Osama Bin Laden, Stockpickr, and Everything I know about Negotiation
- Posted by James Altucher
When the FBI came to my door in mid-2002 and asked me what I knew about “UBL”, their name for Osama Bin Laden, I got a bit nervous. My kids were playing on the floor and I was in the middle of trade during a rough patch in the markets. At that time (the Internet Bust) I rarely had anyone who wanted to speak to me at all, particularly the FBI, and everyone in the house at the time wondered if maybe I was in trouble.
I’m a horrible negotiator. I think most people think they are good negotiators, with natural-born talent. This is like the statistic that nine out of ten people think they are above average drivers (only 4 out of ten can really be considered to be above average). I’m the one out of ten that knows he’s a poor driver. And I know I’m a poor negotiator. Part of this is because I do consider myself a good salesman. I like people to like me, and to get them to say “yes” as quickly as possible when I’m selling them something (a service, a product, a business, a deal, etc – I’ve sold everything possible for every imaginable price). But negotiators aren’t necessarily eager to please. Sometimes they are exact opposite.
Fortunately I’ve learned from the absolute best negotiators ever. And every negotiator has a different technique. Here are some of I’ve seen in action. First off, there are the basics, which I won’t go over too much because everyone knows them. And then there are the three killer techniques. The basics are: (think of this as Negotiation 101)
- Have a backup: “This price sounds fine to me but I have to ask my board of directors, my partners, my best friend, my CEO, etc”. Always have someone you HAVE to go back to who can then throw a wrench in the middle if need be.
- Never be the first to throw out a price. This sounds easy in theory but is not practical since everyone knows it. Instead, using the Killer techniques below, you can get around this approach and throw out a first price without fear.
- Don’t be afraid to say NO: But there’s a more useful way of saying this, which is, diversify your choices. This isn’t always possible but try not to enter into a negotiation unless you have at least one satisfactory other choice. This applies to everything from dating, to selling your house, to selling your company, to providing a service. Makes it much easier to say, “NO”.
- Both sides need to be happy at the end. Otherwise, the deal will end up poorly for everyone.
But using the Killer techniques below, everyone should be happy at the end.
Advanced Negotiation 201:
- The Nicker-and-Dimer. I once went to an ancient coin exhibit with the Dr. Larry Brilliant mentioned above (I know. Its like a name out of a science fiction novel but that’s his name). He was former CEO of Softnet, a company that did a bunch of tech stuff until the tech boom ended. Then he was head of Google Charities. Before all of that he cured smallpox in India. Now I have no idea what he does.
The last time we spoke was in 2001, but for various reasons, in 2002 he mentioned to the FBI I might have some good ideas about tracking down “UBL”. Anyway, we were shopping for ancient Israeli coins together and he told me this: When you are negotiating, always have more items on your negotiating list than the other guy. If you are selling your company, its not just about the price of the company. Its about the size of the earnout, the goals that need to be achieved, salary, salaries for your employees, free car service forever, what’s your title, what are your responsibilities, etc etc. Have more items because then when it gets down to the nut–and-bolts negotiation you can give up the nickels and take the dimes. Then it seems like the other guy is winning but you’re still getting everything you really want.
- The Idiot. I was once partners in a VC fund with a guy who was an ex managing director at CS First Boston. He had negotiated hundreds of leverage finance deals. He was a genius negotiator and everyone liked doing business with him (which is hard for me to pull off when I’m negotiating). His favorite technique in the middle of a negotiation would be to raise his hands up in the air and say, “Listen. Lets take a step back here. Pretend I’m a complete idiot and walk me through this deal.”
He had no fear pretending he was the dumbest guy in the room even though he was probably the smartest. And he would ask any question he wanted and everyone liked being smart in front of him by answering in as much detail as possible. Then he would say “Ok, I think I get it but I’m not sure. I need to spend a few days thinking about it.” He would completely slow the pace down. And then on every item he would add more tiny items (the nickel and dime approach) and would just wear everyone down. it was almost like taking the nickel-and-dime approach to an extreme. And he was never afraid to say, “Ok, its no big deal. We all have other choices.” He was fearless without seeming like he was BS-ing, even though he was always BS-ing (not totally true. We did have other choices but not as good as the one he was negotiating).
