An FBI Hostage Negotiator Buys A Car [audio]
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1. "Nibbles": Reach a general agreement (agree on a basic premise). Instead of instantly accepting the deal, push for one small concession at a time.
2. Before entering into a discussion, think about a 'BATNA' = Best Alternative To Negotiated Agreement. Are there other options? Is there a minimum you are willing to agree with?
3. "Expanding the pie": While certain points in contention may be very inflexible (salary, job position), "expand the pie" and seek out other areas which may be more flexible (vacation days, compensation). This also serves to clarify the central hinge of the negotiations.
4. Disarming Empathy. Essentially, the act of being empathetic (in a sort of self-deprecating way perhaps?) so that the other side bargains against themselves while you do not budge from your initial offer.
"Expanding the pie" is more like changing the game. You have one thing you're negotiating on, and it's a zero-sum situation. One winner and one loser. But what if you bring other things into the negotiation, to turn that into a win-win situation? Then it's easier to find agreement.
The actual example in the podcast was over pumpkins. There was only one person selling pumpkins in the village the negotiator was in during her time in the Peace Corps. She wanted to buy all four of them but the farmer would only sell her two. She even tried offering double but the farmer wouldn't budge.
The customer took the position of buying all four pumpkins because she needed them in order to make enough pumpkin pies.
The farmer took the position of keeping two pumpkins because she needed the seeds to plant for next year's crop.
Once they got out of positional bargaining and discovered the root of the problem, the solution became clear: The customer gets all 4 pumpkins at the original price, but first the farmer opens them all and takes the seeds, which the customer would have thrown out anyway. Thus, both got more than they would have if they'd stuck to their original positions.
The difference is "nibbles" is getting more out of the other party after an initial agreement has been made.
"Expanding the pie" is widening the scope of the negotiations in order to reach an agreement in the first place; within the parameters of the initial offering an agreement was never going to be made.
1. calculating the total combined value all involved parties receive from making a deal 2. trying to increase this value above and beyond their BATNAs 3. then carving up and sharing this excess
So it's about focusing on specialized synergies and value creation. For a more in-depth read I'd recommend Co-Opetition by Brandenburger and Nalebuff (whose class on Negotiations I just completed): http://www.amazon.com/Co-Opetition-Revolution-Combines-Compe...
Step 1: Decide what car(s) you want to buy, down to the color, trim, options, etc. Type it all out in concise list form.
Step 2: Visit Edmunds.com, etc and get a general idea of local fees, taxes, and costs.
Step 3: Find the dealer websites within 120 miles or so, and write down their "Internet Sales" and "Fleet Sales Manager" email addresses.
Step 4: Compose an email to each of the email addresses you wrote down. Say that you are sending this out to several dealers within 120 miles and you will be selecting the lowest cost for the following list (which you created in step 1). Ask them to give you their "walk out the door" price. This price will include all fees, taxes, costs, etc.
Step 5: Wait. Maybe 30% of them won't reply, but that's OK.
Step 6: Take the lowest quote and tack it to the wall. Send another email to the next 2 or 3 lowest quotes saying that the guy tacked to the wall is quoting you $true_value (don't lie). See if they come down in price.
Step 7: Pick the one.
This has worked 3 times for buying a new car. No haggling or even stepping into the car lot until negotiations are done. You don't necessarily have to take the lowest quote (it's nice to pay a little more for a dealer closer to home) but it sure does drive the price down.
IOW, only works if dealer is honest.
VW has 2 dealers in my region. Want a TDI Jetta with a manual transmission? Let the games begin -- they get 3 a month and the sales manager won't let it out the door for a good price.
Toyota used to have supply constraints for certain Camry models (some trims were made in Japan exclusively a few years ago). Want one of those? Good luck -- my dad had the guy demand a deposit to be on a waiting list, or take a lousy deal on one of the other trims.
Another thing that happens is that dealers need to trade with other dealers for specific cars. Sometimes these deals fall through, and the dealer who promised you a car is actually being honest -- he doesn't have it for reasons out of his control.
