DAVID KESTENBAUM, HOST:
When you want something, when you really, really want something and someone else wants something different, what is the best strategy to get what you want?
I've been thinking about this because of all the fiscal cliff negotiations going on in Washington. You're forgiven if you've zoned out. They've been going on for months and months now, Democrats and Republicans trying to reach some big agreement by the end of the year that would avert the automatic spending cuts and tax increases, all that. When I'm watching this, I keep thinking about strategy.
There's so many possible strategies you could use to get what you want.
ROBERT SMITH, HOST:
You could hold out for your absolute best offer, go down with the ship - my way or the highway.
KESTENBAUM: Or you could pretend to hold out but knowing that you're going to compromise in the last seconds.
SMITH: Or maybe you attack the other side. You try and prove that they're wrong, and you're right.
KESTENBAUM: Or maybe you just try to be as reasonable as possible.
SMITH: Oh, that never works (laughter) reasonable as possible. The fiscal cliff for all it's grand theater, for all it's written about, it really comes down to a bunch of people in a room. They're trying to come to an agreement. They're trying to cajole. They're trying to charm, bluff, weasel, compromise, whatever it takes to get what they want.
KESTENBAUM: And these are not mysterious techniques that only congressmen know. We all use them. We negotiate every day. We just don't realize that we're doing it. And so today we called up three experts on negotiations, three of the best. And we asked them - tell us about a great deal that you made in your everyday life. And how did you get what you wanted?
(SOUNDBITE OF MUSIC)
SMITH: Hello, and welcome to PLANET MONEY. I'm Robert Smith.
KESTENBAUM: I'm David Kestenbaum. If you've ever wondered what happens when a hostage negotiator buys a car, wonder no more.
(SOUNDBITE OF SONG, "LAY YOUR CARDS OUT")
POLICA: (Singing) In these little moments, get your cards out. I am waiting.
SMITH: Our first awesome negotiating technique is called the nibble.
KESTENBAUM: Adam Galinsky teaches negotiation at Columbia. And his story takes place just after Thanksgiving. He's at an airport in North Carolina waiting to fly home. And a woman makes this announcement over the P.A. system.
We are overbooked. We are looking for volunteers who can fly home tomorrow instead of today. If you think about it, this is a negotiation. I mean, on one side of the table you've got the airline that needs some people to give up their seats. On the other side are the passengers who will be willing to give up their seats if there's a good offer on the table.
In negotiations, one side has to go first. In this case it's the airline. The woman over the P.A. system says we're looking for people willing to be bumped. And Adam says she offers a voucher toward a future flight.
ADAM GALINSKY: It was way overbooked. And - so they started out at about $300. And I didn't really want to do it because you have to go the next day and stuff like that.
KESTENBAUM: Over the P.A. system, the amount keeps going up - $500. Adam does not have a lot of money. So that's tempting but not tempting enough. Then goes up again - $700.
GALINSKY: And eventually they're offering a $1,000 voucher...
GALINSKY: ...For a flight that I paid $180 for.
KESTENBAUM: This, Adam thinks, this I can do. And most people in his shoes, they would say, OK. They probably wouldn't even see this as a negotiation. But Adam does. He goes up to the airline desk. He has a counteroffer.
GALINSKY: So I went up there. And I said - so if I get bumped off this flight, will you put me in first class tomorrow?
Yeah, we can do that.
KESTENBAUM: Now he's got a $1,000 voucher. And he's going to fly first class. Then he says something else.
GALINSKY: I need to stay somewhere tonight since it's tomorrow. Will you put me in a hotel? I didn't want my parents to, you know, drive back and pick me up and stuff. And they said, yeah, we can do that.
KESTENBAUM: Voucher, first class seat the next day, hotel.
GALINSKY: The boy's got to eat. So will you pay for my dinner tonight? And they said, yeah, we can do that. And I said - now, is someone's supposed to pick me up in a car...
GALINSKY: ...Tonight. Can you get a car service to take me home tomorrow? And they said, yes, we can do that.
KESTENBAUM: This - this is the nibble. That's the technical term. You reach a general agreement - $1,000 is good for me. And then you say, oh, one more thing. One more thing - asking the other side to throw in something small.
