Mahjong and Game Theory

What was really going on in the “Crazy Rich Asians” Mahjong scene (film based upon international best selling novel by Kevin Kwan), and what it can teach us about communication, rapport building, leverage (and whether to use it), negotiation, strategy, and cooperation:
As background, Watch the scene here
Read the article here

The Importance of Rapport in Negotiation: Structure and Strategy

We live in a culture in the U.S. where people shy from negotiation. When “No Haggle” car purchasing policies were introduced some years ago, they were warmly received by consumers because of the dread of negotiating (though these policies naturally yield disproportionate economic benefit for the car dealership over the consumer). For many, negotiation is emotionally awkward and even synonymous with “conflict.” Some even consider it gauche. In general, negotiation is regarded as a specialized superpower possessed by experts, but otherwise to be avoided whenever possible.

Nonsense. Negotiation happens everyday in small, unsexy ways. We tacitly negotiate for the next open parking space at the grocery store; we negotiate with our children countless times per day (which will necessitate a blog entry on the distinction between power and leverage – ahem); we negotiate with our neighbors about fences, dogs, and noise; we negotiate with colleagues and supervisors over assignments, compensation, vacation scheduling; we negotiate with ourselves (if I go for a run before work, I can relax and watch a movie after dinner).

Perhaps some of the discomfort we have with negotiation stems from an “Us” versus “Them” win/lose paradigm, not to mention a fundamental fear of rejection (“What if they say no?” My stock answer to that is: most likely you are in no worse position than before you asked). Negotiation is like a muscle: the more you exercise it, the stronger it will be and the more you can apply it to varying situations – like the pushups that now allow you to install solar panels on your home or have more energy at the park with your family. One very effective tool to overcome the “Us” versus “Them” apprehension in negotiation is to build rapport with the other party. How do you do this and why is it important?

The How: it means adopting a genuine attitude of curiosity about other people, and slowing down the process a little. If possible, take some time in advance of the negotiation to learn what you can about that person’s background. Even if you know nothing about them, a simple, “How did you get involved with X work?” or “What brought you to this part of the country? Were you raised here?” or even the national origin of their family name . . . before jumping into the nuts and bolts of the horse trading at hand, take a few minutes to get to know them. The key here is that your focus is on learning about them, and letting them know (without so much as saying it), “I see you as a human being.” Then, pay attention to what they say in response. Smile. Show an interest. Demonstrate that you heard them with a recap: “Wow. Coming to California from the midwest seems like it was quite a culture shock. And sounds like you don’t miss the weather!” And then . . . notice if they reciprocate. Do they show an interest in you? It’s ok if they don’t, but it’s also information to keep in mind later in the negotiation.

Do: pay attention and listen (this is different from waiting quietly for your turn to talk); have a sense of humor; look for shared experiences to build upon.

Don’t: bombard them with questions and cause the person to feel interrogated. This has the opposite impact of creating trust.

The Why: Genuinely connecting with another person satisfies a basic need for people to feel that they belong. In fact, people have a stronger need to belong than they do to be “right” factually. When you show an interest in someone else’s life, attitudes, interests it is a validating and satisfying moment for them, not to mention the dopamine the brain secrets because someone is paying attention to them (much better than the dopamine “hit” through the pings supplied by social media, because it’s in the flesh!). Not only does building rapport humanize a negotiation and alleviate some of the defensive posturing characteristic of many negotiations, but it also provides a baseline of behavior for that person. That is, in a more/less relaxed state of mind while talking about a topic that is comfortable and easy for them, what was their tone of voice, volume and vocal pacing? Do they tend to gesture a lot with their hands and body? Do they stop to pause and think? Do they smile? Baseline behaviors when an individual’s defenses aren’t peaked provides a basis for comparison later in the negotiation when their words and actions deviate from the baseline. You may not know the meaning of the deviation, but noticing it may be enough to inform you it’s time for a break and to regroup.

As humans, we have a basic need to connect. We *think* we get that through screens and asynchronous moments: Skype, FaceTime, Facebook, Instagram, Twitter. But it’s an illusion. Minimal effort, knowledge or preparation are required to advance that extra step in attempting to establish rapport – and you concede nothing by doing so.

