Welcome, this is negotiations and I'm Maurice Schweitzer on the co author of friend and foe a professor at the Wharton School where I teach negotiations and I introduced the advanced course negotiation. What I'd like to do today is introduced the way I think about negotiations and begin to think about the dynamics of the negotiation process. So first I want to think about negotiations with a small end. That is the kinds of negotiations that we engage in happen every day with the people closest to us both at work and at home and everywhere in between. So we're constantly engaging in negotiations whenever we want to get something from somebody else, we want them to do something for us or you want them to give something to us. And there's some exchange process and were engaged in this interpersonal interaction. Now it could be with one person, it could be with many people but that's the broad idea and to give you a sense of how I'm thinking about this. I want to jump right into an exercise so I want you to imagine the following. Imagine that I came along and I paired you with somebody else in the course and I said you don't know who this other person is yet. But you're paired with somebody else and what I'm doing is I'm giving you $100 pot. Okay now imagine for a moment I said of the $100 how much of the $100 would you offer to your counterpart? Now here's the deal, you're going to make that offer. They know it's $100 pot and they could either accept or reject that split. If they reject the split then you both get zero. So that's the game. So think for a moment, how much of the $100 would you offer? Now imagine I said, well you're now paired with somebody else and you're now the second person, somebody else has $100 pot. They've offered you some amount of money out of the $100 and you can accept or reject that. Remember if you reject it, you both get zero. So I want you to think for a minute, what's the smallest amount that you would accept that is below some amount. You say, look, reject, we both get zero. Okay, so think for a minute what that number would be and here's what I want you to think about. So imagine that we actually played this game and this game has actually been played hundreds and hundreds of times throughout the world in many different cultures and countries. And we find some regularities in the way people play this game. We know that from an economics perspective, if we did what's called backward induction, we look at that second players problem. And we say, look, imagine the second player, you're effectively deciding between zero, you reject it or whatever you're offered. And this game is called the ultimatum game because the first player gives you an ultimatum take it or leave it. And if you reject it you get zero. And so from a self interested profit maximizing perspective, the sort of neoclassical economic perspective everybody should say yes I'll take it whatever it is, a dollar, $2, $0.05 even. That's the economic rational perspective. But we know that in practice what actually happens is not only do the first players give substantial amounts of money, often half the pot like $50, sometimes less, maybe 30 but substantial amounts of money. And then we see the second player getting offered substantial amounts of money, let's say they're offered $30 and they reject it saying look I'd rather we both get zero. Then my unfair outcome of getting 30, knowing somebody else gets 70. So I want to sort of think about that for a minute. And my guess is that a lot of you, as the first player offered substantial amounts of money. And as the second player we're expecting a substantial amount of money it might have rejected say a low offer like $10. Now imagine that I said, here's a survey, do you prefer $10 or $0? Check one of these boxes. Most people would have said, I prefer $10 but knowing that somebody else gets 90 makes that $10 far less pleasant to receive. And so the idea that I want to suggest is that we care about not just our own outcomes, but the interpersonal outcomes that as we care about how good a deal is for the person across the table from us. And so the idea here is we can't say, as a manager go to an employee and say. Hey look, here's your raise for the year, maybe it's a very small one or no raise at all saying, look, the job market so difficult. This is better for you than anything else you could do. The idea is that people will go ahead and still rejected if they feel as if you're getting a great outcome. So recall that I said it was $100 pot. Now imagine if you thought it was $100 pot, but in fact it was really $1,000 pot. And so the idea here is as that second player you might say, look, $50 is fine, as long as I think it's $100 pot. But if I think it's $1,000 pot, well now I need more or imagine you think it's $100 pot, but it's really a $20 pot. And so that $10 offer was actually quite fair, but I thought that it was bigger than it really was. And so the demands that I make are greater. So one idea here that I want to suggest is as we're negotiating the perception your counterpart has of how good that deal is for you really matters. That is if it looks like you're making out really well, their expectations, their demands are going to be greater. So the idea here is we've got to manage our perceptions if you show up to negotiating table and you're wearing your rolex watch and your mont blanc pen and you drove up in your fancy car,. People might assume that you have so much money and this deal is going to be so great for you. It's going to change what their expectations and demands are. So here's the broader idea, there's I'm arguing that the perceptions matter perception influences behavior and will influence outcomes. And I want to think about this broader arc of what happens in the negotiation process and how that impacts our outcomes. That's the goal of this course to think about that. We can think about economics as a baseline, as a foil for us to think about. But I'll be drawing heavily from social psychology to think about what happens in this interaction, what happens in that process and how that impacts ultimately our outcomes. And finally, just share one quick story related to this, I was talking about this and I had a former executive student who said, and he was a high powered executive. He owned a bunch of different companies, he just bought a factory in upstate New York and he was very busy managing all of the different companies that he had. And he said, look, I bought this company, I knew exactly what we needed to do, I knew that we needed to lay off some workers and cut our wage costs. That has reduced some of the wages and we would become really profitable. I knew exactly what to do, but I was in a hurry. So I took my helicopter from New York upstate to this factory, I landed in the field across in the factory and I walked in and I shared that news and my vision for the company. And the union leaders practically shoved me out of the building and he was experienced like, yeah, this is exactly what happened. And I responded like, yeah maybe you got to take your helicopter a few blocks away, then rent a beat up car show up and have that candid conversation. Where people aren't feeling as if you're coming to the table with a lot of money where their demands, what they're receptive to hearing is going to be quite different. So that's the broad idea. Welcome to this course. I look forward to getting started.