In this case these were things the airline probably did not care that much about, probably had meal vouchers, probably had deals with the hotel and probably had a first-class seat that was just going to be given as a free upgrade to some frequent flyer.
GALINSKY: And no one else got this. They all got the $1,000 voucher. It was about 10 of us who got bumped. But I was only one to get first class, the only one to get the hotel, the only one to get the dinner and the only one to get the car service. If you don't ask for something, you can't get it.
KESTENBAUM: The moral here - always be negotiating. Even if it looks like you have a deal, you can often get more.
SMITH: Politicians know this very well. The nibble is a time-honored technique in Washington, D.C. And with the fiscal cliff, we're already hearing about little nibbles back and forth. And when this deal gets made and probably will be made before the end of the year, we're going to hear a lot about all the little extras that got thrown around at the last minute. Loopholes get written into the tax code. Deductions get saved. Maybe a congressman even gets a meal voucher.
KESTENBAUM: Or a new highway. Always be negotiating. OK. Technique number two, expanding the pie.
SMITH: Cathy Tinsley teaches negotiation at Georgetown University. And her story takes place in Africa. Before she knew anything about negotiating, she was in the Central African Republic working with the Peace Corps in a small village.
CATHY TINSLEY: I'd gotten there in June. And it was November. So I'd been in my for about five or six months. And I decided that I wanted to have everybody in my village over for pumpkin pie - for Thanksgiving dinner. And I was going to make some pumpkin pies. So I went to the marketplace to try to buy pumpkins. And there was only one woman that had pumpkins. And she had four of them. And I thought about how many people were coming to dinner. And so I asked how much were her pumpkins. And she said 25 francs, Central African francs. And I said, OK, great I'll take all four of them. And she said no, no, no. I'm only going to sell two to you.
SMITH: Any negotiations expert will tell you - before you go into a negotiation, when you're negotiating over anything, even pumpkins, you need to think about this key concept to evaluate whether to accept an offer or walk away. It's an acronym called BATNA - best alternative to negotiated agreement. In other words, if you can't reach an agreement, how bad is that really?
Did you have any other options? Could you say - buy pumpkins from someone else?
TINSLEY: Looking around the marketplace, there was nobody else who was selling pumpkins. So I had in negotiation terms, no BATNA. I had no alternative. I had no way of just leaving her. I was stuck with her.
KESTENBAUM: You were - you're in like the worst possible negotiating position there.
TINSLEY: Exactly. Exactly. I...
KESTENBAUM: You've already revealed that you need four pumpkins. It's clear she's the only person with pumpkins. And you're relatively wealthy by local standards.
TINSLEY: Exactly. Exactly.
SMITH: Cathy figures the woman just wants more money. After all, she has a monopoly. And Cathy doesn't mind paying more so she ups her offer. She says I will pay you double what you asked for for all four pumpkins. Again, the woman says, no. I'll only sell you two.
TINSLEY: Finally, I think out of desperation I really was about to just quit. And I just said to her - why? Why will you only sell me two? And she said, well, it's the end of the harvest. And if I sell you all four pumpkins then I don't have any seeds to plant for next year.
(Laughter) and I looked to her and said, you know, we've got a really easy deal here I said because I only want the outside part of the pumpkins. And you want the inside part.
SMITH: And you can guess the end to this happy little story. They cut up the pumpkins. Woman gets her seeds. Cathy got her pies.
KESTENBAUM: This is actually a really important idea in negotiations. It's easy to get caught up thinking you're negotiating and fighting over one thing. A classic example is you're negotiating a salary for a new job.
You want more money. The employer says, no. But maybe there's something else you can negotiate where there's more flexibility like vacation or benefits or use of the company car. Negotiation experts have a term for this. It is called expanding the pie.
SMITH: This is another big component of the fiscal cliff negotiations in D.C. Both parties have very little wiggle room on taxes, for instance. The Democrats have said that the rates must go up, at least for the wealthy. And many Republicans, they have actually signed pledges promising themselves and their voters that they would do the opposite. They would never raise taxes.
KESTENBAUM: But in something as complicated as the federal budget, there are thousands of obscure ways to get money without being so obvious about it. For instance, you can futz around with the way you calculate inflation. And they were really talking about this because by adjusting the formula for inflation, you raise more money.
