role, then I am confident you won't be disappointed."
"If you decide to give this a try, then I'm sure you won't be disappointed"
Another example of a conditional statement is: "If I can....will you?" For Example: "If I match the price for you, then would you be happy to place the order with me today?"
Anchors shape peoples' perceptions. Higher anchors, such as minimum bid prices, will usually increase the final price at an auction. Give a plausible reason why you are using a specific anchor. A "because" plays an important psychological role and having any reason helps (even if it is not logical)
If you know enough about your counterpart's reservation value, you should make a reasonably aggressive offer. If you do not have enough information about your counterpart's reservation value, then it is best to let your counterpart make the first offer.
There are many criteria that you can use to anchor negotiations in your favor including:
What a court would decide
Anchor with an extreme offer. Use a number that doesn't feel like it has been plucked out of the air. An odd number like $39,543 looks like it is the result of a thoughtful calculation. Then surprise your counterpart with an unrelated gift.
When starting negotiations, begin with a high anchor by alluding to a high price that someone else might charge: "If you go to 'abc' they will charge you $2000 a day"
Provide a range. Columbia Business School found that people who gave a range were offered a much higher salary. Use a "bolstering range" where the low number is the amount that you want.
Use flexible but extreme offers and "non-offer-offers" to anchor, for example: "We'd obviously need to do our due diligence on your company to determine our valuation. Our general sense is that private companies of this size tend to sell at 12 times earnings, which is what we're currently thinking". When you make such a statement, watch for the person's reaction very closely, you have 2 goals: (1) Learn about their 'Zone of Possible Agreement (ZOPA)' and (2) Shaping their perception.
A non-offer that is unrealistic may work well as an anchor because it doesn't undermine credibility or expertise. For example: "Purchasing is undoubtedly going to demand price cuts of 15% or more just to get the conversation started".
If you have been anchored, clearly and politely communicate that you are ruling the offer out of consideration. Deflect their extreme anchor offer by saying "no" in a variety of ways: (1) How am I supposed to do that? (2) What are you trying to accomplish here?
Anchor emotions. If you can anchor a person's emotions so that they expect a loss, they will be motivated to avoid it. For example say: "I have got a lousy proposition for you...you're going to think I'm a lousy businessman. You're going to think I can't budget or plan."
4. Attentional Bias/ Identity
We see the world differently because:
1. We have different information: We notice different things. If you take your nephew to a parade, he might notice the trucks, and you the cheerleaders. We notice what we care about.
2. We have different interpretations: We are influenced by past experiences. We often aren't aware of how past experiences affect our view of the world, we just think this is how things are. We apply different rules, for example: "It is unprofessional to be late".
5. Asymmetric Warfare
If your position is weak, consider relinquishing what little power you do have. Sometimes it is better to give up fighting and to ask the other side for help.
6. Consistency & Commitment Bias
Everyone thinks they are open-minded because the opposite is being closed-minded. People's perception of their open-mindedness makes them feel obligated to explore possibilities."It seems like you are giving them a choice, when you are really you are heavily weighting the only option you are giving them. Ask: "How open-minded are you about at least trying..?"
When possible, mention precedents and past practices, as something you have done before is less likely to be contested.
Research on the non-rational escalation of commitment shows that we have a strong desire to justify our prior decisions and behaviors. If someone isn't doing something, say: "I'm guessing you haven't got around to...." . Either the person responds with pride or they double down on their commitment.
Use a commitment (and loss aversion) to avoid a bidding war, for example: "We're going to commit to a financial package that will be at the top of the industry, but we're not going to reveal it until we have your commitment to take it or reject it. We don't want this package to be used to start a bidding war with your current company."
Lecturing doesn't work as it makes people become defensive. Instead, try and work on a
joint activity to lower their guard and get them to open up. This is what hostage negotiators do, they work with kidnappers on the task of getting food or medical supplies.
People often think that if we accept another person's story then we must reject our
own. Don't think of it as a binary choice, embrace both. Extend an invitation by using phrases such as:
Can you help me understand....?
Let's work on how we might....?
I wonder whether it is possible to....
8. Curiosity Instinct
Asking a direct question can be rude, adding: "Just out of curiosity..." helps to soften it.
"I'm not sure if it's for you but...." - This phrase creates curiosity and intrigue. It causes the listener to feel less pressure, putting them at ease.
Instead of asking: How can they think that? Ask: "I wonder what information they have that I don't?" or: "How might they see the world such that their view makes sense?"
You can get your counterpart to bid against themselves by saying "no" 4 times without actually saying the word:
How am I supposed to do that?
Your offer is very generous, I'm sorry, that just doesn't work for me.
I'm sorry, I'm afraid I just can't do that (at that price).
No, said with a downward inflection.
Don't defend your ideas, invite criticism and ask for advice. Ask: "What concerns would you have with this idea?"
Use the phrase: "Correct me if I am wrong". It shows you are open. If they don't correct you, it implies that you are correct.
If someone acts defensive (or different from how they normally are) it could be because something you have said is a threat to their identity.
People will become defensive if you say something they feel is untrue. Don't say: You are a racist. Say: I feel discriminated against.