Negotiating using the BATNA technique is huge for saving you money or making you more money.
Last year, after playing an afternoon tennis match at my club, I decided to switch on my Uber driver app to try and catch a fare heading home. Making money by going in a direction I planned to go anyway feels great if it works. This was before Uber came out with their new tool to allow for direction-based rides based on a pre-inputted destination address.
My tennis club is in the middle of the city, so I knew my chances were less than 30% to head back west since 70% of the population of SF lives on the eastern half. I'm a gambling man and this time I lost. I picked up a mother daughter couple close to my club who were headed northeast to their hotel at Fisherman's Wharf. Oh well, at least I'd make about $15 and perhaps catch some surge fares down there heading back west.
The daughter told me she just started attending Cal Berkeley, my business school alma mater, so we got into an engaging discussion on the importance of figuring out how to leverage the internet to make a a better living if she learned only one thing in college. She agreed.
LOST AND FOUND: BATNA
About 20 minutes after dropping them off at their hotel, I noticed something deeply wedged between the cushions of my front passenger seat. It was her black iPhone 6S. Drat! Nothing is worse than losing a wallet or a phone. But, by the time I noticed her lost phone, I was all the way on the other side of the city.
I would have gone through the normal “lost item procedures” through my app once I got home, but luckily, the daughter called her phone, and I picked up immediately. She was incredibly relieved. I gave her my phone number and address so she could come pick it up at her convenience.
After four hours of tennis and almost an hour on the road, the last thing I wanted to do was fight traffic back down to Fisherman's Wharf during rush hour to drop off a phone, even if I could catch a $20+ fare on the way. I was tired and starving for some black bean noodles at San Tung, one of my favorite Korean/Chinese fusion restaurants in the Inner Sunset on Irving and 12th.
Hannah the student was just relieved she found her iPhone and had my contact information. Given I told her I'd keep it safe, she told me she planned to go to dinner with her family between 6pm – 7pm and could swing by my house after. I told her I'd be home, and let her know that a non-surge fare would be between $15 – $20 to come to my house or $18 – $26 if she was unlucky.
I was going to respond to her and say, “Alternatively, if you want to pay me $40, I could drop it off where you guys are dining at 7pm,” since I'd be done eating my black bean noodles by 6:30pm, but I held back. I didn't want to appear to be profiting from her mishap. I really just wanted to go home and relax after a long day.
$40 is a fair amount since I'd have to drive down to her restaurant and then drive back home. Her coming to my house and back to her restaurant would cost at least $30 – $50 anyway plus her time depending on surge pricing. I really wanted to just stay home and rest, but when there is something outstanding, it bugs me enough to come up with a fair solution.
I wrote to her the following instead, “I guess you could make me an offer to drive down to your restaurant to drop off your phone. Either way, your phone is safe with me, so don't worry if you'd like to stop by later.“
She immediately responded, “How do you feel about $60?“
I hit the bid. I was thinking of just wasting another one hour of my time delivering it for free, but I was just too exhausted. Besides, it's dangerous to drive while tired. Grabbing some dinner and taking a quick 15 minute nap is safer for everyone.
When I got to their restaurant a little before 7pm, Hannah and her mother were ecstatic. They didn't have to re-arrange their tight weekend vacation schedule to retrieve the phone, and they were probably willing to pay $100 or more for me to deliver her phone.
They were so thankful that they paid me another $10 in cash to give them a lift to an area close by. All in all, I made $100 during this roundtrip hour long journey because I was able to give a couple more rides. $100 an hour is not bad given I was only making about $30/hour net after fees. But $100 is still far less than I charge for my personal consulting practice.
KNOW YOUR BATNA
My favorite MBA class at Berkeley was Business Negotiations. Here's the semester in a nutshell.
BATNA is a term coined by Roger Fisher and William Ury in their 1981 bestseller, Getting to Yes: Negotiating Without Giving In. It stands for “Best ALTERNATIVE TO a negotiated agreement.” Said another way, it is the best you can do if the other person refuses to negotiate with you.
* What is your best alternative if you do not go through with the transaction.
* What is their best alternative if they do not go through with the transaction.
You become the best negotiator when you not only know your own limits, but also the limits of others. You must have the ability to walk away from a purchase or a sale. He or she who cares least, usually always wins.
The iPhone exchange wasn't a typical business negotiation. But given time is money, it became one. We negotiate much more often than we think e.g. promotions, raises, job offers, deciding where to go eat with a significant other, scholarships, when to meet up, and more. So learning how to negotiate is a crucial skill for building wealth.
My preference was simply to go into a food coma on my sofa after dinner, earn no money, and wait for Hannah to pick up her iPhone after 7pm. I basically had zero downside because I didn't have to deliver her the phone all the way across the city since it was her mistake for leaving it behind. My BATNA was negotiating some type of payment to deliver her phone, even though I'd much rather just stay home and relax.
If Hannah didn't take a ~$20 Uber ride all the way to my house when we first corresponded, Hannah's BATNA would have been way worse. I might have disappeared with her iPhone. This would have obviously caused her a lot of stress and wasted time getting a new phone. And if I finally did respond, I could have easily asked for a much higher price like $200 if she wanted it back. Wouldn't you pay $200 to get your new $800 phone back that contains all your precious information? Probably, because you can only get a subsidized rate on one iPhone if you sign up for a 2-year plan or lease it for a higher cost.
