Business Brilliant

by Lewis Schiff

  Networking of this kind isn’t easy. It goes against certain natural instincts that dictate how “birds of a feather flock together.” What’s more, studies reliably show that the vast majority of people are uncomfortable in situations that necessitate their being the least-affluent member of any group. One famous experiment, repeated many times, shows that most people say they would feel happier earning $33,000 in a workplace where everyone else makes $30,000 than if they were earning $35,000 in a workplace where everyone else makes $38,000. They would be happy to sacrifice $2,000 a year in salary just to enjoy being top dog in a lower-paying workplace. For most people, it’s not enjoyable to be at the bottom of the pecking order, even if the reward is greater net income.

  The tiny minority of people who function as connectors between disparate networks either do not feel bothered by socializing from the bottom, or, if they do feel bothered, they don’t let the feeling stop them from serving as connectors. One thing connectors can count on, however, is that connectors in any station of life enjoy connecting with fellow connectors. There is a measurable tendency of people with many connections to be connected to others with many connections. It is also true that if you are not a connector, you are more likely to socialize with fewer people, and the few people you do socialize with will likely not be connectors, either. In this way, networking produces a rich-get-richer, poor-get-poorer effect in society. Christakis and Fowler wonder if this helps explain in part why the income gap between the rich and everyone else in America keeps growing, aided by online social networking.

  Another explanation is that there is also a well-documented “friend-of-a-friend” network effect in which people’s moods, behaviors, and other conditions are marginally affected by people they don’t even know. These effects can be good or bad, depending on what a given network is seeded with. Christakis and Fowler found, for instance, that you are 15 percent more likely to be happy if a friend of yours is happy, but you are also 10 percent more likely to be happy if a friend of a friend is happy, and 6 percent more likely to be happy if a friend of a friend of a friend is happy. Loneliness has an even more powerful network effect. You are 52 percent more likely to feel lonely if a close friend feels lonely, 25 percent more likely to feel lonely if a friend of a friend feels lonely, and 15 percent more likely to feel lonely if a friend of a friend of a friend—someone you have never even met—feels lonely. This same three-degrees-of-separation effect can be found among binge drinkers, smokers, and people suffering from obesity. If you become obese, it triples the chances of your close friend becoming obese, and it may even have an effect on the weight gain experienced by people two and three degrees separated from you.

  The authors of Connected admit that these findings run counter to people’s perceptions of their own free will. “Particularly in the United States,” they write, “we are accustomed to seeing our destinies as largely in our own hands: we ‘pull ourselves up by our own bootstraps’ and believe that ‘anyone can strike it rich.’ We see our society as a meritocracy that rewards sound choices and creates opportunities for the well-prepared.” But we are also social creatures and our habits and emotions have been proven to be as predictably communicable as the flu.

  So is success contagious? Does it help you to follow the money if the people within your network are also following the money? The answer to both questions is probably yes, since so many of the behavioral differences found between the middle class and self-made millionaires are highly social habits such as seeking equity, negotiating higher pay, imitating success in others, and finding investors. It makes sense that self-made millionaires with these habits of mind will gravitate toward and influence others with similar habits, especially because they share a common belief in the power of know-who.

  Imagine for a moment that your core discussion network is made up of about five successful connectors, each of whom has his or her own core discussion network of about five successful connectors, each of whom in turn also has a core discussion network of about five successful connectors. That’s roughly 150 people within at least three degrees of you who are actively looking for chances to be bridges between networks, eager to fill those “structural holes” that normally prevent productive relationships from happening. The contagious effect of a network of 150 connectors, most of whom you will never meet, might produce opportunities for you in such roundabout ways their sources might seem just as random and mysterious as that of a head cold. You would be apt to feel very lucky, even if you’ve made a conscious effort to seed your core network with successful connectors.

