by Lewis Schiff
The right move in such a circumstance is to turn the tables psychologically. You express gratitude for the offer, talk about how you can’t wait to get to work, and you say that you would be very happy to accept the job offer with a salary of so many thousands more. Now whose instinct for reciprocity is being challenged? For the manager to do anything but give you at least a portion of what you want is to risk making you unhappy, and no one wants to have a brand-new unhappy employee. As we discussed in the studies by Pinkley and Northcraft in chapter 3, about 40 percent of all hiring managers are willing to pay what it takes to make their new employees happy—if those employees ask for it. A full 90 percent of managers said they are willing to negotiate a high enough pay level to ensure that a new employee at least feels satisfied, but only if the employee offers them a number.
Ultimately, the norm of reciprocity is all about the innate human desire to be perceived as a nice, considerate person within one’s social setting. The new hire accepts less money than he wants because he fears appearing ungrateful for the job offer. The weaker party in the negotiation agrees to a deal he instantly regrets because he would feel like a jerk if he stood up and announced that there’s no deal. However, according to Stephen Covey, selling out the goals you’ve set for yourself doesn’t mean you are reasonable or considerate. It means that you lack courage. Negotiators who worry too much about the other side’s judgments of them are setting themselves up for disastrous “lose-win” deals in which, as Covey puts it, “I’ll be so considerate of your convictions and desires that I won’t have the courage to express and actualize my own.”
Susceptibility to this lack of courage varies greatly from person to person. The people who are least susceptible, according to the Business Brilliant survey, are called multimillionaires. Almost 97 percent of self-made multimillionaires agree that “in business dealings, it’s not my responsibility to ‘look out’ for the other person’s interests.” Among all self-made millionaires, over 85 percent agree. But for the middle class? Less than 25 percent agree. Just 1 in 4 believe in this fairly fundamental fact of negotiation, that the other side needs to look after itself, with no help from you. As the hostage negotiator Dominick Misino might say, empathy makes for smart negotiating, but sympathy does not.
A series of results in the Business Brilliant survey reveals that self-made millionaires in general are far more comfortable than the middle class when it comes to advancing their interests over those of other people. About 75 percent of self-made millionaires agreed with the statement that “Coming out on top in business dealings is paramount.” Just over 30 percent of the middle class agreed. About 9 out of 10 self-made millionaires said “I am always looking for a way to gain advantage in my business dealings” and “It is important in negotiations to exploit weaknesses in others.” For the middle class, just 4 in 10 are looking to gain advantage, and a little over 2 in 10 see the importance of exploiting weaknesses in others. Self-made millionaires seem much more willing than the middle class to accept that following the money is a competitive sport with winners and losers.
In fact, almost 8 in 10 self-made millionaires believe that “Being Machiavellian is essential to becoming wealthy.” Among self-made multimillionaires, people who have attained great wealth, the belief in Machiavellianism is found in nearly 9 out of 10 survey respondents. The middle class, however, rejects the idea. Fewer than 2 in 10 believe that being Machiavellian is essential to becoming wealthy. As we’ve observed many times before, our survey reveals that middle-class perceptions about how to achieve wealth are grossly out of step with the perceptions of those who have actually done it.
Machiavellianism has been described by psychologists as a cool, rational, detached, and opportunistic attitude. People who score high on tests for Machiavellianism are more able than most to identify optimal strategies for getting what they want and they tend to behave in a self-interested manner if it is to their advantage. They are not as emotionally affected as others by social norms and social pressures, which is why they tend to be more upset by inefficiency than injustice. But it’s not as though Machiavellian personalities can never be trusted. They understand, perhaps more than most, that reciprocation is vital in building long-term trusting relationships. On the other hand, if there is little or no consequence for taking advantage, Machiavellians tend to take advantage.