But because I allayed Hannah's fears by providing her my contact info and told her all is safe, she decided to entrust the phone in my good hands for three more hours while she and her friends enjoyed a show. Could you have done that if your phone was lost or in the hands of a stranger? I don't think so, unless the person who I spoke to was an incredibly nice and trustworthy person. I'd skip the show and want to meet up ASAP. For $60, Hannah got a deal. It would have been much more costly for her if I was a scumbag.
For me, $60 was just the right amount to get off the couch after dinner and not feel bad for accepting her payment. Thinking about Hannah's BATNA and the true cost of replacing an iPhone 6 only came after I wrote this post because I often reflect on things that don't normally happen. During the time of correspondence, I was basically trying to come up with an easy way to conveniently get her phone back.
For bigger negotiations, like buying a house, negotiating a business deal, buying a car, or trimming your neighbor's tree that's blocking your view, really think about BATNA. It's always an extremely gratifying feeling when both parties feel like they've gotten a deal.
Related:
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Emotional Intelligence: The KEY To An Easier Life
Readers, what are some of your negotiation strategies? Do you consider yourself a good negotiator? Any tough negotiations in your life you can share where you used BATNA to come to an agreement?
I used to work in M&A where the BATNA concept was very evident. As a buyer, the best deals were those where the seller needed to sell for some reason – tax problems, employee problems, money problems, competition, etc.
When the seller could just walk away, it was hard to get a deal done. They had no incentive to sell – unless the money was more than I was willing to pay.
Sometimes the other party might not realize that you have the better BATNA. Sounds like your comment about how much it would take for her to take an Uber out to you was a subtle way of setting the BATNAs for each party.
I learn something new every time I read one of your articles. I think when I negotiated, the other side wiped the floor with me because I didn’t get a lot of discounts but slowly learning how to negotiate. Knowing the other person’s position and BATNA can be a hard challenge though. The family must have been really well off, immediate offer of $60.. I spend that much for 2 weeks worth of groceries!
Well, to replace her phone at the time would cost $800 because she couldn’t get a subsidy. But the real value is probably all the information on the phone which is worth I would think at least another thousand dollars.
BATNA was a good reminder during my b-school days of what I learned at my first startup.
Perhaps it’s my engineer training, or how I was raised, but I take my personal word very seriously – never given lightly, and move heaven and earth to be true to it once given.
It was a rude surprise to be directly involved with customers, partners, and business arrangements at the startup, and see that in business, contracts are almost meaningless. Given the cost associated with any formal enforcement proceedings, it would have to be an egregious violation of a contract to make it worthwhile to pursue renumeration.
Key takeaway – even a signed contract is just a negotiation point, and can always be renegotiated. This is where the BATNA comes in.
When negotiating, nothing is set in stone, even contracts.
Everything is negotiable. It just comes down to the shifting of the power dynamics.
Everything is negotiable is right. This is why people need to think very carefully when they are leaving their jobs. A severance is very negotiable in exchange for a smooth transition and you being a good ex employee afterward. Yet so if you people believe they can negotiate there a layoff and severance so they just quit. What a shame.
Hm…getting the other person to give the first offer seems like the key. If you had said “$40” right off the bat, you’d have lost $20. I guess this is why on that “Pawn Stars” show, they always ask the seller how much they want. It puts you in a position of strength.
I’m curious, what do you mean by this “$100 an hour is not bad given I was only making about $30/hour net after fees.”? Are there so many fees from Uber that you only get 30% of the fare? From reading your “https://www.financialsamurai.com/whats-it-like-driving-for-uber-mixed-emotions-of-hope-and-sadness/) Uber article, it seems like the fees are more like 25-30%, not 70%?
Oh and I just thought of something else. You mentioned you have to pay taxes on the Uber earnings, but as a Uber driver, are you not a independent consultant? Can you not shelter your earnings in an LLC or C-corp, write off expenses, and pay less tax?
Yes. All fees associated to driving gets deducted e.g. gas, insurance, maintenance, meters, maybe even tickets. You can deduct mileage or actual expenses when driving.
Check out: Your Beater Car Can Make You A Lot Of Money In Reimbursements!
I’m an independent contractor with Uber, and independent contractor with other corporate clients depending on how I want to get paid, and have also set up an LLC for the online business.
Sure. I lost one hour of my time going downtown to drop of the phone. In return, she paid $60 in cash, and another $10 to take them to another destination. I was able to pick up one ride somewhat along the way east towards downtown. I met them right after their show was over since I had a 3 hour heads up. Then I gave a ride back towards where I live for a total net of about $100.
There are no fees paid to Uber (25%) for the $70 in cash they gave me. Only the ~$45 I earned there and back.
If I was just driving around, which I no longer do, I’d earn about $30 for that hour net of fees. The destination feature really is great as it almost always works. Why not pick up someone along the way to make extra money? That is the hustle mentality.
Years ago, wife lost phone in a sketchy part of town. Think she dropped it while leaving car. 30 minutes later we called it. The person demanded money for its return.
“We don’t negotiate with terrorists.” Called up phone company and shut it down immediately. This was in the days before the expensive iPhone etc of course. It made the decision that much easier.
I can see that happening a lot in the past. I picked up the phone, told her my address and telephone number and told her I’d keep it safe for her until she came to pick it up at no charge of course.
She didn’t want to come and spend an hour to pick it up so she made an offer that she thought was fair. I didn’t negotiate. It was enough to compensate me while I was in my Uber driving mode.