  The network effect suggests that this is how you can make your own luck. Self-made millionaires like luck. They believe in it. The Business Brilliant surveys show that 8 out of 10 consider luck as important to their financial success. In fact, they value luck far more highly than “getting a good formal education,” which only 3 out of 10 consider important. Among the middle class, however, the ratio is reversed. About 6 in 10 believe education is important while just 4 in 10 say the same about luck. The middle class tends to favor know-how over know-who, which seems unfortunate. The research shows, and the experience of our self-made millionaires seems to back it up, that if you don’t tend your network, if you don’t seed it so your opportunities are magnified, then when it comes to becoming Business Brilliant, you are literally out of luck.

  6

  Win-Win Is a Loser

  ABOUT 7 IN 10 SELF-MADE MILLIONAIRES SAID “I CAN EASILY WALK AWAY FROM A BUSINESS DEAL IF IT’S NOT JUST RIGHT.”

  TO THE MIDDLE CLASS, IT’S NOT THAT EASY. JUST OVER 2 IN 10 SAY THEY CAN DO THE SAME.

  The Least-Interest Principle

  Adam McKay had been the head writer at Saturday Night Live for three years when he decided in 2000 that it was time to move on. He was tired of the long late-night hours and the thankless creative tussles with producer Lorne Michaels, who had founded the show in 1975. When you are the head writer at SNL, McKay told an interviewer in 2010, “What you learn pretty quickly is that it’s Lorne’s show.. . . There’s only so much pushing and shoving you can do.”

  What McKay really wanted was to move from New York to Los Angeles. He thought he might pitch a sitcom there, write screenplays, and maybe, eventually, he would direct movies. But when he told his manager, Jimmy Miller, about his plans to quit SNL, Miller asked him to wait. Miller was an experienced Hollywood operator who had managed Jim Carrey from stand-up comic to stardom. Since McKay had already decided to leave the show, Miller figured his client had nothing to lose by asking Lorne Michaels for better contract terms. So Miller advised McKay to go to Michaels and, as McKay remembers it, “make some unreasonable demands.”

  McKay presented Michaels with five conditions for staying on the show. “I said that I want a raise, I don’t want to ever go to a production meeting,” McKay recalls. “I won’t be head writer anymore, but I want to name my on-screen credit, and I want to make short films. And [Lorne] said yes.”

  The next season, McKay’s SNL on-screen credit was “coordinator of falconry.” McKay managed his own filmmaking budget and hired a small crew, including a professional producer and cinematographer. He started directing stars like Steve Buscemi, Willem Dafoe, and Ben Stiller in a string of short movies about “every crazy thing I could think of,” including a pawn shop for food and a woman who shoplifts dogs from pet stores. “It was an amazing experience,” McKay said. “It ended up being the greatest thing ever, because I learned how to make movies.”

  Over the next two years, McKay shot more than two dozen comedy shorts for SNL. Then he left the show and moved to Los Angeles, just as he’d planned two years earlier. But he arrived in Hollywood as an experienced filmmaker, not just another gag writer with a screenplay to pitch. He and his friend from SNL, Will Ferrell, went on to make a series of feature-length comedies together, including the cult hit Anchorman: The Legend of Ron Burgundy, which McKay wrote and directed. In a span of just four years, McKay was writer, director, and producer for Ta
lladega Nights, Step Brothers, and The Other Guys, each of which starred Ferrell and grossed more than $100 million. Today McKay is one of Hollywood’s top five comedy filmmakers.

  The turning point in McKay’s career was the moment he took his manager’s advice and deployed what is known in negotiation as the “least-interest principle.” In any relationship, especially a business relationship, the person with the least interest in continuing the relationship is the one with the greatest power for setting its terms. The weaker your interest, the stronger your leverage. As G. Richard Schell puts it in his bestselling Bargaining for Advantage, “The party with the least to lose from no deal generally is the party that can afford to insist that critical deal terms break its way.” All other factors aside, being ready to walk away from a deal is your best guarantee that the deal will work for you.

