Bargaining with the Devil

When to Negotiate, When to Fight

Robert Mnookin

• Publisher: Simon & Schuster
• Year: 2010
• ISBN:
  9781416583646
• Topic: Personal Development
• Subtopic: Negotiation

The art of negotiation—from one of the country's most eminent practitioners and the Chair of the Harvard Law School's Program on Negotiation. One of the country's most eminent practitioners of the art and science of negotiation offers practical advice for the most challenging conflicts—when you are facing an adversary you don't trust, who may harm you, or who you may even feel is evil. This lively, informative, emotionally compelling book identifies the tools one needs to make wise decisions about life's most challenging conflicts.

PART I

Understanding the Challenge

ONE

Avoiding Common Traps

The news about Bikuta is alarming. You have sacrificed the last five years of your life as CEO of ResearchCo., the start-up that you founded. The company is now profitable, but just barely. And you are in a terrible bind. You have licensed your design and know-how for the “FreeFlow,” an implantable arterial stent, to the Bikuta Corporation of Japan. The deal gives that company exclusive rights to manufacture and sell the FreeFlow everywhere in Asia—except China. In exchange, Bikuta was to pay you a license fee of 15 percent of sales. Now you’ve discovered that your so-called partner has essentially cloned your product, renamed it the “EasyFlow” (hardly even changing the name, you note with disgust), and started selling it in China. When you challenged Mr. Bikuta—the founder and CEO—he denied using your intellectual property in making the EasyFlow. You don’t believe it for a moment, and you’re worried about the future of your company. Bikuta Corporation is your most important joint venture partner. What should you do?

You call the Kramers, your sister and brother-in-law. Evelyn and Fred have a stake: they were the first investors in ResearchCo. and the sixty thousand dollars they put in, combined with your own savings, launched the company and kept it going while you developed a business plan and secured the first rounds of venture financing. Without their help, you’d still be an engineer at Johnson & Johnson. You trust them; they are energetic, loyal, and blunt. And they are a study in contrasts.

Your older sister Evelyn is warm, optimistic, and savvy about people. After college, she volunteered for the Peace Corps in Guatemala, later earned a Ph.D. in Spanish literature, and now chairs the Spanish department at San Jose State. She is comfortable in her own skin, and a calming presence. She practices yoga and meditates every day. Women find her looks attractive but nonthreatening, and men find her appealing. People are naturally drawn to Evelyn—perhaps because she tends to see the best in them.

Most people are drawn to Fred, too, but for different reasons. Adventurous and enthusiastic, Fred is a take-charge kind of guy who enjoys being a partisan and relishes competition. A former Marine, he charged through business school and rose through the ranks at Oracle, a large Silicon Valley software company, to become a vice president of sales. He is also a fitness fanatic. He runs daily, tracking his mileage and times as precisely as he tracks the software sales of his team. His passion is rugby—an English form of football, played without pads. Fifteen years ago he started the Silicon Valley Rugby League. Every Saturday morning during the season, with the drive of a Marine drill sergeant leading his men on a twenty-mile run through a swamp, Fred takes his Oracle team into battle, apparently oblivious to the fact that he is now about twenty years older than everyone else on the field. Evelyn thinks he’s crazy—he comes home stiff, sore, and bruised. In their marriage and in his life, he lives by the Corps’ code: Semper Fi. Their marriage works.

“Bikuta is ripping us off,” you tell Fred and Evelyn as they arrive at your office. “They’re using our technology to manufacture and sell stents in China. When I confronted Mr. Bikuta, he gave me a load of B.S. He claimed that our design wouldn’t work in the Chinese market and that they had developed their product independently, with their own R&D. But we got hold of one of their stents. It’s not identical to the FreeFlow, but our engineers confirmed that it’s based on our know-how. Did they think I wouldn’t find out? That I wouldn’t mind? What kind of sucker does Bikuta think I am?”

You stand up and begin pacing around the room. “Mr. Bikuta wouldn’t disclose their sales figures in China, and he flatly refused to discuss paying royalties on those sales. Then the bastard had the gall to invite me to come to Japan to negotiate a lower royalty rate on sales of FreeFlow in the rest of Asia! He actually threatened me, saying that if we don’t lower the licensing fee, they will simply sell their ‘own’ product worldwide!”

Fred’s response is immediate. “I hate to say I told you so,” he exclaims, “but this is exactly what I was afraid of. Once the Japanese have mastered your technology, they steal it or invent around it and toss you aside.”

“I know, I know,” you grimly acknowledge. “You warned me. I’m angry with myself.” You recall the hundreds of hours you spent courting this company. The long, saki-soaked dinners. The rounds of golf developing a relationship with Bikuta-san. For three years the joint venture seemed to work so well. Bikuta’s quality control and manufacturing efficiency are superb. Their distribution was fantastic. For eleven straight quarters, sales of the FreeFlow went up. Bikuta fully accounted for the sales and paid you your fee the day it was due. Maybe you got lulled into dropping your guard. In fact, during the past year you and Bikuta started discussions about expanding your agreement to include sales in China. Now it seems this was all part of the con.

“While he and I were cordially negotiating, he was already stabbing me in the back,” you say.