Yeah, your situation was different. In our case some guy picked the phone up and was holding it for randsom
I’ve always been considered a shrewd negotiator by friends and family. I was raised, and pushed, by my uncle to discuss politics and business before dinner and defend my thoughts whenever feasible. When I decided at 15 to stop going to church, he made me write a paper on why. I’ve got many years of standing my ground and presenting my argument.
There are many theories though on negotiation; Minimax and mixed strategies come to mind most immediately. However, game theory has tons of examples to read about in the dynamic games section. Ultimately, negotiations come from information. That’s it. The more information you have, the better you can leverage your opponent into a “loss” (even if they still perceive a win). In your case, you took a BATNA approach, but arguably your opponent took a minimax strategy and thus overpaid (overpaid by your standards of $40). If you want to learn more about the art of words when it comes to negotiation, rather than the theory, check out “How to Argue and Win Everytime” by Gerry Spence. I highly recommend it.
Strategy and gamesmanship will usually pay off though, so just go for it. I once landed a profitable client contract at a networking event full of lawyers. There was one “target” that I wanted to definitely connect with that night and he kept blowing me off. All night I would join his groups, try to catch him one on one, anything I could do to get a small conversation with him. I don’t think he was intentionally avoiding me, it was just some bad luck coupled with an incredibly crowded venue. However, I noticed his wife standing by the food, alone, and decided I would talk and flirt with her. After talking with her for a few minutes, I started my condensed pitch and sure enough she replies with “You just HAVE to meet my husband!” And so I did. A personal, one on one, introduction from his wife with a glowing review. She walked off to get a cocktail, he looked at me and said “you clever bastard, I know what you did” and we kept on talking. I landed my contract which was about $2,000 for a month of work (no small sum for a sophomore in college) and I’ve kept him as both a business and personal friends for many years since.
I’ll have to look into the minimax strategy. Can’t say that I have heard of that one.
What do you do though, if you charge way more for your time than one someone can afford? The answer must probably be to just come pick up the phone themselves.
Although I probably would’ve gone down for $40 figuring I could hopefully get a fare back, I charge $500-$600 an hour, depending on the package,working with clients one on one on a regular basis. I wouldn’t ask them to pay my hourly rate for delivering a phone, but I would expect them to at least compensate me for the wear and tear of my car and the opportunity cost of not catching a fare downtown bc I wanted to help.
Minimax is basically choosing the strategy (to use jargon) that minimizes your maximum loss. It’s essentially just an expected value evaluation.
And by overpaid, I meant you would have taken $40, but got $70. Thus, you received a consumer surplus of $30, and she overpaid by the same. She still considered it a successful transaction, so everyone walked away happy; however, it just goes to show the importance of information in transactions. Don’t misunderstand me though, I do think you should have been compensated for your extra effort; especially knowing that there was already an arrangement for her to stop by on her own time at no fee from you.
I just started in the game, and only offer minimal cash flow analysis so I charge around $35 an hour. I also only do services for friends and family at this point. This income isn’t what I consider “total income” so I usually just add it to my entertainment budget for the month.
I have become a much better negotiator because I have clients at my LLC now. My website lets people know that the fee is negotiable, but does not provide the range. I know what my average is, and what the rest of my industry charges. Once a person is in my office, I have to decide if they are worth my time. ( I have a full time job on top of my LLC) Some people are too annoying to want to work for. I tell them 25% higher than what I charge on average. If I never hear from them again, I am perfectly happy. There’s always someone who thinks if they trail off while recounting a sob story, then I will change my price because ladies must care about their hard life. I look like I’m listening and interrupt when they’ve gone on long enough to tell them that they are welcome to contact other folks in my industry and I walk them out.
Only the truly awful folks have balked. Most people come back when they have the money and want my fair price.
Being able to say no is such a blessing.
I agree. The power of “no” is incredible. But it’s very hard to say no. If I were to be more rational, there’s no way I should’ve going all the way downtown for a lousy $60. But I did feel bad, and it was nice to make the connection during the car ride.
What is it that you do again?
How do you feel about people who expect you to do things for free or who take advantage of your time? I get inundated with email request to help out on XYZ, but sometimes it is just too much to help everybody so I put an out of office responder with some resources to help the most commonly asked questions.
How do I get into this business? (I’m nowhere near you, so no competition.)
That’s a great story. Would you have taken $200?
$60 + Do Gooder Happiness > $200 – Greedy Smuck
Supply curve 0 at $20, 1 at $40, 1 at $60, 0 at $200?
:)
Probably not, unless she or her mother insisted. But the reality is, I do believe my time is worth more than $200 an hour especially if the hour is spent fighting through traffic.
I think if they offered me $200, I would’ve made an argument for them to just take it over to my house and back and save themselves $150-$140.
Hi Sam,
I have been a follower of your site for a little over 6 months and have thoroughly enjoyed reading your articles! Also, a fellow tennis player.
Your lost and found story really resonated with me through a recent experience coming back from vacation.
Long story short – I carry two cell phones on me. One for work and the other personal. On the return flight home back to Houston at IAH, I put both the cell phones on airplane mode after takeoff and place them in a side of my wife’s purse (big enough to be a bag :). We did the normal in-flight stuff, watch a movie, take a nap, look at vacation pictures on the ipad etc. The plane lands around 7:00 PM, we gather our stuff up, exit the plane and then start working our way towards baggage claim.
