23 March 2017
Silence is golden
Hardball negotiations
by Robert Kilconner
“Silence is golden” may be the name of a song but like many phrases drawn from popular culture it contains a truth, in this case a truth about negotiations.
Suppose a man wants to buy your house. He offers you £100,000 but you would only be willing to sell at £120,000. You have a choice. You can revert to him and say that you would be prepared to sell at, say, £130,000. He then counter offers at £110,000. You come back at £125,000 and settle on £120,000 as the price.
It sounds alright on the face of it, doesn’t it? You got the price you wanted so you should be content. But then look at it in another way. You indicated in your responses how much you wanted but did you ever really test how much the purchaser was prepared to pay. Perhaps he had fallen in love with the house and would have been prepared to pay a large premium. Perhaps he would have paid more because he thinks there may be shale oil under the garden. Maybe he would have paid £150,000. You are not going to get it because you never really tested him.
Suppose, then, that you responded to the offer by simply saying that you were not interested in selling at that price. What would he have done? Presumably, if he really wanted the house, he would have come back at a higher price. If you continued to reject his offers, the price would rise to the amount he was prepared to pay but no further. If that price was, say, £150,000, you would receive £30,000 more than you were prepared to accept. How would you have achieved this result? By remaining silent, giving the impression that you were not anxious to sell and refraining from making counter offers.
This approach is applied by traders throughout the world. When you buy a carpet in the souks of Istanbul you do not respond to the shouted offer by immediately coming back with the amount you would be willing to pay. You show a casual interest, say “no” and walk away. They will send someone after you who will keep suggesting lower prices. It is only when he turns back that you know you have found the bottom.
Fundamental to all this is not showing any anxiety yourself to do the deal. Then the other side, unless they are strong enough to take the same approach, keep coming to you with ever improving terms trying to get you to engage. It is for that reason that the government is correct in going into the Brexit negotiations on the basis that if necessary it will live with no deal. Since this would be bad for both sides and since the EU will be pushed by member governments not to jeopardise its economy unnecessarily, this will force it to come to the UK with proposals rather than the other way round. If the UK just says “no” we will discover what their bottom line is. After all, in the end it is their position which concerns them not ours.
This type of hardball is frustrating for the other side who will protest that as a deal is in everyone’s favour we should keep making reasonable counter offers, reasonably acceptable by them that is. So no wonder that the deferral of the article 50 notice, something which clearly signals that we are not going to worry much about pleasing them, has thrown Mr Juncker into such a hissy fit.
Watch to the negotiations with Ms Sturgeon too. She came in with her demand for a new referendum and probably expected that Mrs May would make some conciliatory counter offer. In fact Mrs May has brushed her off and Ms Sturgeon is beginning to soften her demands. What will she do when her new demands are rejected? Jump up and down and protest? No doubt, but if her initiative needs to succeed, she will also come back with a weaker set of demands and then, perhaps, a weaker set still.
Confusion about this that lies behind many of the criticisms of the government’s stance. “Good terms for participating in the market are important” it is said. Well, yes, everyone agrees on that but you then have to ask yourself what strategy is most likely to secure those terms. Is it to tell the EU that preferential access is important to us, in which case they can send a list of the conditions they will impose or is it to say it that if necessary we will do without, in which case, unless they wish to impose a financial penalty on their own people by not doing a deal, they will have to start making offers? Ask the traders in the souks. They will tell you the answer to that.
Sometimes the confusion is even worse and I think that the stupidest proposal I have read so far was that the Government confirm, unilaterally and without reciprocity, that EU nationals will be able to stay in the UK after Brexit. There’s nothing wrong with the result, of course. Probably it benefits everyone and indeed it is just the sort of humane result we all hope for. What is wrong was the suggestion that it be offered as an upfront concession and the unctuous comment in the next sentence that such a concession would be helpful to the negotiations. Go ask the man in the bazaar what he thinks of that one. Idiots!
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