Fair is a word we often associate with childhood; we try hard to make the world fair for young people - give them the same presents, the same amount of money, share the praise. Interestingly, the Australian language is littered with references to fairness; fair go, fair dinkum, fair share and even Fair Work. However, as we get older, the notion of fairness tends to fade into insignificance. We learn that the world is far from fair – we even come to expect that life doesn’t give us that – and it is best to ‘just get on with it’.
The other night I was reflecting on this, and the work of Steven D Levitt and Stephen J Dubner came to mind. They wrote the legendary bestseller, Freakonomics that made millions. It reveals why the way we make decisions is often irrational, why conventional wisdom is frequently wrong and how and why we are incentivised to do what we do.
These guys had an incredibly successful partnership based on Levitt’s academic research. You may already know that their book was an international sensation. The Freakonomics podcasts are worth listening to next time you have to walk the dog or take a long car trip!
Neither of them had anticipated the overwhelming success of this book, so they hadn’t negotiated a profit-sharing arrangement. When they realised how successful it was, they agreed they’d better sort something out. Dubner came up with a proposal of one third/two third split. Levitt countered this offer with sixty/forty. When each examined the other’s proposal, they discovered that that they had both allocated the greater share to the other partner!
Dubner had based his proposal on the fact that Levitt had undertaken all the original research, and he believed that contribution was worth more than his. Levitt had assumed that because Dubner had made the material accessible to a wide audience, that was worth more. After a laugh, they decided to split the proceeds from the book 50/50.
This story raises important issues for all negotiators around the fairness of each deal. Is fair even important? Forming trusting partnerships is key to successful negotiations and generosity matters, but fair? If fairness in negotiations is seen as something that allows others to feel safe, engaged, and productive – free from self-interest and prejudice, we might just invest a little more time in considering if we are being fair as we progress through a deal. And of course, sometimes even generating a bigger pie is something worth considering if people have varying expectations on finances.
We have a strong sense of fairness built into our DNA since we were hunter-gatherers. Our ability to feed ourselves depended on cooperating with a wider group and if the group was successful, there was a fair division of the catch. Skilled negotiators need to care about how their proposals are perceived by counterparties. If they believe we are being greedy, then they will respond competitively. On the other hand, if we demonstrate we are motivated by need they will be far more cooperative.
If you found this blog insightful and would like to better understand how fair negotiating can create long-term, sustainable relationships with your counterparts, check out our flagship Advancing Negotiation Skills program here!