Lucia Kanter St. Amour, Pactum Factum Principal

Cognitive Traps Series part 3: Reciprocity

Reciprocity Effect is extremely alluring, and one of the most powerful and difficult cognitive traps to resist. It’s very simple: if someone does something for you, you’ll naturally want to do something for them.When you offer something for free, people feel a sense of indebtedness towards you.For example, researchers tested how reciprocity can increase restaurant tipping. Tips went up to 3% when diners were given an after-dinner mint. Tips went up to 20% if, while delivering the mint, the waiter paused, looked the customers in the eye, and then gave them a second mint while telling them the mint was especially for them. In another study, 11% of people were willing to donate an amount worth one day’s salary when they were given a small gift of candy while being asked for a donation, compared to 5% of those that were just asked for the donation.  Think of a recent invitation to a friend’s house for dinner where your friend insists that you need not bring anything other than yourself; it’s almost impossible to just show up at the door empty-handed without bearing some contribution, such as a bottle of wine.

Take-away: Remember the reciprocity principle the next time you prepare for a negotiation: a smart negotiator will have prepared a concession plan, understanding that if they make a concession, the Reciprocity Effect will make it almost irresistible for you to make a concession in return. Some pre-planned concessions could be decoys – that is, the other party is not truly giving up something of value. You can employ the same strategy yourself. Test the legitimacy of concessions made by the other side before Reciprocity kicks in on your part.

Background on our Cognitive Traps series (not our original research): Social and cognitive psychologists have been interested for decades in how the brain processes information and what that produces in the outside world in terms of behavior.  In the 1970’s, two psychologists from Stanford University (Daniel Kahneman and Amos Tversky) started to study aspects of decision-making: does the rational person made decisions based on innate cost-benefit economic analysis? Their work (called Prospect Theory) created a new discipline of science known as Behavioral Economics, which earned them the Nobel Prize in Economics in 2002 (Tversky had died in 1996, so technically the prize only went to Kahneman at the time it was bestowed).  According to behavioral economics, the Rational Person theory doesn’t take into account all the reasons people behave the way they do. People make decisions relative to a reference point, and that reference point is the status quo – “where I am now.” Kahneman and Tversky categorized their work into a set of common heuristics: shortcuts that the brain takes so that it can make decisions in fast-moving everyday life.  But many of these heuristics can also act as cognitive traps in a negotiation, if you aren’t aware of them. Reciprocity is one of them.’

Lucia Kanter St. Amour, Pactum Factum Principal

The Complexities of #MeToo

We won’t sugar-coat it: Harassment claims destroy lives – even when valid, even when vindicated. But it matters a lot to people to feel that their workplace is safe. The #MeToo movement raises deep-rooted complexities. “Men could be falsely accused of harassment or assault. Women could lose out on opportunities at work because men will be afraid to work with them. The punishment for less severe forms of sexual misconduct could be the same as for more severe offenses.” These were among women’s top concerns about the #MeToo movement in a national survey Vox conducted with the media firm Morning Consult in March of this year. These concerns were held by a majority of women surveyed — 63 percent were very or somewhat concerned about false accusations, 60 percent worried about lost professional opportunities, and 56 percent were worried about perpetrators getting the same punishment for different misdeeds.
Read full article here.

Pressures leading to the #MeToo movement in October 2017 were mounting for years (probably decades), beginning with the feminist movement in the ’60s, which raised the consciousness in which women shared experiences of sexual assault and harassment – i.e. the first “MeToo.” We also have key legal and cultural precedents, notably the 1986 U.S. Supreme Court case Meritor Savings Bank v. Vinson, and the high-profile 1991 Senate confirmation hearing of U.S. Supreme Court nominee Clarence Thomas in which law professor Anita Hill testified that Thomas sexually harassed her in the workplace.