- The Math Trick. This is the best technique I’ve seen. This one is from Steve Elkes, former COO of iVillage when he sold it to GE for $500mm. He was then COO of thestreet.com and managed to raise over $50mm from TCV at a price of $14.26 per share. I don’t think the stock ever ticked higher than that (its in the $2s now). He also negotiated for thestreet.com when they bought Stockpickr.com, a company I started, so I was able to see his negotiating first hand and unfortunately for me, he was on the other side of the table.
“The Math” technique is this: before the negotiation even begins, you state what you think a common sense, very straightforward, mathematical formula that everyone should use to value the property, service, business, etc.
So for stockpickr, Thestreet.com was trading for 20 times next year’s earnings. So thestreet needs to buy things where it has upside, Steve said. How about we all agree to pay 10 times next year’s earnings for Stockpickr.
I immediately said yes since I had modeled out what I thought were enormous earnings for stockpickr.com based on the advertising rates thestreet.com was charging customers, average advertising rates in the industry, the rate our traffic was growing, other revenue opportunities, etc. No problem! I said and thought this was a no-brainer. I was counting the money.
Until bit by bit my number was notched down: advertising rates weren’t high as I thought. Steve would then use “The Idiot” technique. “I don’t know what advertising rates really are,” he said, “so how about we just talk to the head of sales here and see.” So then its suddenly out of both our hands and in the hands of an impartial guy who carefully explained to me why advertising rates weren’t as high as they seemed.
Then he used “the backup technique”: “I’m fine paying whatever, but the board doesn’t see those other revenue opportunities you mention so we have to stick with the revenues and earnings we KNOW you’re going to get.” And since we had a formula we already agreed to, I was whittled down to agree to the number that the formula spat out. Which was fine. By the end of the negotiation, both sides were happy. I was happy because the initial price I had in my head had slid down so much I was just glad the slide was over.They were happy because they got down to the price they wanted.
As for the FBI agents, Larry Brilliant had mentioned to them an idea I had mentioned to him a few years earlier about a company where I thought Bin Laden was keeping some of his money. Nice guys and seemed like they were on top of it. Eight years later UBL has still not been found.
Click here for the book
- How to Self-Publish a Bestseller: Publishing 3.0
- 7 Things Happen to You When You Are Completely Honest
- How to Deal With Crappy People
- 10 More Reasons You Need to Quit Your Job Right Now!
- The 100 Rules for Being an Entrepreneur
- 33 Unusual Tips to Being a Better Writer
- How to be THE LUCKIEST GUY ON THE PLANET in 4 Easy Steps
- 10 Unusual Things I Didn’t Know About Steve Jobs
- 8 Alternatives to College
- I’m Completely Humiliated by Yoga
- How I Screwed Yasser Arafat out of $ 2mm (and lost $ 100mm in the process)
- What Happened to All the Laughter?
- HOW TO USE HEROIN LEGALLY
- The One Thing I Remind Myself of All Day
- Love Is….
- The Ultimate Cheat Sheet For Dealing With Excuses
- The Ultimate Cheat Sheet for Dealing With Haters
- The Ultimate Cheat Sheet for Mastery
- 1000 Things That People Smarter Than Me Do Every Morning
- How to Write for a Living
- Louis CK and the Hare Krishnas Used This ONE Trick for Success
- The Ultimate Cheat Sheet For Meeting the Love of Your Life
- Why Do I Expose Myself So Much?
- HOW TO GET AN MBA FROM EMINEM
- The Ultimate Cheat Sheet For Selling Anything
- Why 2014 Is The Year You Change
- Are You Playing or Are You Dead?