Thread by @banglani

A short thread on negotiation.

A few years ago, I changed how I negotiate everything - investment offers, employment offers, day-to-day business deals.

I had learned negotiation in business school - concepts like BATNA and anchoring, and techniques like diminishing gives, keeping something in the back pocket etc. - and negotiated the traditional way.

While I was never a hard negotiator, I still felt dishonest about haggling. If I make an offer for 100, then in exchange for another give or the threat of walking away, I revise it to 120, why did I not offer 120 to begin with? The whole process seemed designed to reduce trust.

Not to mention that in "winning" a negotiation, you can sow the seeds of future discontent. Nobody likes learning later that they could have got a better deal, and that hurts the relationship. Even if the eventual deal is "fair", the process creates friction between people.

So I decided to follow a different, simpler negotiation technique:

Make your best offer up-front, then stick with it.

That's it - the entirety of the method. Keep nothing in the back pocket, don't low-ball, don't try to second-guess the other party. Just make your best offer.

It's a simple technique, but it takes enormous discipline to execute. First, in knowing what your walk-away point is. It is very, very hard to know that without getting burned a few times. Will you let that great candidate go for an additional 5 lakhs? How about 1 lakh? 50K?

Second, in sticking to your offer in the face of competition, deal fatigue, emotional appeals and so on. The other party tests you, and you risk coming across as the jerk who just won't budge. It's far easier to be the nice guy - to close the deal without further emotional toll.

But the whole system depends on not moving from your stated position. Your credibility depends on it - not only in the deal, but in the relationship that follows. If you say this is your best offer, but make a better offer later, maybe there's an even better offer possible?

The other downside of this approach is that you don't give the other party the satisfaction of a successful bargain. Humans don't think in absolutes. "I got this car for 5 lakhs" is less satisfying than "They quoted 6 lakhs but I brought it down to 5.5".

However, successfully executed, this technique allows for great peace of mind. Sure, you almost always leave something on the table. But you always get a deal that works; you get a great start to the relationship; and you win their trust. It's worth whatever you left on the table

PS: I sometimes make small concessions right at the end, to "buy goodwill" after the deal is struck, or almost struck. It's probably a sign of weakness.