In one clinical experiment, individuals with “high Mach” test scores were found to be about twice as likely to take advantage of a weaker party than those with low to average Mach scores. Each test subject in the experiment played a simple two-step game on a computer screen with another player in a separate room. When this invisible player trusted the test subject with $40, the rules of the game gave the test subject two options. The test subject could either reciprocate the act of trust and split the $40 with the other player, or the test subject could keep the entire $40 with no negative consequences. In this test environment, those with low to average Mach scores shared the money 55 percent of the time. Individuals with high Mach scores, on the other hand, reciprocated trust and shared the money only 27 percent of the time. In almost 3 out of 4 instances, the high Machs took the money because it was there for the taking.
Many successful businesspeople are known for their Machiavellian streaks. Go back over the tales of billionaires we’ve told so far, and it’s not hard to pick out the sharp Machiavellian moves that helped them secure their fortunes at critical moments. Warren Buffett never worried much about the managers at the tired little companies he bought up and then blew up during his earliest partnerships. Guy Laliberté did not share any equity in the newborn Cirque du Soleil with his creditors or his fellow performers, even though many had made great personal and financial sacrifices to help Laliberté’s circus succeed. Bill Gates, who had acted like Gary Kildall’s loyal buddy when Microsoft sales were dependent on Kildall’s computer operating system, turned on Kildall once Gates had jumped into bed with IBM. At that point, Gates determined that in order for Microsoft’s new operating system to win, Kildall’s company had to be run out of the business.
Stories of this kind raise the question of whether following the money is an instinct one is born with, or whether it can be learned. At the margins, of course, the negotiation courses taught by Linda Babcock, Richard Shell, and others demonstrate that increased focus on proven techniques can improve just about anyone’s negotiation results. But the experience of disappointment and frustration over bad deals can also build resolve in an individual to stop being a sap and take a page or two from Machiavelli. The retailer in Stephen Covey’s story had to negotiate a lot of bad deals before he could learn how to say “no deal.” The small company owner coached by Jim Camp had to learn a painful lesson about appearing desperate, a mistake he’s not likely to repeat. It’s important to remember, too, that Buffett, one of the richest men to ever live, started his first investment partnership only after he’d failed in his determined efforts to grow rich by investing alone. Buffett had no inborn drive to get hold of other people’s money and use it to raid other people’s companies. His career as a corporate raider was merely a means to an end, after his first preference—to remain a shy, solitary investor—hadn’t panned out.
One of the best stories about a once-burned, twice-resolved entrepreneur can be found in The New New Thing, the biography of Internet mogul Jim Clark, written by Michael Lewis. Clark is best known as the founder of Netscape, the first commercially marketed Web browser. Clark was an engineer by training who founded a company called Silicon Graphics in 1983. He was so enamored with his company’s unique three-dimensional imaging products, that he found himself desperate for the cash necessary to develop the products to their full potential. He courted venture capitalists as investors, and kept selling off pieces of Silicon Graphics in order to secure precious working capital. The strategy worked well for Silicon Graphics, but not so well for Clark. As the company grew larger and more successful, Clark’s stake in Silicon Graphics had shrunk so small th
at he found he no longer controlled his creation. By the time he sold off his final stake in the company during a feud with the CEO, Clark had become a millionaire, but he had made other investors in the company much, much richer than himself. Clark deserved better, having founded the company, but, to restate the axiom attributed to Bill Gates, you don’t get what you deserve in business. You get what you negotiate, and Clark had negotiated badly.
Embittered by the experience, Clark began Netscape in 1991 with a completely different approach. This time around, when it came to raising cash to fund the start-up, Clark did not go begging. Instead he behaved as though he was in the least-interest position. First he announced that he would decide who would be invited to invest with Netscape, and he excluded some investors who he felt had screwed him over during his years with Silicon Graphics. Then Clark laid out his terms. Equity shares in the company would be sold on a 3-for-1 basis. Netscape was valued at $18 million, but in order to buy a 10 percent share of Netscape, it wouldn’t cost you $1.8 million. It would cost three times that much: $5.4 million.
