What Are the Traps?
The conversation with Fred and Evelyn illustrates why intuitive judgments are not always wise. Fred’s perspective reflects a number of traps, or cognitive distortions, that commonly lead us to refuse to negotiate when we probably should. These “negative” traps are in the left-hand column below, and they are by far the more common response when we are in conflict with an enemy. But a second set of traps, listed in the right-hand column, can have the opposite effect, causing us to negotiate when maybe we shouldn’t. Evelyn’s perspective reflects some of these “positive” traps.
Negative Traps Promoting Refusal
Positive Traps Promoting Negotiation
Tribalism
Universalism
Demonization
Contextual rationalization and forgiveness
Dehumanization
Rehabilitation and redemption
Moralism/Self-righteousness
Shared fault and responsibility
Zero-sum fallacy
Win-win
Fight/Flight
Appeasement
Call to battle
Call for peace/Pacifism
a) Tribalism involves an appeal to a group identity, where you see your own side—the in-group—as familiar and reliable, while the other side is an out-group that should be distrusted and disfavored. The group identity rests on shared characteristics such as family or kinship structures, language, religion, race, ethnicity, or a common history. In our example, Fred perceives Bikuta as a member of a foreign tribe—the Japanese—who are different, don’t think the way “we” Americans do, and who are not to be trusted. At the opposite extreme is the trap of universalism. This presumes that people are all essentially the same and underestimates the importance of differences created by culture, history, and group identity. In Evelyn’s words, “People are people. Any businessman wants to make money for his company.”
b) Demonization is the tendency to view the other side as “evil”: not just guilty of bad acts, but fundamentally bad to the core. Fred sees Bikuta’s actions—secretly opening a factory in China, manufacturing a competing stent, and asking for a reduction in the license fee—as revealing his underlying character. Evelyn’s perspective reflects the opposite extreme: contextual rationalization. She suggests that Bikuta’s behavior is best understood as the product of external pressures and thus can be easily forgiven.
c) Dehumanization involves seeing the enemy as being outside the moral order, less than human. Said to be a central process in prejudice, racism, and discrimination, this trap justifies treating the “other” as an “object.” Fred’s characterizations of the Japanese lean in this direction. More extreme examples can easily be found. In 2008, Imam Yousif al-Zahar of Hamas characterized Jews as “the brothers of apes and pigs” before calling them a people “who cannot be trusted” and “have been traitors to all agreements.”11 The opposite trap might involve a belief that all people are capable of change and deserve an opportunity for rehabilitation and redemption. In Evelyn’s words, “Give Mr. Bikuta a chance to do the right thing.”
d) Moralism and self-righteousness create a tendency to see the other side as entirely at fault while you are innocent and worthy. Fred feels Bikuta is completely to blame, has purposely and flagrantly violated the joint venture agreement, and deserves moral condemnation. The opposite trap is the tendency to assume that in every conflict there is fault on all sides and that the burden of responsibility should be shared. Evelyn suggests that while Bikuta may be at fault, you are partially responsible as well for not being more attentive to Bikuta’s desire to enter the Chinese market.
e) The zero-sum trap involves seeing the world in terms of a competition: what one side wins, the other side must lose. Conflict is seen as purely distributive: anything that benefits your enemy is necessarily bad for you. Reducing the license fee, according to Fred, can only help Bikuta and hurt you. One sees this trap everywhere. In divorce disputes, for example, spouses often argue over the allocation of money, or time spent with the children, as if more for one spouse can’t possibly be good for the other. The opposite trap is the naïve assumption that win-win is always possible, that the pie can always be expanded so that both sides are better off. Evelyn suggests that if joint venture sales will be expanded by reason of lower license fees, both you and Bikuta could be better off economically. She may (or may not) be right.
f) The fight/flight trap involves seemingly opposite behaviors, but both are automatic reactions and relate to “hot cognition.” In the face of intense conflict, you may: (1) unthinkingly charge into battle or, (2) at the other extreme, flee, conceding what is important to you in the hope of avoiding a fight. Fred obviously wants to fight. Evelyn wants neither to fight nor to flee, but she is perhaps inclined toward appeasement. Better to negotiate with Bikuta and make concessions, she argues, than fight a possibly losing legal battle.
g) The final trap, the call to battle, involves a political figure, business executive, or family member mobilizing his or her “troops” for a fight in a righteous mission against evil. This call uses the language of war and will often rhetorically draw upon demonization, tribalism, dehumanization, and moralism. While the leader inevitably claims his motivation is only to do what is best for the group as a whole, the call to battle often serves the leader’s own political interests as well. Far less common is the opposite extreme, a call for peace, based on the premise that almost any conflict can be avoided or ended through sensible peace-seeking initia-tives. The call for peace may invoke notions of universalism, forgiveness, redemption, and shared responsibility.
