Blunderov
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"We think in generalities, we live in details"
  
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RE: virus: What Is Strategy?
« on: 2005-05-03 08:45:45 » |
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[Blunderov] QOTD: "The bottom line in successful negotiation, Bazerman
said, is to break out of the irrational straitjacket we create out of
the prevailing condition of informationlessness."
Fascinating article. (Seems like Lucifer's cup of tea I'm willing to
bet.)Touches on the psychology of the chess gambit too; in the beginning
there was greed...
Best Regards
Complete article at
http://mfinley.com/experts/bazerman/bazerman.htm
<snip>
What Is Strategy?
Max Bazerman addresses The Masters Forum
November 2, 1994
by Michael Finley
Copyright (c) 1995 by Michael Finley
The five-hundred-dollar twenty dollar bill,and other negotiated
pleasures
by Mike Finley
Copyright (c) 1995) by Michael Finley
Max Bazerman began his morning session on negotiating strategy
predictably - he auctioned off a $20 bill.
It was a simple matter, he said. The person who offered the most for the
bill would win it. Oh, there were a few other rules, too:
The rule of silence was in effect. Bidders were not allowed to kibitz.
The money was real. If you won, you paid him what you bid, and he would
hand over the twenty.
The first bid had to be an even dollar, and subsequent bids had to be in
one-dollar increments.
Bidders could not bid twice in a row.
The highest bidder, no matter what he or she bid, would be awarded the
twenty.
The second-highest bidder had to pay Bazerman his or her final bid.
Session attendees shifted uneasily in their seats, brightly intuiting
that this was not an auction designed to their advantage.
Sure enough, only a smattering of individuals bid. By the time bids
reached $8, only two people were still in pursuit of the coveted twenty.
As they realized that they would either win the $20 or shell out cash to
Bazerman, the bidding became more intense.
The bidding reached $20 - zero gain for the winner, but a $19 loss to
the loser. On they plunged, until bidding reached $24, and the loser
appeared to realize that both he and his adversary were caught like rats
in a trap, and declined to raise. The auction ended.
Lessons learned
Over the past seven years, Bazerman said, he has conducted about 180
such auctions, and over that period his take has been less than the full
$20 only once. Seven times he has cleared $100.
What does it all mean? It means that there are other forces driving
human negotiation - an auction is a classic negotiation - than reason.
This auction is driven first by greed, then by fear, and finally by a
kind of suicidal vengefulness. Usually, Bazerman said, a number of
people are interested at first - simple greed, the attraction of cheap
money. When the bidding reaches the $8-$10 range, however, the greedy
drop out, leaving the top two. The top bid is determined to stay on top.
The lower bid is panicking, afraid to drop out and owe the speaker the
bid.
Finally, the $20 barrier is crossed. From here on, pure nutzoid
feverishness drives the auction. The top bidder is willing to pay more
money than the $20 is worth to prove the point.
"The best hope the lower bid has," Bazerman said, "is that at the last
moment a white knight will take irrational interest in the auction and
free him from the trap." That, of course, never happens. The low bidder,
sensing that he is about to be humiliated, wants to take it out on his
competitor, making his opponent's victory as hollow as possible by
driving up his bid.
At this point, the loser's mentality is, "So what if I lose - I'm going
to make your victory unbearable." And the winner's is, "I don't care how
much money I lose, so long as I lose less than you."
Sound familiar? Maybe it doesn't, but this kind of irrational
negotiating is part of the warp and woof of modern life. It is the logic
that brings countries to war. It is the logic that a general uses to
send an army off into certain death, knowing it will mean the death of
more of the enemy's army.
It is the logic of the mergers and acquisitions, in which companies will
even bid against themselves, will bid vastly more than the appraised
value of a company, will spend themselves and their existing
shareholders into a deep crevasse to make their acquisition offers
acceptable to prospective shareholders.
It is the logic of market giants who engage in mutual bloodletting - not
to increase market share, but to avoid being handed the "second-best"
label. Coke/Pepsi, GM/Ford, Polaroid/Kodak. </snip>
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