We pass through the security exit around 7:15 and I remember that I need to turn my phones off airplane mode. My wife opens up her purse/bag and my work phone is there, but not my personal phone. We double check the bag – no luck – but the side zipper was slightly undone and it looks like my personal phone fell out when we grabbed the ipad to look at picture on the plane. So, I turn around and explain to the security officer what happened and showed him our previous boarding passes. He can’t let us through for safety reasons, which I totally understand there, and tells us to go to the airline provider we came in on. It is around 7:20 and I am thinking no big deal, we flew United, so I go the counter, explain the situation. There are no travelers and it is really slow at the counter. The lady just says sorry go file a claim downstairs with baggage. My poker was likely terrible. I changed tactics and took a page from one of my all-time favorite books “How to Win Friends and Influence People” by Dale Carnegie said that we just got off the plane from vacation and the phone has a lot of important pictures from my wife and I’s wedding anniversary (which is absolutely true).
The United lady, said “o that is terrible, go back through security with your old boarding passes and they will let you through.” I asked, if they could please call the flight terminal with our seat information and have them check, while we run down there. She said they would do that. We rush down to security check-in, wait in line for 15 minutes, and the TSA agent wouldn’t let us through and stated that United has to issue a gate pass. I explained what United said and even suggested they could escort us – TSA said no go.
Back to the United counter we go, it is around 7:40 at this point. The same lady at the United counter has no idea was a gate pass is and hasn’t called the terminal where the plane came in. Being busy is one thing, but lying is something else. I politely ask to speak to someone else that might know about the hallowed gate pass.
Another United clerk, finally looks up our flight and says that it is the planes last stop for the day and tries to call down to the gate. He gets ahold of someone after about 10 mins, but doesn’t tell them where we were sitting, and just hears that nothing was found on the plane. OK – this is just not going well.
Getting close to 8:00 PM. Finally, the manager comes up and says that they are too busy to issue gate passes. I counted more clerks than travelers at the counter! I said if I can’t go back in, would someone please be able to run down there to check the plane where we sat, it is 5 minute walk. We can’t do that was the manager’s response. Again, my poker was more than likely terrible. I started to speak with the clerk that called down there for us and said we would pay him $40 just to check. The clerk was nice and said he should have thought of that earlier and said he would only take the money if he found it. I was about to say, please take the money…when the manager moved the clerk aside and asked me to leave and file a claim with baggage downstairs! The manager wouldn’t not budge, except for her eyeballs after all that death starring.
No happy ending to this story – unfortunately iphone down. Although, I don’t think I could have done much differently. I am not sure if this was a case of can’t or won’t on United’s front, but the situation was frustrating as we likely knew where the item was and couldn’t go verify. As an FYI – you have to file all lost carry on item(s) through United’s website – don’t go to the baggage claim.
Damn, I thought you were going to end with a HAPPY ending! So in the end, no iphone ever?
Losing the phone is the worst, especially for me who uses the phone 90% for business. I would pay hundreds and hundreds of dollars to get it back. And I would be thankful if a driver found it and kept it safe for me to go get it at his place or wherever he is. I wouldn’t expect him to deliver it to me 35-40 minutes away.
Instead of being entitled, I’d be THANKFUL. My responsibility. I’m not going to take money out of a driver’s pocket (telling him to turn off his app and not collect fares so he can meet me) without compensating him.
New iPhone on the way! The lost iPhone never showed up.
I am with you – responsibility and being thankful goes a long way.
And just like that, United has probably lost at least 80% of the people who took the time to read this comment as future customers. The power of the internet!
Buying a car is the classic BATNA moment. If you have a working car at home, you can always walk away without a problem. If the salesperson is trying to hit their quota for the month, they need to close and are under pressure! You should never forget that you have the upper hand unless you need a car ASAP in which case you can always pit one dealer against another.
Poor people are rarely in a favorable negotiating position – buying a car (esp low-end used) is a good example of this. Salesmen have little or no incentive to ‘sell’ to such a prospect.
I’m in software sales and my days are more or less a constant exercise in negotiation. I’m negotiating with customers on pricing and availability, I’m negotiating with colleagues on what promises can be made to customers, and I’m negotiating with management on quotas, expectations, and compensation.
I can say without a doubt that BATNA is an excellent way to structure negotiations. First, it forces you to look at the situation from the other person’s perspective. Once you understand what’s important to them you can structure any offer to target their most important requirements. Some of my best negotiations are when I’ve found out that the customer highly values something we can easily deliver or already have. I can then make a proposal that delivers a high value to the customers at a reasonable price to them and a low cost to us.
Another key requirement for a successful negotiation is being willing to just walk away instead of taking a bad deal. In Sam’s story above he was willing to accept no money to have the girl come and pick up the phone herself. If the girl had been unwilling to offer at least $40 to have Sam deliver the phone then Sam would have just told her to come pick up the phone. Since he didn’t NEED the deal he could afford to only pull the trigger on the deal if the price was right. The way you get into trouble in a negotiation is when you NEED the deal to happen and the person on the other side of the negotiation figures that out.
Hi Jeff, you are exactly right. Due to the fact that you are in sales, you have a much higher emotional quotient than other people who do not know how to negotiate or who think that I’m supposed to waste an hour of my time, gas, car usage, and risk getting in an accident or get a ticket to go all away downtown and back to drop off a phone instead of just keep it safe for her to pick up.
As soon as one takes the time to understand the other person’s point of view, a lot of good things start happening for both sides to come to a happy medium. Socially awkward people need to understand BATNA more than anyone else.
