Post on 01-Dec-2014
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Resisting and Using Cognitive Biases to Get a Better Deal
if you know your enemies and know yourself, you will not be imperiled in a
hundred battles; if you do not know your enemies but do know yourself, you will
win one and lose one; if you do not know your enemies nor yourself, you will be
imperiled in every single battle
sun tzu 孫子 6th century bc general, the art of war
© Victoria Pynchon ‘07
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a theory of the mind
the three cognitive biases that interfere with our ability to negotiate the best deal
three really good ways to combat those biases
and two ways to consistently get the better deal
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theory of mind
v.
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our ability to reason arose from our need to understand one another’s intentions and motivations, allowing us to coordinate within a group
but we never learned to read one another’s minds; suspicion followed
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we developed certain
tendencies of thought called
cognitive biases
universal ways of thinking about what motivates other people
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CB 1: reactive devaluation
CB 2: confirmation bias
CB 3: clustering illusion
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cognitive biases that interfere with our ability to negotiate a good settlement
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How they work; why they’re harmful & how we can avoid their ill effects
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2 ways to consistently gain the upper hand by
anchoring and framing
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what do we most want to know?© Victoria Pynchon ‘07
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What are they Thinking?• What’s their bottom line?
• Are they withholding evidence that undermines their case and supports ours
• What do they really need• How do they value their
case– Their chances of
winning– The amount of their
damages 12
only seven percent of negotiators sought information that would have revealed opponent’s true goals when it would have been dramatically helpful to do so.
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What type of information would
drastically help?• Their future plans• Their motivations• Their fears• Their desires• The basis for their
offer/demand
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Failure to ask diagnostic questions
is particularly troublesome in light of the fact that YOUR belief about THEIR
bottom line will have more influence on the outcome of the
negotiation than any other factor
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Let’s return to the cognitive biases that might keep us from asking these questions
reactive devaluation
the tendency to discount as unworkable, unworthy,
wrong or even sinister any suggestion from the
opponent, just because the opponent is the source of
the idea
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reactive devaluation prevents us from learning another’s mind
what do they want/needwhat do they have of value
how do they value ithow do they value what we have
why do they want what they are seeking
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solutions for reactive devaluation
ask diagnostic questions
Interestsneed $100K to design new
trademarkPriorities
trademark design less important than renegotiation of royalty agreement
confirmation bias
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tendency to search for and interpret information in a way that confirms our preconceptions
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confirmation biasprevents us from knowing our own minds/risks
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confirmation bias solutions
neutral third partystory telling
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clustering illusion
we tend to see patterns where none exist
• We tend to see patterns where none exist
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clustering illusion problems
inhibits ability to “read the mind” of our enemyprevents us from accurately assessing
• perils • opportunities
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clustering illusionsolution:
strategic joint sessions
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How do we influence others and prevent ourselves from being irrationally influenced?
two cognitive biases we can immediately use to . . .
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. . . influence & avoid being influenced
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anchoring
we tend to be influenced by any number
that enters the negotiation
environment28
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the negotiator who makes the first
reasonable offer will set the
bargaining range for the entire negotiation
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create own false anchor move toward that number
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resist anchoring
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framinginfluence or
be influenced
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framing
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a means of influencing another’s
perception by narrowing the
ways in which an item or an idea
can be characterized
what if you had to measure the size of something by using two frames?
what if you could only use one?
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framing experiments
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• how tall was the basketball player –79 inches
• how short was the basketball player? –69 inches© Victoria Pynchon ‘07
use framing in negotiations
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language that emphasizes position
buyer uses words of diminishment
seller uses words of increase
reframe losses as gains & gains as losses
don’t frame too early or you may lose opportunities
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if you know your enemies and know yourself, you will not be imperiled in a hundred battles
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