Interesting note: Be very careful about believing a dealer's website or phone description of a car as a "manual." We ran into multiple dealerships that misidentified paddle shift or "manumatic"/"tiptronic" cars as manuals.
He ended up with an RX-8, but that's an entirely different set of stories... :)
If the supply of a certain good is constrained, then obviously the value goes up. Simply being able to purchase one is a good price by definition.
The only correct response to such a situation is: "I will tell everyone I know about your tactics, and go with the dealer that was shooting straight."
Then execute on exactly that plan.
VINs can be decoded to exact colors/features for most makes/models.
In other words, go to another dealer.
Also, an interesting aside, there's a limited inventory in any given geographic region, so if you match your desire list up with a given VIN, they're usually quoting you on the same inventory item.
As others have said, this doesn't work for all cars. For less mainstream / luxur-ish cars, there won't be too many dealerships in 100 mi radius that carry what you want. At best you'd get a response that MSRP is this and that, please come in and we'll talk about discounts.
I think that's their idea of a hint.
In fact, I praised her more than the agent I got my flat through, and it's her who gets my recommendation whenever someone asks me.
I offered the local dealers the chance to match the price, but after hearing the figure I'd been quoted, they politely declined. They claimed that they would actually lose money on the sale if they did, and while I'm not an expert on the UK new car market, I suspect given the size of the discount that the local guys were being honest there.
Caution: That was mid-2000s, so any recommendation for that particular deal site is stale. Still, I have no reason to believe they have changed and apparently they're still going.
Do you sell it yourself?
Why? Because in the used car supply chain, the trade-in is the start of the chain - the lowest possible price, and the worse possible deal.
The supply chain (in its longest form) looks like this: Used car retailer sells a car (end of chain). He buys the car from a wholesaler. Wholesaler buys a car from an auction. Auction gets its supplies from dealerships. And what cars are dealerships putting in the auctions? Trade-ins.
Now, that chain can be broken at any time -- that's just the longest version. But dealers calculate trade-in prices with the assumption of a worst-case scenario (that they won't be able to sell on the lot and that they'll have to dump it to an auction).
So moral of the story - if you have the time and know-how to sell direct, do it!
She gets on the web and looks at all the dealer in Northern CA, and finds one of those lo-ball one-only offers in San Francisco. She calls the dealer and gets him to hold the car for her, since we would have to drive 240 miles to get there. Then she starts calling local dealers to find one that would match the offer. The nearest one wouldnt, but one an hour away would. She got me the car for $14,000.
A few years earlier we bought a house and needed a new refrigerator and dishwasher. We go to Sears and find what we want. She then proceeds to negotiate several hundred dollars of the sticker price. I didnt even know you could bargain with Sears.
The downside is that I cant make a simple purchase any longer. She makes me go for the best deal.
http://www.edwardjayepstein.com/diamond/chap20.htm
on HN before:
On the other hand, the stuff about the DeBeers monopoly is quite inaccurate today. DeBeers has gotten in anti trust troubles, but hasn't been an actual monopoly for a long time.
Do you have a link for updated info about their current practices and market position?
The bizdev girl in my startup who grew up in such a culture usually gets 30% of supplier list prices on the first call, and then starts to work from there ... even in the US and the UK where it's not supposed to be that way.
Does her she work in a field where you especially need negotiation skills?
On top of all that she is a very nice person. I consider myself to be a very fortunate guy.
Some accounting would be a nice add, as it would help her talk with the business types.
If she goes that road I think you had better be able to cook.
This reminds me of the part in The Hobbit (the book, not the movie) where Gandalf takes the dwarves to meet Beorn, the skin-changer. Before entering his house, Gandalf warns the dwarves that Beorn is tempermental, and that in order to get him to help them, they should stagger their entrances.
Gandalf initially only enters with Bilbo, but as he tells Beorn about the adventures they have had so far, he repeatedly references an increasingly large number of dwarves. e.g. "You have mentioned a dozen, yet there are only ten dwarves here!", to which Gandalf replies by having two more dwarves enter.