I didn’t know that you could put in a destination on Uber and make money that way. In Europe they use Blablacar for intercity travel and it’s absolutely wonderful. I’ve been wondering why we don’t have something like that in the states since our intracity travel with Uber is very good. I can’t wait until we could easily take a trip from Philly to Pittsburgh for $10. I feel like that’s in our future eventually.
The connection you and Hannah made about UC Berkeley also likely helped her trust you with her phone. Had you not been friendly and developed that connection during the drive I doubt she would have had that same trust and you wouldn’t have been able to make that extra $70. I think being able to connect with someone during/before any negotiation is also a big help.
I had my negotiations class literally 3 months ago and we were drilled with BATNA! It was definitely one of my favorite classes as we had to do all kind of negotiations such a union agreements and other stuff. If you can understand BATNA you can get some great deals. Need to be careful to not cross the line and listen to the other person for signals though as they can easily walk away. Have you ever written out your BATNA when negotiating a salary?
Negotiating is one of my favorite things. I’ll never understand why some folks are scared of it.
I subsidized three years of a very expensive hobby (competitive paintball) by buying/selling equipment for a profit. It was a lot of work hunting for bargains online, negotiating a price that worked for me, fixing up beat-up equipment to increase value and driving around locally to sell it on craigslist for more than I paid for it. However, being fresh out of school with stretched income, it was worthwhile.
Also had to get a new AC installed this month. The company I chose quoted $4,250 for the Lennox system we wanted with a 1 year warranty. We settled on $3,150 for that same Lennox unit with a 10 year warranty and both sides were happy. I leveraged every promotion they offered and even some they weren’t offering but I made it make sense for them. I also agreed to write outstanding reviews on every major site if they did a good job, I’ve already referred them new business and I will be a customer for life because they were awesome. They might not have made much money off of me but it will be a long-term win for both sides.
Never pay the first price unless you’re an expert and know you’re getting a bargain.
Paintball! I love it. Still have my Spyder with silencer that hasn’t been touched in 8 years. Such good exercise, incredible adrenaline rush, and fun team play. Loved playing capture the flag.
“Never pay the first price unless you’re an expert and know you’re getting a bargain.” – Yes sire. I grew up for 13 years in Asia. The asking price was always just that. It is in Asian culture to always bargain until you walk away at non department stores.
I guess when you’re used to bargaining for groceries, trinkets, t-shirts, etc at the markets, negotiating gets easier as an adult.
That was my first failure as a negotiator. Best deal possible on a used car for me the reviews are an awesome idea!! We try to get reviews from our commercial customers but it is work. Great trade!
BATNA’s a great way to frame negotiations. There’s a famous negotiations example that, since you mention Uber, warrants mention about how BATNA opens the door to creative negotiating strategy.
Two professors travel internationally for a conference and pick up a cab at the airport. At the pickup, the driver tells them it’ll be $50 for the ride; they agree. The cabbie then proceeds to drive them deep into the very worst part of town, where he eventually pulls into an abandoned lot. He says, “New negotiation: I’ll drive you to your hotel from here for $100. Or you can get out right now, and you’ll surely be robbed of all you own.”
One prof rolls up both back windows, locks the doors and kicks off his shoes, settling back into the seat, and says, “Cabbie, your income depends on fares. But we’ve got nothing to do the rest of the day. So here’s the newest negotiation: You drive us to the hotel right now for $25, or we’ll sit back here all day, making sure you don’t get another fare. Oh, and I’ve got horrendous gas from those peanuts on the plane.”
Yes, the profs won that negotiation. The point is: It’s not always just understanding yours/your counterparty’s best alternatives; sometimes you can alter the negotiations landscape in your favor.
Wow, BRILLIANT and hilarious! Thank you! Why didn’t I just tell this story in the post?
Negotiation skills MUST be learned if you don’t want to get your face ripped off in life. There’s always someone trying to scam you out of your money.
I have spent literally hundreds of hours in negotiation scenarios (a couple hundred visits to car dealerships, negotiating on dozens of properties including a couple in Oahu this week, etc) and I can always tell who is a poor negotiator.
Everybody study up!
I am not a skillful negotiator by any means, but I have used walk away power to my advantage several times, most recently when buying a car. While some people would argue that keeping emotions of out negotiations is the way to go, I have found that I can tip the scales in my favor by showing a little emotion (“Oh, this car reminds me a lot of my grandpa’s old car. I remember going for rides in the country together…”) and then pulling back big time a few moments later. This gets the sales person on the hook and convinced that they can land the sale with me. At this point, I’ve got them, as they’re not going to give up on a sure thing. I landed a certified 2013 Hyundai Sonata at a the non-certified price using this technique. Nothing fancy, but it worked.
Great story Sam! I remember BATNA from my MBA days too.
One thing I learned is that many people are terrible negotiators. They try to negotiate a transaction that’s only a win for themselves, and not for the other party.
I think finding that ‘win’ for both parties is the key to ‘winning’ a negotiation. When you’re a good negotiator, everybody ‘wins’!
Nice illustration of understanding BATNA with someone’s lost phone. Completely agree that the person who cares the least “usually always” wins. I’ve seen that countless times where two parties are trying to get the best deal and one party just really doesn’t care if the deal goes through. They always walk away with the keys to the castle.
“For me, $60 was just the right amount to get off the couch after dinner and not feel bad for accepting her payment.”
