Knowing when to walk away is an essential negotiating self-discipline...
I was listening to the radio this morning as locals phoned in to tell stories of massive vet expenses for their dogs. As we know, the pandemic resulted in a dramatic increase in pet ownership and combined with a shortage of vets, there is a dramatic increase in the cost of vet services. As with their owners, there is an ever more sophisticated range of equipment and services for pets. As an example, the owners of one dog were charged over $35,000 to save the life their five year old pet!
They obviously love their pet, but may have been succumbing to confirmation bias where decisions are influenced by past behaviours. The dog may have been an expensive initial purchase and therefore any future expense is seen as validating the initial decision to buy the pet. The decision is seen as protecting their investment in love and money.
However, confirmation bias and their unconditional love for their pet can lead to financially disastrous outcomes. For all the expense thus far, there is no guarantee that the pet will live a long and happy life and incur no further cost. As a dog owner and lover, I feel comfortable at identifying a point at which I would not spend further money to extend the dog’s life. What that point is, will depend on the individual, but not having a limit to the amount you are prepared to spend, can lead to severe financial hardship.
A further example concerns a friend who lent his entire retirement savings to save his son’s business. This lending has been going on for years and it’s always to overcome a short-term cash flow problem in the (son’s) business. The problem is that the short-term problems never seem to resolve themselves and the son has now borrowed his father’s entire retirement savings of $700,000.
The hole just gets deeper and deeper. Only this week after many attempts of “No more!” another $5000 was paid to keep a creditor at bay. Retirement dreams have been shattered and family rifts have been created as other children have learned of this lending. Just like the pet owners, the father has been caught in the logic trap of trying to protect the correctness of his past decisions to make current decisions to lend more.
The short hand is throwing ‘good money after bad’. At a point in time, say, $100,000 the father could have said, “No more”. His retirement savings would be substantially intact and the family not divided. The son may have had to survive or fail without continuing help.
Easy to say, I know – it’s so tough to watch your adult child struggling and we live in hope that we can fix their pain. But somehow we need to ‘fit the facemask on ourselves first’.
In negotiating terms it’s the discipline of setting a Must Avoid, Must Get, Limit, or Minimum Acceptable position. Whatever the label, it is an essential part of preparing to negotiate.
As one negotiating authority remarked, “The best deals I ever did were the deals I never did.”