You Negotiate Commodities, But You Seize Opportunities

Bikeshedding: http://en.wikipedia.org/wiki/Bike_shed

The Duck technique - http://stackoverflow.com/questions/2349378/new-programming-j...

Man, applying to YC has got me addicted to this news site a bit :) Before, I used to dismiss it because I thought it flew by too fast. I remember passing by it a few times in the last couple years. If there was only an indicator of something psychologically reassuring for someone like me, I would have bookmarked it.

This is the stuff I understand. Technology, web design, psychology of people online, etc. I notice that when I design a business plan, I think in terms of actual use cases from each participant, and why they would do each step. And if there's a missing piece somewhere then that's a red flag. I ask how it would spread virally, or how it would make enough money to spend on user acquisition. This is how I approach business, using what I know.

But there's other stuff out there, SEO, guerilla marketing, PR, etc. and I completely avoid it in my designs because I don't know too much about it. That's why it's good to have a partner who can be involved with talking to PR people and marketing agencies and architecting real-world campaigns when the time is right. Whenever there was a problem, I tried to solve it myself using the tools that I know. All my business plans have been of this nature -- sites that are viral by design and get people to spend money by design. Not that it can't work spectacularly, but it's a one-sided, internet-centric approach.

It sounds, to me at least, like he did a very poor job of actually putting this "opportunity" in proper context. More often than not this type of behavior is a failure of the CEO rather than the board.

As a technical founder I'm really well aware of it. After all, I'm constantly pushing projects that my non-technical partner (and by extension our board) really doesn't grok. Things like site security, more robust backups, improvements to the software stack... these are all things that don't really show up in any visible way within the product but they're all crucially important. It's my job to put the risks in proper context and help him understand that. It's his job to learn, understand, and help me make better decisions as well. I've often championed projects that addressed risks that weren't worth the effort to properly deal with. I need him to reign me in when that happens.

I think it's far to shallow to say "well they don't understand so their just flailing about trying to turn it into things they do comprehend." Assuming that you've assembled the right board and the right investors it's much more likely that you've done a poor job of engaging them in the topic. To them the advisor LOOKS like a commodity because from their position he is.

"I work in advertising, where frequently the challenge is to get the client to agree to pay you as much money as possible, then go away. The problem is that some clients (particularly new ones) will absolutely refuse to let an estimate pass their desk without making some alteration, just to show that they’re involved in the process. Now, if you go in with a carefully crafted ad campaign, where everything beautifully interlocks with everything else, then this moron blindly slashing away with his pen will inevitably cock it all up.

The solution is to give him a helicopter. A helicopter is something glaringly, obviously wrong, deliberately thrown in to satisfy a busybody’s need to “do something.”

It comes from a video producer I once knew who would always include an actual helicopter (for aerial shots of the city) in the estimate every new proposal he made. The helicopter was always obviously far more expensive than anything else on the list, and the client would always immediately cross it off before approving the proposal. End result: the producer got to do the project as he wanted, the manager got to feel useful, and everyone was happy."

In practice, everything a board does is unanimous. If you respond to you VC board members saying "he is too expensive" with "let's vote on it", the company has WAY deeper problems.

Yes, you need to negotiate opportunities. But an opportunity is where you see value that is not visible to others. If that value is large, then it will pay off in spades even when other people think you're being crazy.

negotiating can send a signal that you don't value the other entity as highly as they value themselves. it's one thing to negotiate over the price of an apple, say, because the apple doesn't have feelings. but if you try to talk down the compensation package for a potential employee/advisor, particularly one who would likely become a star contributor, you can hurt their feelings and/or cause them to seek employment elsewhere. you can always buy an apple from somebody else, and the store/vendor can always sell that apple you passed over to somebody else. but as a laborer, you have only so many hours in the week you can sell to somebody else, so in general it's in your best interest to get the highest compensation you can.

So negotiating as a general rule is good. But in specific cases, where you're dealing with an opportunity or "non-commodity" thing, no, negotiating can sometimes be bad. That was his whole point.

He did follow-through on his first offer. What he wanted, but the VCs did not agree with, was to accept the last email two days prior to the board meeting.