Until then, it had been customary for computer company founders to sell equity on a dollar-for-dollar basis. No one questioned it. That was the social norm of reciprocity in Silicon Valley culture. If you want to enjoy the fruits of venture capital investment, you should accept certain customary practices regarding equity. But Clark was fed up with Silicon Valley convention. It had burned him once before, and he resolved that this time would be different.
The result was that although some venture capitalists turned up their noses on principle at Clark’s outrageous 3-for-1 offer, others bought in eagerly. One venture capitalist who had been an early investor in Silicon Graphics begged Clark for permission to invest in Netscape, but to no avail. Clark blamed the man for his problems at Silicon Graphics and refused to let him have a piece of the new company. On the day that Netscape was formally incorporated, the man killed himself with a gunshot to the head. He had been suffering from paranoid delusions in the weeks before his suicide, but some speculated that he could not live with what he knew he had missed out on.
When Netscape made its first public stock offering in 1995, the stock price rose in a matter of months from $28 to $140. The astonishing success of Netscape stock marked the beginning of the Internet investment bubble, and Clark was one of many people who would become very rich from it. From his initial Netscape investment of just $5 million, Clark made a reported $2 billion—not because that’s what he deserved, but because that’s what he negotiated.
7
Spread the Work, Spread the Wealth
NEARLY 9 OUT 0F 10 SELF-MADE MILLIONAIRES SAID THAT WHEN IT COMES TO TASKS THEY ARE NOT EXCEPTIONALLY GOOD AT, THEY ARE VERY LIKELY TO DELEGATE THOSE TASKS TO PEOPLE WHO DO THEM BETTER.
BY CONTRAST, 2 OUT OF 3 MIDDLE-CLASS RESPONDENTS SAID THAT WHEN FACED WITH SUCH TASKS, THEY WOULD LIKELY “DO THOSE TASKS ANYWAY.”
The Disability Advantage
For someone who had barely graduated from high school, fifty-six-year-old Jay Thiessens was doing pretty well for himself back in 1998. He had a beautiful home in Sparks, Nevada, in which he and his wife had raised three children. He owned a fishing boat and a motor home, and his small custom manufacturing company, B&J Machine and Tool, was pulling in $5 million a year.
Thiessens achieved this level of success by making a number of very typical self-made-millionaire moves. He gained an equity stake in his employment at an early age. He broke away and started his own company as soon as he was able. Then he grew the company over the years by plowing cash back into it, instead of saving money for retirement. There was nothing innovative about B&J’s products and the company had no sales staff because it relied on networking and word of mouth to build its clientele. When Thiessens launched B&J in 1971, he put up only $200 of his own money. In a bit of clever deal making, Thiessens persuaded one of his former employers to take on all the risk of financing B&J’s initial equipment and property rental costs.
For most of his life, though, Thiessens harbored what he called “a little secret.” The secret was that Thiessens was illiterate. Thanks to a few lenient teachers and a lot of vocational classes, he was handed a high school diploma in 1962 that he could not read. Over the ensuing years, he developed a kind of mental block about reading and, by the age of fifty-six, he still could not make his way through a children’s book.
Like a lot of illiterate adults, Thiessens was very good at covering up his secret. He had an open and assertive demeanor, mainly because he couldn’t function at work without getting help from his employees. “I could never handle a situation right as it happened,” he told one interviewer. “I had to wait to act on it until the right people were around me.” Most of his workers considered him a good listener with an excellent memory for details, so his aversion to reading and writing seemed to be a mere matter of personal style. They assumed he was too busy during the day to deal with paperwork, when in fact he carried business correspondence home with him each night so that his wife could read it to him in bed.