In the end, master businessman Gandalf gets Beorn to house all 16 in their party, by means of exactly this "nibbles"-like negotiation strategy.
I really do think Gandalf has a lot to offer the business community as an astute and personable negotiator.
"Wait, no, I have a better idea, how about this. You sell me the gray Prius for 2.5% under factory invoice with the 2% APR financing we talked about earlier, or I summon the great worm Catyrpelius from his resting place in the Abyss to digest your entrails over a thousand years. What? Sure, I'll wait here while you run it by the sales manager."
http://www.amazon.com/gp/aw/d/0395631246
It's a little bit dated but an excellent introduction to negotiation and overlaps with a number of the topics discussed in the show.
1. Decides ahead of time what exactly he wants and how much he wants to pay(via internet, friends etc.)
2. Calls up area dealerships that have the exact model/make
3. Asks them to skip the pitch. No, he is not visiting the dealership. Yes, he is damn serious about purchasing this car.
4. Tells them to write down his number, which is the price he is willing to pay.
5. Requests them to call when they can sell him for that number. Promises to buy it if they do so.
How it works out:
Typically he will get multiple calls back trying to get him to reset his price. He stays firm and politely informs them he is serious about that price and that he is ready to purchase. That part is very important because dealerships get a fair share of timewasters. He usually ends up with a dealership that can chalk up his sale as an easy one even if the margins were low/non-existent.
I'll emphasize that my dad, like the negotiator in the story, will not budge. This is harder than it seems but the key for him is to keep the conversations short and set a no-bullshit attitude up front. He has had instances when the dealership will lure him in and then try to do a switcharoo. He will laugh or express disappointment depending on the day but in either case, he will walk out.
That said, he is a reasonable party. If it is $100 more, he will likely accept it--but even then, only as a final compromise. If it is $1,000 more than his price, he will almost certainly walk away.
Another key point is that my dad does his homework in figuring about the lowest he feels a dealership can go while still having interest in selling it to him.
Also, his being a doctor may help him in being taken serious, though it also makes the salesman more aggressive in trying to get additional $ out of him.
I've never understood that. Are most people unwilling or unable to stay firm to something they've decided to stay firm about? I went through this last time I bought a car, and as hard as a Toyota dealer tried to move me on a car he had, I quickly learned that the longer I sat there and just did nothing, the lower the price fell. I ended up not even buying the Toyota - but a car dealer has literally zero power over what I do or where I spend my money.
Haven't tried it myself, but apparently it works reasonably well.
The only way to take the position of power is to not need (much) money, which leads to the ironic situation where, by not needing work, you end up getting paid more for it. Call it the Paradox of Need, you can see it in many different socio-economic situations.
The fact that living a low cash-burn lifestyle also improves you morally, is environmentally positive and gives you personal freedom are side benefits to this approach.
OTOH, the client is talking to the developer because the developer has something the client needs: skills to provide something of value. It helps to (politely) remind clients that they are free to spend more time looking for a less-expensive developer while in the meantime nothing gets done and the client possibly loses money, or loses an opportunity to make money, and may then still end up with a less-skilled developer who will not deliver adequate results.
The only way to take the position of power is to not need (much) money, which leads to the ironic situation where, by not needing work, you end up getting paid more for it. Call it the Paradox of Need, you can see it in many different socio-economic situations.
I and many friends have found that best time to find a girlfriend is when you have girlfriend. Some goes for finding a job; it's better to currently have one while looking. Partly this signals capability (i.e. There must be a reason you do not have a job/girlfriend|boyfriend|whatever, even if I can't see it), partly it allows you to act with some (possibly attractive) aloofness.
So if you can act like you don't need the job/money/whatever then you can gain an upper hand.