I’m disappointed at your mindset in this article and I think that your actions of charging money to return the phone was in poor taste. I guess the reality is that we live in a world where people feel that they must be compensated to get off the couch to do something considerate. I recall my college days when money extremely in short supply and all of the sacrifices required to make ends meet. I understand it’s an expensive phone but perhaps it was a gift or purchased on payments. I’m not suggesting that you give all of your net worth away to charity or save everyone on the planet. An act of kindness without being motivated by profit or putting a value on your time is a worthy pursuit in my humble opinion. Especially in light of your current financial situation.
A thought experiment:
If the situation was reversed and a student had been driving you in an Uber. During that ride you mention in conversation you were a millionaire.
How would you react to:
1) The student extorted $1000 for the return of your business phone containing critical business contacts. Would you be angry? You are worth so much what’s $1000? Would you expect to be taken advantage of since you mentioned your financial situation?
2) The student drove back and returned your phone for free? Do you feel her time is worth less than yours due to the income gap between both of you?
“For $60, Hannah got a deal. It would have been much more costly for her if I was a scumbag.” I would love to know what your yearly income number would be in order to feel that it wasn’t necessary to charge a college student money.
Insightful article on your mentality. Keep them coming!
Come off of it, man. He extended an offer of increased convenience for a fee. The original offer of no fee for decreased convenience was still on the table. The college student had a choice, which she made and did not seem to have any hard feelings. In fact, she appreciated the deal so much that an extra $10 was thrown in at her discretion. There was no extortion here and I think offering multiple solutions to a problem the student created WAS being considerate.
Your high horse looks tired, you should give him a rest and a drink.
Michael,
I was actually hoping someone would basically call me selfish for accepting their offer of $60 to go all the way back downtown during rush hour to give her back the phone instead of having her come and get it. So thank you! Some key points:
1) Life is about choices. After 4 hours of tennis and 1 hour of driving, I was tired and hungry. I contacted her immediately to let her know her phone was safe and sound. I would much rather have her just swing by and pick it up. She chose instant gratification instead of waiting. But she, her mother, and her sister were ecstatic when I came. They felt like they won. And I felt like I had helped out. I could have simply declined her offer and told her to come by instead. $60 is 1/10th my hourly personal consulting rate.
2) We live in a world where a lot of people expect everything for free thanks to the internet. For example, after publishing 3 posts a week for over 7 years now, I still have people who constantly consume my articles who think I’m selfish or stupid or whatever, yet who are unwilling to pay me anything for what I write. No wonder why there is a large portion of the population who find it difficult to make any money.
3) It is tough work driving for Uber for an extended period of time. But I did so regularly (500 rides) because I made a commitment, wanted to learn the ins and outs, and talk to all sorts of people to share some lessons and stories here. It’s also dangerous to drive when tired.
Yet there is an expectation that the rider class is some way BETTER than the driver class. Riders seldom ever tip, drivers are expected to wait for their passengers instead of the passengers being curbside, and some passengers even expect drivers to drive an hour back and forth through rush hour traffic to deliver a phone that was left behind due to the fault of the passenger, without compensation.
One of my biggest hopes after driving and riding is for customers to provide more COMPASSION to service people like drivers and waiters who don’t make a lot.
See: When Uber Drivers Make More Than Their Uber Corporate Employees
4) No matter how much you give to charity, how much you pay in taxes, and all the time you spend helping people for free, you will always be judged. This is why being Stealth is so important. You will always be judged because everybody has a different opinion. Therefore, if you don’t want to be judged, keep your thoughts to yourself.
Michael, may I ask what you do for a living, how old are you, and whether you do any gig economy work. Also, would you be willing to donate some of your time and money to Financial Samurai as a regular reader? I’ll use your time or money to write more posts to help other people. If you don’t want to give money, perhaps a guest post on your philosophies on this subject?
By providing as much background as possible about yourself, it’ll help make the context more balanced.
Thanks!
Sam
Suggested reading: Spoiled Or Clueless? Try Working A Minimum Wage Job As An Adult
You make a good point about everybody wanting everything for free now days and not respecting other people’s time. I think you make a great argument for finding a middle ground so that both parties feel like it’s a win. Why take advantage of someone else’s time? Instead, think about an agreement where both parties are happy in the world just becomes a nicer place.
I hope Michael can respond, because I am very curious to hear his background. It’s always interesting to see how other people think based on where they’re coming from. It would be great if Michael would donate some of his time and money to you as well is really a regular reader. otherwise, why judge?
I wondered if you would think differently if you position yourself as only being able to make money by driving and living paycheck to paycheck.
Wow my comment has stirred quite the discourse!
You are welcome to use my comment for your next post but I doubt you need my permission. Just brain storming, it would be interesting to interview that girl and ask her the questions I posed to you. I think that would make a good article. As an aside, I’m not sure why you listed four rationalized and somewhat defensive points in your response yet didn’t address of my questions. Maybe you can include those answers in your followup article? I’m just curious.
Thank you for the gracious offer to contribute to your readership. However, the internet is already full of so much advice. I hardly think that one more perspective, among a sea of them, could possibly help. I’m not even sure how one quantifies help derived from a blog post. Besides, I think it would be hubris to assume my writing would provide help to anyone. I feel “potentially entertaining” would be a better description.
Regardless by replying to your blog post I’ve donated my time which has even spawned another article for which you will derive income. I applaud your willingness to share your experiences and advice but, like all free advice on the net, I take it for what it is. I do enjoy reading your website from time to time as I find it very entertaining.
