More is Better than Less
A cynical approach to negotiating is to always ask for more. After all (and this was actually said to me verbatim once), more is better than less and you don’t get 100% of the things you don’t ask for. Further, if you can do this from a position of strength, when it comes to isolated negotiations, you are going to win more than you lose.
What this strategy ignores, however, is that the more often one employs it, the more likely the world becomes to not want to negotiate with you. And since life is in some sense a never-ending series of negotiations, having the world not want to negotiate with you means cutting off the chance at open-endedness, which is an expensive prospect given that the theoretical value of open-endedness is infinite. In other words, being an aggressive and self-interested negotiator doesn’t mean you will lose negotiations, but rather that over time you will have fewer chances to negotiate.
One thing that I’ve observed to be true is that most of us overvalue near-term certainty and undervalue long-term optionality. Consider, for example, the hypothetical case of a key vendor that leverages its in-stock position on raw materials important to a small business during a supply chain disruption caused by a global pandemic to significantly increase the price of that material to that small business. While the vendor is likely to get what it's asking for, it will come at the cost of the small business reducing its reliance on that vendor and willingness to build capabilities around said partnership. And so we should all do the math in thinking about that trade-off and decide if we as people and organizations want a bigger piece of a smaller pie or its opposite.
None of this is to say that people or partners shouldn’t be compensated fairly, but rather to observe that if you present value any growing stream of cash flows, the majority of the total value is typically concentrated in the terminal value, i.e., the value that is created beyond the forecast period. Think about that for a moment: We have no visibility into how or why most value will be created.
Now, I’ll admit that’s maybe overstating the practical implication of an abstract mathematical formula, but when it comes to thinking about how to approach negotiation, I don’t think it’s too far off. After all, more truly is better than less, and the variable that matters most to generating more is not performance during any single unit of measurement, but the duration of your measurement period.
Said differently, if your goal is to negotiate for the most, then figure out what will get you more time and opportunity beyond the forecast period. And if you think about it that way, rarely will the answer be more dollars now.
-Tim