The point is that #MeToo isn’t new and didn’t develop as the latest social justice trend. Social movements like #MeToo are usually rooted in deep structural marginalization over time, until the “dam” finally breaks – at which point, players in the present moment pay the price for the many years of inequity and mistreatment. The results can be disproportionate and sometimes misplaced. At Pactum Factum, we have also seen situations where a harassment allegation in the workplace is used a sword rather than a shield (e.g. an under performing employee’s anticipation of an upcoming performance evaluation or adverse action; or other ulterior motive). The notion that “a person wouldn’t come forward and put themselves through the unpleasantness of vetting such a claim unless it were true” does not necessarily hold. But the idea behind the #MeToo movement’s subtitle, “Believe Women,” is that every claim should be thoughtfully heard and thoroughly investigated. A moral and practical balance must be struck when navigating the multiple states of Unknown that confront anyone entrusted to investigate such claims. This is yet another reason that a proper workplace investigation is so critical when these issues arise.

Lucia Kanter St. Amour, Pactum Factum Principal

 

The Grocery List of Negotiation: Preparing a Plan

For the ten years I taught Negotiation at UC Hastings College of the Law and UC Berkeley Law, I assigned my students the task of submitting a planning memo before each simulated negotiation exercise. I will level with you: they considered it tedious “busy work,” to which I would say, “you’re welcome.”

Entering into a negotiation without preparation or a plan is like walking into a casino with an open wallet. Even when I could discern from the contents of my students’ memos that they approached it as a “check the box” exercise, they were still developing an important habit. Generally, I recommended that they use the Appendix B planning guide that G. Richard Shell offers in his book “Bargaining For Advantage,” which was also an assigned text (and an excellent primer on negotiation). This issue of the Pactum Factum newsletter will discuss some of the aspects of that planning guide, supplemented by my own notes and strategies from experience over the years.

Simply reading through the steps isn’t adequate; you need to actually hunker down and do the work of fleshing out each step, in writing:

STEP 1: Context, Players, Problem Statement / Issue Identification
Consider the context of this negotiation. Is it “high stakes?” Is preserving the relationship important? Is it purely transactional? Is it a hybrid of transactional and relational? Which conflict “mode” would be most effective for the context (see February 2017 blog issue on the TKI Conflict Mode Instrument). This first step should also include an effort to define the problem(s) / issue(s) at stake and creating a list of issues or agenda for the negotiation. It’s easy to lose track of issues once you’re in the thick of it. Think about comparing your problem statement with the other side in advance of the negotiation and setting an agenda of the issues all parties wish to cover. This can save time at the outset of bargaining, and minimize frustrations from cropping up right out of the gate.

This step should include any research you can reasonable conduct on the people who you will be negotiating with. Find out who will be present at the bargaining table and conduct some internet sleuthing. Where are they from? What is their background and education? What makes them tick? Do you both like dogs? What other commonalities or potential obstacles can you discover?

STEP TWO: Interests
Develop different types: concrete, psychological and procedural. And consider whether they may be shared interests with the other side, conflicting or ancillary.

Mine

Theirs (known or guesses)

STEP THREE: Specific Goals
Too many people approach a negotiation with a goal of “doing the best I can.” Vague and unprincipled goals lead to lackluster results. G. Richard Shell teaches us that negotiators who develop high, specific, justifiable goals accomplish approximately 40% better results than negotiators with amorphous goals. Let’s break this down:

“High” means a starting point that you can communicate with a straight face, but one that you don’t realistically expect to achieve. Leave yourself room to make concessions and show the other side that you have been willing to come their direction. People like to feel that the outcome of a negotiation was “hard won.”

“Specific” means crunching numbers for a precise calculation, as well as any other attributes needed to make your goal durable and practical (who, what, when, where, how).

“Justifiable” means that when you are asked how you arrived at that demand, you can refer to objective standards and metrics to back it up (see step four). This works both ways: when the other side presents their offer, you should always ask, “How did you calculate that?”

You also need to know what your Reservation Point (aka “Bottom Line”) is – that is, the point at which you walk away from the bargaining table because no deal is better than a “bad” deal. This includes what Roger Fisher and William Ury have famously coined as BATNA – understanding what your Best Alternative To a Negotiated Agreement is (i.e. if you can’t get a deal, what’s your best backup plan. You should also consider your WATNA – Worst Alternative . . . and MLATNA . . . Most Likely Alternative).