What is critical to understand is that each column represents a cluster of reinforcing prisms that can distort judgments. The negative traps are most prevalent when we see our adversary as an evil enemy. Even in business cases like Bikuta, where the adversary clearly isn’t evil, we can easily fall prey to these negative traps and perceive our opponent as evil, which causes us to speak and behave as though the opponent is evil. This is equally true in the international and personal realms. The negative traps encourage us to exaggerate the costs of negotiation and underestimate the benefits; the positive traps do just the opposite. Both are common default modes for dealing with conflict, and many of us have a decided preference for one or the other. Which way we lean is largely a function of basic personality style, but it is also influenced by past experiences, stories that have been handed down to us, and the personal narratives from which we draw our deepest sources of identity. Fred, for example, sees himself as a warrior, a champion against injustice. His worldview: “The world is a harsh place; people will exploit you if they can.” He is quick to see evidence that confirms this story. Evelyn is an optimist, a peacemaker whose instincts tell her that going to battle is unproductive. Her worldview: “There is good in everyone; all you have to do is tap into it.” She focuses selectively on evidence that confirms her story.
In sum, it is not that Fred and Evelyn are completely ignoring the need for analysis and relying solely on intuition. Rather, I believe that they each started with a gut reaction to your news about Bikuta, jumped to a conclusion, and then hired the analytical system as a lawyer to argue the case. It’s as if the intuitive part of their brains has taken charge of the analytical investigation. That’s why neither seems at all open to the other’s perspective. Indeed, knowing them as well as you do, you could have almost predicted their advice before the meeting.
How can you avoid these traps? A critical first step is to recognize and acknowledge them. Be aware of your strong emotions. There is no way to avoid them, especially when you are in conflict with a devil. Another step is to expose yourself to different perspectives, as you’ve done by calling Fred and Evelyn to your office. They are not persuading each other, but if you feel pulled in both directions, that can slow you down and prevent you from making a hasty decision.
Now you are going to shift gears and consciously open yourself to careful analysis. For that, you m
ay need expert help.
TWO
Bargaining and Its Alternatives: Costs, Benefits, and Beyond
It’s a relief when Fred and Evelyn finally leave your office. You feel upset and confused. Fred inflamed your anger toward Bikuta and made you want to fight. But Evelyn made you feel ashamed and a little guilty. She’s such a good person, with such generous instincts. Maybe you are partly responsible. Perhaps you should give Bikuta another chance?
Fortunately, you have a trusted advisor named Mr. Spock, the secret weapon of many entrepreneurs in Silicon Valley. He is a clear thinker and a brilliant strategist. But he’s not warm and fuzzy. He is emotionally detached, humorless, someone your wife describes as a “cold fish.” That’s fine with you—you’re not looking for a drinking buddy. Actually, you’re quite fond of the guy. He is very direct, totally reliable. And he is available on reasonably short notice.
In fact, Spock has already arrived at your office. Never one to engage in pleasantries, he drops into a chair and says, “I got your email describing the dispute with Bikuta. What’s your thinking?”
“I’m furious. I’m so upset I’m not sleeping at night.”
“Okay, let’s keep the emotions out of it,” Spock intones. Many of his conversations begin like this.
“Easy for you to say!” you protest. “I’ve been working my ass off to build this company. I’m lying in bed at night wondering if the company is going to survive. My brother-in-law warned me about doing business with a big Japanese company. He said they would eventually screw me, and he was right. Now I have to put up with his obnoxious gloating.”
“Let’s stick to the facts,” Spock responds. “Stay with me here. How important is Bikuta’s business to your company?”
“It accounts for forty percent of our revenues and an even higher percentage of profits. That’s why we’ve grown so fast. I’ve got ten new employees because of the deal with Bikuta. And now he decides it’s okay to stab me in the back? He can’t get away with this! I’ve spent five years of my life building this business.” Your voice is rising. “I will not tolerate being made a fool of!” you shout.
“Look, you’ve got to calm down if you want my help,” Spock says coolly.
Spock can be infuriating.1 Like his Star Trek namesake, his abnormal insistence on logic and emotional self-control makes him seem like an alien. But that’s why you called him. You say, “Where do we start?”
“To begin with, give me a copy of the contract with Bikuta, all the correspondence, and any relevant financial records showing the history of the relationship. What does your lawyer say?”
You hand Spock sixteen cartons of bulging files and a legal memorandum prepared by Ron Star, your outside lawyer. Spock asks for a quiet corner and goes off to read this ton of verbiage. An hour later, he has mastered every page and is back in your office.
“Now,” you say, “you have a better sense of my predicament.”
“I do,” he says. Spock looks at you with a glimmer of what might be compassion. But you know it isn’t. “As I understand it, Bikuta has proposed that you renegotiate the contract. You are trying to decide whether to accept this invitation. Negotiation is an option. But is it the best option? That’s what we have to think through.”
“Negotiating is the last thing I feel like doing,” you retort.
“What you feel like doing is not the issue. You must rationally de-cide on the best course of action,” says Spock. “Let’s start by talking about what you might do away from the table if you decide not to negotiate.”