The tax brackets are set to adjust with inflation. So maybe that's not a tax increase. Maybe this is just correcting the inflation formula. Adding stuff to negotiate, expanding the pie, that can make a big difference.
SMITH: Which brings us to our last story, our last technique, disarming empathy, also known as the thing I laughed it at the beginning, being nice.
KESTENBAUM: The story comes from a hostage negotiator who wanted to buy a car, not just any car.
CHRIS VOSS: An SUV that I fell in love with. It was this gorgeous color.
KESTENBAUM: What color was it?
VOSS: Manufacturer calls it salsa red pearl. That has to be the best name for a color I've ever heard of. It's sort of this sexy Burgundy, great, deep burgundy color (laughter) just a great color.
KESTENBAUM: Chris Voss was a hostage negotiator with the FBI. Now he teaches at Georgetown. And here is the story of how he bought that salsa red pearl SUV. He goes into the dealer on a Friday afternoon when he figures the sales people will be kind of worn down. He meets the sales guy. And then he asked to make an offer. The trick here he says is that you want to start with a low offer, low but not so low that they get up and walk away.
VOSS: If you're going to play the bargaining game, your first offer really needs to just start to make the other side mad. Then you need - you don't want to offend them. But you want them to get a little annoyed. You want where they're still talking to you but they let you know they're clearly - that they're angry. They're a little upset. And then you know you've come up with a good price.
KESTENBAUM: Voss says his number, which is significantly below the sticker price.
VOSS: I threw out the price. And the guy looked at me really, really hard. And he got up and walked away from the table. So then I started to get worried because at that point I thought this is probably near their bottom line.
KESTENBAUM: But the guy comes back with a counteroffer. The counteroffer is more than Chris Voss wants to pay. And the normal way things play out in these situations is that you end up meeting at a price somewhere in the middle between your price and the other guy's price. Chris does not want to do that.
So he needs to neutralize the other guy's argument, which is, hey, look, we came down from the sticker price.
VOSS: You know, the real trick to bargaining is get the other side to bargain against themselves. You just lay back and let them do all the work. But you have to be nice about it. You know, you can't make them feel like you're beating them up.
So he came back to me. And he said, you know, we're going to counter. This is the amount. He was trying to be really positive and upbeat. So I said, you know, I'm really sorry because I shouldn't have even offered you a low price. And this counteroffer you came back to me with, that's phenomenal price.
The truck is worth that. It's worth more than that. It's worth everything that you're asking for. It's a gorgeous truck. It's beautiful. And I am embarrassed to say this. But I just can't pay your price.
VOSS: And that leaves him nowhere to go, especially if you're being really nice about it.
KESTENBAUM: Is this all stuff that's straight out of the FBI hostage negotiation handbook?
VOSS: It's kidnap bargaining. I wouldn't say 101 but I would say it's - it kind of masters-level kidnap bargaining.
KESTENBAUM: The people at the car dealership, they never went back in their office and googled your name and found out you were a hostage negotiator?
VOSS: (Laughter) No, thank God they didn't do that, no. They just thought I was, you know, another, you know, poor guy coming in off the street trying to buy a truck.
VOSS: After Chris' little performance of kindness, the sales guy says, all right. Let me go talk to my boss. He leaves the room. Time passes. Then he comes back.
VOSS: Came back with another offer. And this time he had smiley faces written all over the offer sheet and you win underlined three or four times, you know. And I - if he had balloons, he would have brought balloons out to me, I think. And I said I just - I'm sorry. I can't do it. I just - I can't do it. I was being as what we call, you know, disarming empathy.
KESTENBAUM: The smiley faces on the page are looking up at Chris. The eager salesman is patting him on the back. But, again, Chris does not change his offer.
VOSS: He got up and walked away from the table about four times, came back with a lower offer every time until he came back with my price.
KESTENBAUM: He came back to the original price that you'd asked for?
VOSS: Yeah. I beat him all the way (laughter) down.
KESTENBAUM: How did you feel at the end of that?
VOSS: Well, even at that point in time I said, look, you know, I've got to make sure that I can do this. And - so you have to give me 'til Monday.
KESTENBAUM: It's always good he says to sleep on a decision like that. So he goes around to other dealers. No one can beat the price. So he comes back and writes the check. He still has the car.