STEP FOUR: Authoritative Standards & Norms
Be specific about standards or objective criteria that will favor you, standards you believe they will use, and think about how to work with their standards or convince them that yours are more relevant or appropriate. Objective standards & norms means those that neither party can manipulate.

Mine

Theirs

My Counterarguments

STEP FIVE: Leverage
Assess who you think has leverage going into the negotiation (bearing in mind that leverage is dynamic and can shift through the course of a negotiation and the process of gathering information, not to mention external factors). Be sure to evaluate positive, negative and normative leverage

Mine

Theirs

If no deal, their alternative is:

STEP SIX: Third Parties
Are any third parties a factor; or can a third party be used as an audience / excuse / justification? Though don’t make the mistake of omitting necessary decision-makers from the bargaining table. One of the basic requirements of each party in a mediation with me is that any necessary decision-makers must be present. If you’ve been negotiating over the course of hours, days or weeks without a final decision-maker participating in that journey, it can all fall apart.

STEP SEVEN: Possible Creative Ideas/Proposals
Although true brainstorming is time-consuming and best accomplished together with the other parties, it’s worthwhile to start this in the planning stage. How can you build on shared interests, Bridge conflicting interests, create options? Be creative at this stage without “culling” your ideas too much. The culling comes later when you gauge if the other side is open to the idea, and then you start to test practicality and durability of creative options.

STEP EIGHT: Plan for Use of Information
Do not skip over this step! “Give/Get/Guard” means considering what information you are willing to give (or want to make certain they hear); what information you need to try to get from the other side; and what information you need to guard from the other side discovering (and consider ways to do so: answering a question with a question; answering a different question from the one they asked; being transparent and communicating clearly that you cannot divulge such-and-such information, etc.)

STEP NINE: Concession Plan
Related to step three: map out the concessions you are willing to make during the course of bargaining. Think through all the possible ways you can build concessions into the negotiation to show the other side you are “giving up” something(s). Concessions can be monetary or otherwise; tangible or intangible items. Smart negotiators even plan for “false concessions,” – that is, the appearance of giving up something that does not, in reality, matter much to you (and be aware that the other side may be doing the same thing).

STEP TEN: Personal Reflection
Think about ideas for increasing your effectiveness and managing your own emotions, reactions, and personal goals in this particular negotiation. Take a few moments to consider what could trigger you emotionally and strategies for handling yourself if that happens. If you are negotiating in a team or with your attorney, is there a code word you can agree upon in advance that lets the other person know it’s time for a break or that you are becoming upset? Note that this requires true presence of mind in the negotiation. When I was a fledgling attorney, I would hold a small smooth stone in my hand; it was cool to the touch and helped me remain calm and grounded. Did I still get overwhelmed or feel out of my depth? Yes. But the key was that I didn’t yield to false pressure tactics and knew enough to adjourn and reconvene after I’d had time to think or consult a more senior colleague for advice. If you feel like the other side is applying pressure for you to respond to one of their proposed options or demands immediately, this is a flag; ask yourself how likely it is that the pressure is “real” versus manufactured by them – and what that might signify. Absent true time pressure by an authoritative an objective source, don’t allow yourself to be rushed.

Lucia Kanter St. Amour, Pactum Factum Principal

The Most Beautiful Woman Theory

a.k.a. Nash Equilibrium.  In reality of course, the bar scene from Ron Howard’s film, “A Beautiful Mind” is not how the real Nobel Prize recipient for Economics John Forbes Nash Jr. came upon the idea.  Economics is a system for optimizing resources, which is one of several approaches Pactum Factum applies to negotiation and mediation. In a Nash equilibrium, each party’s strategy is optimal when considering the decisions of other parties. Every party wins because everyone gets an outcome they desire, even if it isn’t their preferred outcome individually. A Nash equilibrium teaches us that decisions that are good for individuals can sometimes be terrible for groups. A cooperative strategy is one that leads to the highest joint payoff for all participants.
Watch the scene

Lucia Kanter St. Amour, Pactum Factum Principal