I'm not a big fan of fronting in order to start a relationship, and if I got the feeling that a possible client was going to try to weasel me on cost because they think having money makes them the boss then I'd seriously consider walking away. Of course, if I was in fact in serious need of money then the game changes, but past experiences tells me that clients who are lording money over contractors are a big risk of refusing to pay.
The best predictor of how "difficult" a client will be in this dimension is the degree to which the person you deal with is paying with what they perceive as "their own money", literally or figuratively. A client selection strategy based on this observation dovetails nicely with the "charge more, much more!" approaches frequently discussed on these pages.
Yes, but freelance developers are a dime a dozen. Therefore clients will always have the upper hand in business transactions.
Once you finally accept that clients are also a dime a dozen too, it'll become a lot easier to only accept the good clients, and only accept good pay.
And the freelancer has what the client needs: the ability to make a web site.
A transaction happens when both parties believe they're better off with the result: the freelancer wants the money more than the time, and the client wants the web site more than the money.
A good freelancer will always have power in a negotiation. There are a lot of average freelancers.
Sometimes I employ "power negotiating" skills and have some fun just to stay sharp.
Here are some of those techniques: http://www.negotiatingguide.com/negotiation/powerarticle.htm
It took about a year to build up a good hourly rate reliably... this was done mostly just by being fast, available, and good and always keeping an eye on the next project.
At this point, I know several people who are able to make money off me, and that has always been my goal as a freelancer, more than anything. The agencies I freelance with all recognize that I'm as reliable as an employee but far cheaper as far as total cost, so they have a better margin on work they do with me.
And even though I'm charging quite a bit, since they are charging a markup on my time... well, it's just a lot nicer for everyone. If I raise my rates, they make more money (within reason, of course).
It's basically as educational as anyone at a cocktail party talking about the good deal they got on a car. Except in that case, you'd at least get the numbers.
There's a pretty good EconTalk with Russ Roberts talking about the fine details with a dealership sales manager. You have to read between the lines (Roberts is not such a great interviewer that he gets a car salesman to torpedo their own best interests) but it's pretty illuminating.
As in all things, it's mostly about the market. There are makes/models where sticker isn't even the real sticker; for instance, cars with waitlists are unlikely to get purchases under sticker. On the other hand, you can capture much of the dealer's incentive if you choose the right time of month to make an offer on a car the dealer would like to get off their lot.
First, I asked for a light that would be go great with the bike and the sales person put one he had laying around on the bike. I said it looked great. Then I asked for a helment and found one for me that I liked. I put on the helment and did a test ride with the bike. I told him I'll take the bike. Then I asked, how much for the helment & light? He gave me the price. I said "That's not bad but honestly, I don't have the money for everything. What can you do?" He offered to give me 20% off the helment & light. I again said that was a great deal but couldn't do it. A few more back and forth and me throwing in that I would need another bike (for my gf) and wanted to come back and buy from him, he eventually threw in the light and helment.
What I knew was roughly how much profit they were making from the bike. I knew roughly the mark up of accessories and I knew how they wanted to sell the bike.
It worked out really well for me and the business. I love the bike and the business now has a new loyal customer.
The last place I would drive a hard bargain would be in a bike store.
For one, I can afford the bike + extras, otherwise I wouldn't go out to buy it, we're talking relatively small money here. I simply set a budget and didn't exceed the budget, which may have influenced my choice of bike but that's fine.
When I went back a few weeks later with a small problem (crank play) the guy instantly dropped what he was doing, fixed the problem immediately (obviously no charge) and asked how my kids liked the bike. We talked for a bit more and he asked me to come in any time there is anything wrong with the bike right away.
I love the bike and that guy running his small business.
I wonder how he would have treated me if I had decided to haggle with him over the price of the seats or the bike using my negotiation skills. Relative to my income that guy is working a lot harder for a lot less.
Maybe my perspective about bike store owners changed when I worked for a bike store when I was 15 (newspaper route + working in the bike store paid for my first computer).
Car dealerships I approach in an entirely different way.
If you get treated differently if you have issues in the future because you bargained then that's an issue with the business not the price you paid.