VOSS: I do. I drove it here this morning. I love it. (Laughter) It makes me very happy.
KESTENBAUM: (Laughter) And every time do you get in do you think - I paid a good price for that?
VOSS: (Laughter) I do. I suppose besides the fact that I love the color, I feel like I paid a really good price for it.
SMITH: (Laughter) That was amazing. You know, David, I covered the debt-ceiling standoff last summer between the Democrats and Republicans. And I felt at the time even that the speaker of the House, John Boehner, he totally did this hostage negotiating technique. He would not budge, if you remember the news.
He just kept saying to the president, or so we heard afterwards in the - in these meetings, I'm sorry I can't do it. My Republican colleagues will not agree to this. And many say that Boehner won those negotiations. He was the one that managed to hold his line.
KESTENBAUM: Then of course there was the election. And now it seems like President Obama has a little bit of the upper hand in the fiscal cliff negotiations. Actually, the first expert that we talked to, Adam Galinsky, he pointed out that Obama has a better BATNA than the other side.
His best alternative to a negotiated agreement, Obama's BATNA is that if no deal is reached, the Bush tax cuts will automatically expire, which does a little bit of what Obama wants. It raises taxes on the wealthiest. It does raise taxes on everyone else too. But, you know, you can always propose another bill to fix that part.
SMITH: Yeah. And now Obama's the one who can use this disarming empathy and say to Republicans, you know, I'm sorry. I just can't do what you're asking. And if you follow the news of the last few weeks, the Republicans are the ones who are coming back to, like, the car dealer going - well, what about this? What about this?
KESTENBAUM: Now to be fair, we should point out that every negotiation in Washington, D.C., though the techniques used there are same as the ones we talked about today, those negotiations are much more difficult than just buying a car or making a pie. I mean, for starters it's not just two people trying to reach a deal. There are 538 people sitting at the table, 538 members of Congress.
SMITH: And the president, so that makes 539. Also, these negotiations are not taking place in a backroom at a car dealership where no one else has to know what goes down in the end. These are happening in the public eye.
In every negotiation, as you heard, there is a moment where each person has to push a little harder than they might like. They have to look like a jerk. And there's usually a moment where each side caves a little bit. And it's hard to do that in front of TV cameras. And it's hard to do that when newspaper reporters are putting you on the front page of the paper.
KESTENBAUM: And, finally, it's hard to make a deal when nobody really knows what their own bottom line is. I mean, all the car dealer needs to do is make money, right? But with the fiscal cliff there are so many questions about the economy. No one really knows for sure what the effect of a tax hike would be or how a budget cut would ripple out through the economy or how voters are going to react to whatever you do.
SMITH: And when you think about all that stuff, the surprising thing is not that it's taking so long to reach a fiscal cliff deal. The surprising thing is if they ever make deals at all.
(SOUNDBITE OF SONG, "LAY YOUR CARDS OUT")
POLICA: (Singing) In these little moments, lay your cards out. I am waiting.
SMITH: As always, we would love to hear what you think of the show. You can find all sorts of ways to respond on our blog - npr.org/money.
KESTENBAUM: If you have an awesome negotiating technique or a story of your own, we'd love to hear them. You can send us email - email@example.com.
SMITH: OK. You say your name. And I'll do - I'll do the thanks for listening.
KESTENBAUM: I want to do thanks for listening.
SMITH: No, you always get to do thanks for listening. I want to do the thanks for listening.
KESTENBAUM: I'm better at it.
SMITH: David, you are better at it. I completely agree with you. If this were a just world, you would always say thanks for listening. But I am just not going to let you do it. I just can't do it. I have to do it this time.
KESTENBAUM: I'm just going do it.
SMITH: No, no, no, no, no. (Laughter).
I'm Robert Smith. Thanks for listening.
KESTENBAUM: I'm David Kestenbaum. Thanks for listening.
SMITH: No. Thank you for listening.
KESTENBAUM: Thanks for listening.
SMITH: Thanks for listening.
(SOUNDBITE OF SONG, "LAY YOUR CARDS OUT")
POLICA: (Singing) Girl, get your head right. I am waiting. Girl, get your head right. Girl, get your head right. Girl, get your head right. Get your - get your - get your - get your - get your head right.
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