  The Business Brilliant survey suggests that a preference for the least-interest principle is very closely related to financial success. About 7 in 10 self-made millionaires said, “I can easily walk away from a business deal if it’s not just right.” To the middle class, the benefit of the least-interest position is not so clear. Just over 2 in 10 say they can easily walk away. In a sense, McKay and his manager, Jimmy Miller, embody these two contrasting attitudes. McKay, a writer and stage performer with a middle-class upbringing, was not a natural negotiator. He wasn’t even aware of the bargaining power he had attained the instant he decided to quit SNL. Miller, however, owed his entire livelihood to deal making. Having risen from humble Pittsburgh roots to become a Hollywood player, Miller saw McKay’s situation in a completely different light. From his perspective, McKay was ready to squander a golden opportunity. In the end, McKay took Miller’s advice, and his subsequent two-year tenure at SNL turned out to be much more than a golden opportunity. It was priceless.

  There is an alternative interpretation to the Business Brilliant survey results, one that might also explain the deal-making differences between self-made millionaires and the middle class. What if self-made millionaires have an easier time walking away from deals precisely because they are millionaires? Doesn’t their superior wealth give them the upper hand in most negotiations? Don’t members of the middle class have less wiggle room and a greater need to make a deal work, at whatever terms are available?

  That’s probably true in some cases, but the full set of data from the Business Brilliant survey suggests that most members of the middle class have a lot in common with McKay—they don’t always recognize when they have the upper hand, nor are they inclined to exploit their least-interest position when they have it.

  Recall in chapter 3 how the vast majority of people who are offered new jobs never try to negotiate their salaries beyond the first offer they are given. At the moment of the job offer, it is you, the candidate, who are in the least-interest position. The manager offering you a position has named you the top applicant. With the manager’s cards on the table, there is virtually no risk at all in asking for more money at that point. It would be very difficult for any manager to justify hiring the second-best candidate, simply because the top candidate asked for a few more dollars. And yet, three out of four job candidates fail to see this situation in these terms. They accept the first offer they are given with gratitude.

  The crucial point to understand about the least-interest strategy is that it is often more a matter of approach than an actual objective position, as it was with Adam McKay. The best negotiators always project an appearance of least-interest, indicating that they could walk away at any minute, even on deals they would really like to close. You can sweeten the terms of any deal just by acting like you are less interested in closing than the other party. And sometimes, even if you privately feel you really need a particular deal to succeed, the only way to make it work is to put up a least-interest facade. Desperation, even when it’s disguised as an eagerness to please, can be a deal-killer.

  In the fall of 1983 in Silicon Valley, a Frenchman named Philippe Kahn had a problem that his American friends might have called a classic catch-22. Kahn had a software product for computer programmers called Turbo Pascal that he was selling for $50 per copy. Microsoft had a competing product priced at $500 that was also slower and bulkier. With its superior performance and low cost, Turbo Pascal should have been selling like crazy, but Kahn couldn’t afford to promote it. If he had more money for advertising, he could sell more copies, but he needed to sell more copies before he could afford to buy advertising.

  A Paris-born math teacher, Kahn arrived in California the previous year with $2,000 in his pocket, along with an early version of Turbo Pascal. He had hoped to land a job in Silicon Valley or sell Turbo Pascal to one of the many software companies there. Neither of these plans worked out, so he started up his own company, calling it Borland International because he assumed it sounded better than “Kahn International.” When Borland failed to attract any venture capital investment, Kahn was forced to run the company on a shoestring, selling copies of Turbo Pascal and another product mostly by word of mouth. This was years before the Web, blogs, online advertising, and even e-mail spam. The only practical way to advertise a computer product in those days was to buy ads in the computer trade magazines, and those magazines were unwilling to extend credit to little companies that lacked venture capital backing.

  Kahn desperately needed to advertise, and he needed to do it with little or no money down. He was hardly in the least-interest position. But Kahn knew that if he appeared as desperate as he really was, no magazine would ever run his ad without demanding full payment upfront. So he targeted Byte, the favorite magazine of computer programmers at the time. He invited a Byte sales representative to visit Borland’s office, and once the appointment was set, Kahn went about planning a least-interest dog-and-pony show.