“Oh yeah, they do that—use negotiations as a cover for a sneak attack,” observes Fred, who fancies himself something of a history buff. “It’s the story of Pearl Harbor.”

“Fred, I can’t stand it when you talk like this,” Evelyn interrupts. “You sound like even more of a bigot than you actually are. People are people. Any businessman wants to make money for his company. Remember you, too, were impressed with Bikuta and liked him. Remember the weekend you hosted him to a round of golf at Pebble Beach? You told me afterward that, unlike some of your American golfing buddies, Bikuta was scrupulously honest about keeping his score—that he had actually counted every one of his strokes. You’re the one who always says, ‘Character is revealed on the golf course.’ ”

Fred ignores this rebuke. “I’ve done many deals with the Japanese. They don’t think the way we do. They nod and say ‘yes,’ and half the time it means no. And they can be bullies. The whole culture runs on status and hierarchy—those on top exploit those below.”¹ Fred turns to you. “You’ve got no choice. To negotiate now would be to reward bad behavior. Tell them that if they don’t stop selling in China, you’ll terminate the joint venture and sue their ass off.”

Fred doesn’t need to convince you; this is exactly what you want to do. You feel humiliated and you want revenge.

You say, “I doubt we will get far filing a lawsuit in China or Japan.”

“No, obviously the Chinese and Japanese courts are worthless,” says Fred. “Sue them here in California. Take your case to an American jury. Teach Bikuta a lesson.”

You frown and think to yourself: If only it were that easy.

Evelyn, showing increasing signs of exasperation, finally cannot contain herself. “What macho nonsense!” she exclaims. “Let’s not get carried away. Suing Bikuta will destroy what’s been a profitable relationship so far. It will make your lawyers rich and distract you from the business. Go to Japan. Sit down with Bikuta. See what he has to say. What do you have to lose? And besides, have you considered Bikuta’s perspective?”

You give Evelyn an incredulous look.

“Bikuta asked you to include China in the license agreement originally,” she reminds you. “And you refused. Because you wanted to preserve your options. And haven’t you been talking lately with some Chinese firm about making stents for the Chinese market? You know how seriously the Japanese take their business relationships. Maybe Bikuta heard about this and thought you were going to cut them out.”

“But that was our right! We can enter the Chinese market with anyone we want. We have no obligation to Bikuta,” you scoff.

“Don’t listen to Evelyn,” Fred interjects. “Bikuta was represented by international counsel. I’m sure his lawyer explained to him what the corporation’s obligations were. Evelyn is such a bleeding heart. Every time some seventeen-year-old assaults an old lady and grabs her purse, she talks about what a difficult home life the kid’s had.”

Evelyn ignores this comment. “Of course you have the legal right to find a new partner for the Chinese market,” she tells you. “I’m not saying that Bikuta isn’t at fault. I’m just saying, give Mr. Bikuta a chance to do the right thing. Maybe you can negotiate a lower fee but extend the contract to the Chinese sales.”

Fred explodes. “Evelyn, whose side are you on? There’s a principle at stake here. You cannot do business with people who intentionally violate their agreements. Once they’ve screwed you, you can’t just go back to business as usual. It sends the wrong message—not just to Bikuta, but to anyone else you might do business with. You might as well put a big sign on your head saying, ‘Please, exploit me and I’ll come back to the table! I’ll accept any kind of behavior, right or wrong!’ Is that how we want to be perceived? No! Besides, from a purely financial standpoint, Bikuta has no incentive to give us a dollar more than they absolutely have to. Every dollar they pay in royalties to us is a dollar less profit for them. And vice versa. That’s the reality.”

Evelyn rolls her eyes. “Fred loves to rant about the harsh ‘realities’ of business, but frankly I’m the one who’s being realistic. Bikuta’s a lot bigger than we are. They can afford the costs of litigation a lot more than we can. If we sue, they will probably stop selling our product entirely. If we negotiate—extend the joint venture to China—and if total sales go up, we could make more money even with a lower royalty rate.”

The dilemma described above is quite realistic. The question is: Should you negotiate with the enemy or not? Fred and Evelyn are both making some sense. Each offers a point of view that has emotional and intellectual appeal. But you also see flaws in both arguments, and you are pretty riled up yourself. You want to make a wise decision, not one based solely on emotion. How do you sort through these arguments? Where do you begin?

After helping to resolve many business and family disputes over the years, I have come to believe that for most of us, confronting an enemy poses exceptional negotiation challenges. When I say “enemy,” I do not mean just an ordinary competitor; I mean someone who has deeply wronged us and poses a serious threat to our well-being—someone we may even see as evil.

In the introduction, without elaboration, I proposed a definition: An act is evil when it involves the intentional infliction of grievous harm on another human being in circumstances where there is no adequate justification.² This definition has three essential elements. First, for an act to be evil, the perpetrator must intend to inflict harm. Carelessness is not enough. Second, the harm must be very serious. I use the word grievous to connote harms that are severe. Third, the infliction of harm must lack an adequate justification or excuse. Of course, the judgment about whether a justification is adequate may in some cases be reasonably debatable, and may depend on one’s moral perspective.

Does every person who commits an evil act by definition become an evil person? I think not. Instead, I w...