Btw, I paid full price for the bike as it wasn't on sale. My guess is they made 30% profit from the $800 purchase.
No, they made a 30% gross margin. Their profits would likely be substantially less.
My understand is that bikes have a pretty slim margin and stores make their money on accessories and servicing.
And they still have to put the bike together, give it the '0' service (mostly checking if everything is tight, re-inflating tires and setting it up for the customer) and a warranty. And clean it up after every jerk that goes puddle hopping with a new bike during their test-drive, after which they won't buy it.
There is not a whole lot of money in selling discounted bikes.
Then after the first year you have hopefully a loyal customer that can't fix their own punctures and that keeps coming back over a long time for fixes and eventually an upgrade. It isn't rare for a sale to make more on accessories than on the bike itself, compared to the price of a bike a bag set, seats, lights (usually mandated by law to be on every new bike) and clothing are sold at much higher margins.
I'm fine with his haggling. My time and the way I'm perceived by the store owners of the places where I shop is worth more to me than I could ever gain by haggling over the price of a bike. Leak and I are in that sense not in the same position. I also think that if I want to keep that store in business by the time some warranty issue rolls around that I probably will have to let them earn some money. (the dutch word for that particular feeling is 'gunnen', this doesn't happen often but I haven't a clue what the proper English translation is).
He gets to do it his way and I do it in mine. Any guilt complexes are on account of their respective owners.
http://i125.photobucket.com/albums/p80/02limited/Picture002....
If anyone in a deal is walking away happy it means some other party is suffering whether they know it or not. Any equitable deal is one in which every party is just a little bit unhappy and accepts it for the greater good.
What the aforementioned practitioners do is to convince someone that they are happy and the further they can push them away from reality the more advantage they take. Usually if not always a false scarcity of information is employed.
Tim Ferriss is the worst kind of con artist in the regard.
Ideally (and typically, else markets wouldn't work!) both parties walk away happy. Who's suffering when both sides feel as though they've gotten a good bargain?
Well, maybe I'm old-fashioned but I'm pretty sure the "the worst kind of con artist" cons people out of hundreds of thousands of dollars and gives them nothing. Even if you posit that the content of his books have zero use value (I'm not sure I agree, but I don't really care to argue either way so let's just assume this is the case) and that they also have zero entertainment value (I disagree, but taste may vary) then the worst he's done is... taken your 20 bucks or whatever and sold you a disappointing book in return.
Then I don't want to live in an equitable world. Sounds like an equitable world means everyone is always just a little bit unhappy.
Everyone wants to be happy; the extent to which we do so at the expense of others is pretty staggering in recent history.
One thing I always believe helps is having information about the thing that you want to buy. For eg:- If you know that the car that they are trying to sell has been sitting in the lot for more than 2 months, then you know they are desperate to get rid of it, so you can come up an appropriate(much lower) ask price!
In all fairness, adding in the nibbles may annoy or piss of the person you are dealing with(in some cases). In a way, you are sort of pushing them into a corner.
However, expanding the pie and looking out of your tunnel vision is a useful hint!
Also, in the case of FBI negotiator, not everybody will let you sleep over their offer when they have matched your ask price without you giving them any wiggle-room.
1. The "Nibble" - ask a little more into the offer, especially if not directly related.
2. "Best Alternative To A Negotiated Agreement (BATNA)" - ensure there is a viable alternative, preferably before negotiation.
3. "Expanding the Pie" - offer can be often improved or agreed on parts of an item or service rather than assuming it applies only to the whole.
4. "Bracketing" [my term] - offer low to point of anger but not withdrawal, then praise counteroffer and negotiated item/service while claiming cannot afford counteroffer.
5. "Defer Immediate Agreement" [my term] - on best offer, defer immediate agreement with any reason so can gain time to check the offer or for other offers.
I am actually surprised though, that the car sales man didn't ask how much he could pay. If the FBI negotiator still stuck with his initial offer, I guess he would have suggested some kind of monthly rate or a similar kind of loan that would "fit his lifestyle better".