It was in 1998 that Thiessens finally shared his secret with his employees at a company retreat. Afterward, he found a reading tutor and went public with his news, in hopes of encouraging other adults faced with the same embarrassing problem. An Associated Press report spread Thiessens’s story in newspapers all over the country, People magazine ran a pictorial, and he was even profiled on a cable television reality show called Courage. Most stories about Thiessens at the time remarked how he had built a profitable company with a 50-person payroll in spite of his inability to read. But it was also true that many of Thiessens’s best management practices came about precisely because he could not read.
Thiessens, for instance, admitted to being something of a control freak by nature. His illiteracy forced him to let go and delegate more tasks to his managers and workers. The general manager at B&J recalled how “[Jay] would bring legal stuff to me and say, ‘You’re better at legalese than me.’ I never knew I was the only one reading them.” Thiessens also lightened his burden by instilling a strong culture of teamwork in the company. Various employee committees were used to resolve problems that otherwise would have been dumped on him. The resulting esprit de corps at B&J was so strong that when a flash flood filled the main plant with three feet of water, the employees pitched in and saved the company by working around the clock for four days disassembling and cleaning all the machinery.
Thiessens’s story is an extreme example of a very commonly observed fact: A lot of entrepreneurs were poor students when they were young and had particular difficulties with reading and writing. A 2007 study concluded that about 35 percent of U.S. small-business owners suffer from some form of dyslexia, compared with about 10 percent of the general population and just 1 percent of corporate managers. Business professor Julie Logan, the author of the study, concluded that in order to overcome their learning deficits, successful dyslexics become proficient at getting help, which happens to be an absolutely crucial skill for anyone building a business.
“I know that sounds very strange,” Logan told National Public Radio. “But one of the things that we found in the study is that people who have dyslexia, actually, at a very early age, learn how to get other people to do things for them. They learn how to delegate to compensate for their weaknesses. So they learn to trust other people to do things. This is a great advantage in business because if you start a business, you get good people around you and you delegate. You actually can keep your eye on where that business is going and be very strategic.”
Logan’s research showed that companies headed by dyslexic owners tend to grow twice as fast as other companies and that dyslexic owners are twice as likely as others to be running two or more companies at once. Presumably, the nondyslexic business owners fall behind because they can’t resist the temptation to micromanage. As Logan explained, “The willingness to delegate authority gives [dyslexics] a significant advantage over non-dyslexic entrepreneurs, who tend to view
their business as their baby and like to be in total control.”
The most successful dyslexic entrepreneur in the United States is probably self-made billionaire Charles R. Schwab, founder of the brokerage company that bears his name. When Schwab was applying to colleges as a young man, he had miserable verbal SAT scores and was accepted at Stanford only because he was recruited for the golf team. Schwab did well in science and math during his freshman year, but he almost flunked out because he failed the same introductory English course twice. “It was a very debilitating, depressing thing for me to do that,” Schwab recalls, “because I was thought of as pretty bright and I didn’t realize how incompetent I was at the skill of writing.” To get by, he charmed his teachers and leaned on other students for help. Even in science and math classes, he had to ask friends and roommates to take notes for him during lectures because he found it impossible to listen and write at the same time.
Business school was somewhat easier for Schwab, but he was still nowhere near the top of his class. He recalls jealously watching classmates get hired by Fortune 500 companies as “General Motors Scholars, Merit Scholars, Baker Scholars.” Schwab decided to skip the corporate ladder, where reading and writing skills are essential, and took the entrepreneur route instead. He partnered with two friends from business school and the threesome started an investment newsletter that Schwab could neither edit nor even read very easily. “A lot of people who are brilliant entrepreneurs think they can do everything,” he once observed. “They don’t develop the team that they need to have in order to accomplish the various levels you’re going to reach in your growth curve as a successful company.” Schwab never had a problem developing teams with skills that complemented his own. He’d been doing that out of necessity since he was eighteen. His team-building abilities helped make him a billionaire several times over, and he has far surpassed the career achievements of his more bookish business school classmates.