Thank you Sam
Darn! I thought I was able to provide a convincing argument for why you could donate your time and wisdom to help write a guest post about your perspective. I’m always interested in reading about other peoples perspectives and backgrounds.
If you are unwilling to donate time or money, can you at least share with us something about yourself? We don’t want to assume who you are.
I know there may be some people reading who might think you are a millennial or a retiree on a fixed income. Who knows. But if you can provide your background it will help understand where you’re coming from. Thanks!
I doubt Michael will ever share his background. He’s probably one of those “holier than you” folks who tells people what to do, yet doesn’t do anything himself.
Like the guy who says other people should pay more taxes while he doesn’t pay much himself.
People like Michael blame the world for their problems and end up miserable. They are too weak to make a change they want others to perform in this world.
I too was initially appalled that Sam returned her phone for $60 (I’m thinking my currency) especially since she is a student (sad memories of crushing poverty come to mind).
But you’re overlooking an important fact: Sam in this situation is an Uber driver. I think it’s only fair for Sam as an Uber driver, to be compensated for his time, fuel (cars don’t run on magic in rush hour!), etc. for an out of the way roundtrip.
She offered $60 to have it delivered to her instead of picking it up for free which is what I would’ve done. But then nobody wants my phone :D
They weren’t upset and relieved enough to ask Sam to drive them somewhere else for an additional $10 more, further rewarding Sam the driver.
This workeds out to be a profitable business deal for Sam the Uber driver, not Sam the stealthy blogger.
I’m a terrible negotiator and this is valuable information.
Ah, but it wouldn’t have been free for you to pick up your lost phone at my house. It would cost about $20-28 to take an Uber to my house from Fisherman’s Wharf, another $20-$28 to take the Uber back and more importantly, it would cost them an hour of lost time. You forgot to calculate your BATNA!
For someone to expect an Uber driver to give up a fare to go downtown and spend an hour of his/her time w/out compensation shows a lack of thoughtfulness. This person probably has never driven before or worked a lower wage service job for an extended period of time, at all. There is this strange level of entitlement nowadays due to the internet, technology, easy credit and the desire for instant gratification.
The flip side is that because there is so much entitlement, it’s actually much EASIER nowadays to get ahead if you put in the work and not expect things to be just handed to you.
I would have much rather have just relaxed at my house. Another passenger left their phone in my car before, and I told them to come by and they did. All good.
I think one of the lessons I’ve learned from Michael and you is that sometime later it is best not to do anything and just have people solve their own problems. It’s much easier that way do you think?
I think you missed that I was agreeing with you getting paid for your troubles as an Uber driver. I was also trying to make Michael understand the situation and divorce “Sam the successful blogger” from “Sam the driver” in his mind.
I should clarify why I was initially appalled; the post started off like a Good Samaritan story – lost item to be returned by kind stranger, the write up then read like you were ransoming her phone rather than negotiating taxi fees and later turned into a financial lesson on BATNA.
I had to reread the blog and the comments a couple of times to get that Sam the blogger was discussing how Sam the driver successfully negotiated his fees. Not understanding the blog title (BATNA) didn’t help either (but then it doesn’t take a lot to confuse me).
I probably would’ve left my phone at your place until I was in the area and could pick it up (almost free unless you planned on charging me for storage ;) ).
IMHO, first option is to always let people solve their own problems (especially family) else they become dependent, unable to think or act on their own. However, if they ask for help (not too much) then you can help.
Just because people (like me) disagree with your opinion and your messaging doesn’t mean it should preclude you from sharing it. Or your background. It is your right NOT to share… but if one comments, it reasons to stand that one should then be willing to defend, expound and share in the same way the author has. Unless one is a keyboard warrior.
Keyboard warrior is a funny term! I don’t mind people disagreeing if they provide an eloquent argument. I just wish more people who disagree would provide some background so I can understand where they’re coming from. I have read tens of thousands of comments over the years , And the consistent variable I have noticed is that comments are reflection of one’s self. Therefore, knowing something about the background of the person is very helpful.
Thanks for sharing your thoughts!
I love the blog! As an uber/lyft driver part-time you are right some riders are inconsiderate of your time.
Forget to drink your coffee this morning Michael? I think you’re overreacting and clearly don’t understand the amount of time and inconvenience the passenger caused Sam because she was careless and forgot her phone. Come to SF and try to drive across town during evening traffic when you’re super tired and then re-state your answer. If she was just a couple blocks away that would be one thing, but she wasn’t in close proximity at all. The fact that she was a student has nothing to do with it. She could afford to take Uber, she was careless enough not to make sure she didn’t forget anything and she and/or her parents were also willing to pay to take more of Sam’s time to get the phone back directly.
If you re-read the post you’ll notice that Sam didn’t propose $60, the passenger did! Plus she also had the choice to go pick it up herself so she made her own decision and was happy to pay the $60. In addition, his offer to drop the phone off saves Hannah a ton of time and inconvenience because the standard lost and found procedure for Uber would have taken much longer and her phone easily could have been misplaced by Uber’s staff and lost for good. I’ve been to their driving center in SF and it’s a mad house there.
Hi Michael,
Following up on your hypothetical:
“How would you react to:
1) The student extorted $1000 for the return of your business phone containing critical business contacts. Would you be angry? You are worth so much what’s $1000? Would you expect to be taken advantage of since you mentioned your financial situation?”