Funniest thing was we had gone to a local dealership to attempt a test drive and they wouldn't even talk to us. The guys who won our business then sourced the vehicle from that same dealership -- they drove it up to our house with the local dealer's plates on it, for something like $6k less than the dealer's sticker price.
I left out one detail -- we ran our offer past the other dealers who had responded and none would match it.
* Wait Wait...Don't Tell Me, basically the US equivalent of Radio 4's News Quiz
* Tech Nation, the title of which should be fairly self explanatory
* Car Talk, a call-in show about cars. I am not a car person, and I enjoy it (the show stopped production a few months ago, but should be widely available online)
* This American Life, does eclectic long-form journalism.
* Science Friday, which is part of a daily call-in series Talk of the Nation, but all about science.
If you're into science and tech, Radiolab (radiolab.org) is also well worth a listen, it's not technically NPR (there are several different public radio groups in the US), but it uses really innovative production and I wish Radio 4 would broadcast it here in the UK!
Hopefully other people can add their own favorite shows...there are quite a few of them, and I've just highlighted a few that I find interesting as a Brit. I'm in the US a fair bit, and tend to listen to public radio where I can so these are all shows I've just stumbled across and enjoyed.
Directory: http://www.npr.org/rss/podcast/podcast_directory.php?type=to...
Various show pages:
http://www.freakonomics.com/radio/
On Point - Two hours daily that has lively conversations that cover everything from breaking news to ancient poetry, and features writers, politicians, journalists, artists, scientists and ordinary citizens - http://onpoint.wbur.org/
To the Point - A news based one-hour daily program that focuses on the hot-button issues of the day - http://www.kcrw.com/news/programs/tp
Cheers!
We could likely have started lower, and we messed it up by using some repairs that needed to be done (that were clearly priced into the advertised price) as an argument for dropping the price when we ought to have been able to get that price drop and make the offer contingent on the seller having some of the repairs done on their dime.
The key thing is to be able to move quickly. They picked us because the alternative would have been to wait for other offers, while we turned around and started negotiating as soon as we were sure, offer an agreement in principle subject to a survey right off the bat if they could meet our price, had an agreement in principle from my bank, and had been renting so we stressed that we could move on everything immediately.
If you can stress to the sellers estate agent in particular that you can move quickly, keep in mind that it will be in their interest to get a quick, trouble free sale vs. hanging on for weeks for 10% more commission, and that will influence how they deal with their client (conversely, it is in your interest whether selling or buying to be very wary when an estate agent pushes you to accept an offer - there's been some survey where it turned out estate agents typically hold out longer and sell for more when selling their own houses than their clients do).
* Price we were willing to pay "out the door" (a hard, absolute max that wouldn't leave us in dire straits if one of us lost our job) * How much work we were willing to do after the sale * Tied in with the above, a minimum 1-year, preferably 2-year warranty on major repairs paid for by the seller * Within a 30 minute rush-hour commute to the furthest employer * 30-year mortgage that we can afford to pay off in 15 years * Any school district except the worst few in the area (no kids yet, but this is our first home and we'll have it 5-10 years; when we move kids will be just entering the equation and we need to plan that we may not be willing or able to move)
As with any negotiation, the most important thing is knowing exactly what you need, what you want, and what you can (and will) spend. The hardest part (for me anyway) is getting a deal that is everything I need, most of what I want but is 2% more expensive than my max and still being willing to walk away.
The main principles of negotiation (take your time, set yourself a price and if you can't get it for that price walk) apply. But there may be a scarcity of offerings that suit you, a place may have extra perks (location near water / the beach) and so on.
The most important facts about buying a house are how long it has been on the market and what it was bought for. If you can't figure out the latter you may be able to make stab at it by comparing the market development relative to when the house changed hands last and what was done to improve it since.
Happy house hunting!
Silicon Valley is a very, very hard place to buy a house right now -- inventory is crazy low.
Any book or online class recommendation?