“I want to sue them! I want to expose them publicly. If there’s any justice in the world, Bikuta should be forced to stop using our technology and to pay us damages. But you’ve read Star’s memo. My prospects in court aren’t good.”
Indeed, Star’s memorandum makes for depressing reading. Although there is ample evidence that Bikuta has used your trade secrets in making its Chinese product, Star says, the problem lies in enforcing your joint venture agreement. In theory, you could sue Bikuta in three different jurisdictions: China (where the knockoffs are being sold), Japan (where Bikuta’s headquarters are located), or California (where your company is based). But your odds of success are grim.
Suing in China would be hopeless, Star says—a waste of money. In China, the theft of intellectual property is rampant. Relationships count for more than formal contracts; Bikuta is already doing business in China and your company is unknown there.2 The Chinese government is taking steps to repair its reputation, at least with respect to patents and copyright, but it has a long way to go.3 The likelihood that a Chinese court would protect your intellectual property is near zero.
Your prospects in Japan are not much better. While Japanese courts are not known to be corrupt, Bikuta would still have a home-court advantage. More to the point, Japanese law offers little protection for trade secrets, and a Japanese court would never try to enjoin Bikuta’s activity in China.4 Finally, it would take two or three years to get a court ruling and it would cost a fortune; Japanese litigation is notoriously expensive.5
Suing in California is the only hope, and even this is problematic. Because Bikuta makes no products or sales in the United States, a court might well throw out your claim for lack of jurisdiction. But if you could get past this hurdle, according to Star’s memo, you’d have a good chance of winning on the merits.
Spock says, “Obviously, if you decide to sue, the best place to bring suit is in California. But I agree with Star’s analysis. All in all, because of the jurisdictional problems, you’d have only about a fifteen to twenty-five percent chance of an ultimate victory in a California court. Meanwhile, your legal costs would be huge and the lawsuit would distract you from building your business.”
Spock then asks a tough question: “Suppose you get everything you say you want: you sue Bikuta and win. Assume that the court can enforce the judgment and stop Bikuta from selling this product in China. What happens next?”
You don’t know what he’s getting at. “We throw a big party?” you venture.
“No—I mean, going forward, who will sell your product in Japan and the rest of Asia? Your contract with Bikuta expires next year. Would you want to renew that contract, even on renegotiated terms? Would you want Bikuta to continue to manufacture and distribute for you?”
“Are you kidding?” you say. “How can I trust them?”
“Okay, let’s put Bikuta aside for the moment. Who would you work with in Asia? Do you have some other joint venture partner lined up and ready to go?”
You squirm. You don’t have anyone. There are some prospects, you tell Spock, but it would take at least a year to check them out, negotiate a deal, transfer the technology, and get manufacturing up and running. In the meantime, your position in the market would erode. And the new partner might not agree to a 15 percent royalty rate, either.
“Okay, let me summarize what we’ve got so far,” Spock says. “If you don’t negotiate with Bikuta, you have litigation as an alternative. We’ve just examined the costs and benefits of going that route. I think we’ve established that even in the California courts the odds are you won’t ever get to the merits of the case because of the jurisdictional problem. In all events litigation will cost you plenty and be a big distraction. We also looked at your business alternatives. You don’t have to use Bikuta as your manufacturer and distributor—you can find someone else who might be a more trustworthy partner. But you’d lose a lot of time and maybe some market share.”
You stare at him dully. You need a cup of coffee.
“Now, what about Bikuta’s alternatives if he can’t make a deal with you? Are there other firms that can provide the technology?” Spock asks.
“None,” you reply. “Unless he can use our technology, he really can’t have a competitive product—at least for several years. If we sue him and stop him from using our know-how, he’s out of this market.”
This last thought starts to cheer you up.
This conver
sation illustrates how the consummate “rational actor”—a Mr. Spock–like character—might begin to analyze your problem. Mr. Spock, of course, is the well-known character from the Star Trek television series: the pointy-eared science officer of the U.S.S. Enterprise and executive officer under Captain Kirk. Spock is half Vulcan and half human, and his behavior reflects the Vulcan ideals of logic and strict emotional mastery. His trademark is his weird mix of nerdy brilliance and deadpan humor, and I use him advisedly here.6 In this book, Spock has a method and we can follow it. (In a sense, we can cultivate our inner Spock.)
Let’s step back and think about what Spock is doing. He has just identified your alternatives if you don’t negotiate with Bikuta: your choices away from the table. He has begun to consider Bikuta’s alternatives as well. We’ll see why in a moment.
“Now, what’s really important to you here? From what you’ve said …”
Spock then proceeds to list what he sees as your interests:
Maximizing your revenues from the FreeFlow.
Building up sales in Asia.
Entering the Chinese market.
Protecting your intellectual property.
Maintaining your reputation as a dependable joint venture partner.
Resolving this conflict as quickly and cheaply as possible.
Bargaining with the Devil Page 3