  Some temporary workers were hired to show up in the Borland office that day, just to help the company look busier than it really was. Kahn made up a phony advertising budget chart that included the names of Byte and all its competitors. Then he drew a heavy black line through Byte’s name and left the chart out on a desk so the Byte sales rep could see it. “Here was this chart he thought he wasn’t supposed to see,” Kahn told Inc. magazine years later. “So I pushed it out of the way. He said, ‘Hold on, can we get you in Byte?’ I said, ‘We don’t really want to be in your book, it’s not the right audience for us.’ ‘You’ve got to try,’ he pleaded. I said, ‘Frankly, our media plan is done, and we can’t afford it.’ So he offered good terms, if only we’d let him run it once.”

  The flip side of the least-interest principle is that when you put up a show of indifference about whether a deal succeeds or not, you provoke the opposite party to envision what it might lose. Suddenly, the opposing party sees risk where previously it had seen none. Kahn’s lack of interest in Byte and the line drawn through Byte’s name on the chart put the Byte sales rep back on his heels. It would be embarrassing if his boss saw Borland buying ads from every magazine except Byte. And what if Borland succeeded and grew without ever running an ad in Byte? Word might get around that Byte didn’t matter very much, all because of this one blown sale. Most people in Kahn’s position would have flattered the sales rep, praised Byte’s importance to the industry, and begged for advertising credit, probably in vain. By doing the opposite, by doubting Byte’s value to Borland, Kahn had the Byte sales rep eating out of his hand, pleading with him for just one chance to extend Borland credit for a full-page ad.

  The full-page ad ran in the November 1983 edition of Byte. Kahn hoped the ad would bring in at least $20,000 in revenue, enough to pay for the ad. Instead, his company sold $150,000 worth of software that month. Within five years, Borland International had annual sales of $82 million.

  The “Wish, Want, Walk” Formula

  In hindsight, Adam McKay’s five demands for staying with Saturday Night Live produced an ideal “win-win” outcome. Lorne Michaels got to keep McKay at SNL for two more years, during which McKay made his films and also continu
ed to supply ideas and scripts for live sketches. McKay, in turn, got a well-paid apprenticeship in filmmaking. During his final months with the show, McKay created “SNL Digital Shorts,” a genre of funny four-minute videos that were shot and edited quickly with digital equipment and then put online following their broadcast debut. Years after McKay left SNL, Andy Samberg and other cast members stepped in and produced wildly popular digital shorts like “Lazy Sunday,” “I’m on a Boat,” and “Natalie Portman’s Rap.” The short videos drew millions of online viewers and helped keep the show relevant among Web-savvy young adults—just one legacy of McKay’s and Michaels’s “win-win” deal.

  Most people think that a “win-win” happy ending of this kind should be the ultimate goal in any negotiation. The Business Brilliant survey found that more than 8 out of 10 middle-class survey respondents agreed with the general statement that “Win-win solutions are best,” as did 6 out of 10 self-made millionaires. But when we looked at our data more closely, a slightly different picture emerged. We found that as the level of personal wealth goes up, the level of enthusiasm for win-win goes down. Among self-made multimillionaires, those with net worths exceeding $30 million, the Business Brilliant survey showed that fewer than 2 in 10 believe that win-win is a winner.

  Why would that be? What do the very rich know about win-win that most of us don’t? It turns out that win-win has a dubious reputation among almost everyone who has seriously studied the art and science of negotiation. The win-win goal can be a dangerous trap, especially for anyone who goes up against an experienced negotiator. If you attempt to make a deal from a win-win perspective with someone who assumes a more aggressive “I-must-win” posture, you’re liable to be the only party surrendering concessions in the name of preserving the deal. Once you make it your priority to achieve a reasonable compromise on a win-win basis, then what appears to be a win-win outcome might actually be “wimp-win”—with you as the wimp and the other guy as the winner. I suspect this explains why just a very small minority of self-made multimillionaires agrees with the middle-class consensus that “win-win solutions are best.” You don’t become a multimillionaire by playing wimp-win.