The demand of the full cost of the phone in exchange for its return is a hilarious way to get arrested by a bemused officer for a felony offense, even in a post Proposition 47 California! As Sam is not a fan of being taken advantage of, I have a feeling that’s how the “extortion” would end. Just because someone may be worth a lot or a little doesn’t make right wrong.
The person that lost the phone is responsible for the recovery of the property. Whether paying for the convenience of having it delivered or incurring the cost themselves by traveling to the phone, the onus is on the owner.
“2) The student drove back and returned your phone for free? Do you feel her time is worth less than yours due to the income gap between both of you?”
That’s nice of them. As should be expected when people do “nice” or “charitable” things, there isn’t a requirement for payment. Again, I don’t see the nexus to income gaps. Should the wealthy bleed money “Downton Abbey” style? Delightfully in America we don’t have a designated Nobility. You can be noble through your comportment wether materially wealthy or not.
Michael,
What’s wrong with just coming to pick up the phone herself since she lost it? If you live in SF and left your wallet in NYC, do you expect the person who found it to take a flight to SF on his dime to return it to you? And if he did volunteer to go, wouldn’t you at least pay for his flight to SF?
It’s always easy to judge others without being in their shoes. You give no value to the conversation but judging Sam. All you done it show that there is something wrong with you, and only you can help yourself.
A lot of people have a very difficult time in life because they don’t understand how to negotiate and create a win-win scenario for both parties. It seems like you are one of those people and should try to learn more than to judge others.
Do yourself a favor and ask yourself why do you judge other people. Once you dig deep and find the answer you will realize the problem within yourself to hopefully make a change.
Interesting story, Sam! And your knowledge of BATNA is probably very valuable for anyone working in the gig economy to understand. It kind of reminds me of last minute requests to be a runner for a concert. Finding someone on short notice may cost a promoter a premium, but it’s imperitive to make a concert run smoothly. A runner who otherwise had the night off can either lay around, drink beers and play video games for the night or negotiate a lucrative wage for the day. I’ll have to think of some ways I can apply this principle in my life more often! :)
Great post Sam! I consider myself a pretty decent negotiator. I get the other person to make the first offer and never accept the first offer as its better for both parties that way. Coming from a position of FU money is also very helpful.
Fisher & Ury’s book Getting to Yes was a book we used in my Decision Making coursework in my doctoral program. We used a lot of the strategies as we worked to negotiate contracts with the school district (I was on the teacher’s union executive board. Unfortunately my “people pleasing” personality makes this incredibly challenging in my personal and business life. I will follow along here and read what others share as I learn more about how to implement. I would likely have driven the phone to her at no charge and then had trouble taking any money offered. Not smart – but it’s been hard to change.
I recently put my phone through the wash, $60 sounds great to get your phone and all the data/pictures back.
I am in the middle of a salary increase process at work. My boss asked me what I am looking for, but specifically stated this was not a negotiation yet. She was getting my BANTA!
In my big corporate jobs, salaries have never really been negotiable. There is a formula that everyone gets plugged into and a number gets spit out. My manager and my manager’s manager (supposedly) have no power to change it. The eventual outcome is that everyone makes about the same amount.
The one thing I was able to negotiate was a signing bonus when I started my latest job. I also advised my brother to ask for a signing bonus and it worked for him too.
I tried asking for more vacation time, but just like salary, the corporate policy is apparently impossible to deviate from.
Thanks for the recap on Getting to Yes. My business mentor swears by that book and now I’ve bumped it up higher on my reading list.
In my own life, I’ve negotiated my salary three different times in the span of a 3.5 year career. I’ve seen people take the routine raise and not ask for more. I’ve also seen people ask for more to later be let go because they did not ask in the right way.
The end result is I’ve nearly doubled my starting salary within three years of starting my career.
I don’t consider myself a good negotiator, maybe an okay one. I feel MOST people don’t bother crafting their request in negotiations, so just by doing this, that puts me into the top 10% within my field (accounting). I did not use BATNA in the past, but I feel having done so may have launched me into the upper few %’s of negotiation.
My “tricks” have been to demonstrate my case using, 1) numbers/facts in nearly every sentence and 2) from a non $ perspective.
One short example was when I researched the range of pay of a newly promoted position. I saw I was near the upper-middle of the pay bracket, but I wanted the pay to be higher. I negotiated by stating I’m aware of colleagues who are being paid more than me (the facts) and I want my pay to reflect what is fair (non $ perspective). I went on to say, if HR believes I’m doing a fantastic job (they tell this to everyone as far as I can tell), then I felt obligated to bring this to their attention.
My strategy there was to ask for my pay to equal the upper echelon by rephrasing exactly what HR previously told me. That last part was also another fact following by demonstrating my non $ perspective.
HR responded with no. I responded by almost restating the exact same thing (this is where you need to stand your ground if you believe in the facts), to which they said, okay, we’ll get back to you. A week later they asked me what amount I was seeking. I gave them the # of the highest person I knew (to maintain that this was a fair amount), and they agreed.
From these negotiations, I’ll be making as much, if not more, in my 4th year as many make in their 6th year. Don’t sell yourself short.
Great job! There is always a JUDO MOVE to conduct during negotiations where you can turn their arguments around in YOUR favor.
Just be careful not to go back to the well too often in a short period of time. You don’t want to create a “hostage scenario,” which was another key point in my Negotiations class. Hostage scenarios create feelings of resentment from the other side. Next chance they get to snipe your head, they may!