Contrary to popular belief, 9 out of 10 times you will benefit greatly by making the first offer.
Donald Trump's "Art of the Deal" - What's his final grade?
By Leslie Mulligan
Donald Trump is certainly dominating headlines these days as he campaigns for President – he is all over TV news, social media and can’t help but pop up in our daily conversations with friends and family, regardless of your political leanings. But he has never been shy, as a long-time fixture on the NY real estate scene; he promotes himself as a skilled “deal-maker.” As a negotiating expert and trainer myself, I was compelled to read his first book, Trump: The Art of the Deal, to explore what negotiation concepts he relies on, and maybe to see what he misses. Regardless of his own “pomp and circumstance”, based on the ideas in his book, what grade would Trump get in Negotiation Fundamentals – Pass or Fail?
Let’s walk through the book a bit before we grade Mr. Trump. Overall, the book is a good read, shedding light on this provocative political candidate with deep dives into many of his real estate deals. He does frame a few negotiating fundamentals, but the narrative really serves as a showcase for Trump’s inimitable style. He liberally uses old-school negotiating tactics, which may work one time, for one deal, but do not necessarily play well in long-term business relationships. Does Donald Trump “play well with others?" His book highlights mostly his successes, as you would expect. But in this blog, I will dissect his view of Negotiating a bit, with lessons learned for all of us. In any case, the stage has now shifted, as he plunges into the political arena. In fact, Trump himself proclaimed in his presidential announcement last June: “We need a leader that wrote The Art of the Deal.”
Although originally published in 1987, I read Trump's book this year for the first time. In fact, with Trump’s recent political ascendancy, many people have been prompted to buy the book; The Art of the Deal’s sales have jumped, to the point where the book is hovering around the Top 100 books on Amazon – quite a coup for an almost 30–year old book (that sold millions when originally released). It is also the #3 Best Seller in Amazon’s Business Professionals Biographies.
Politics aside, here is my critique of Trump's first book and his thoughts on deal–making. How would Donald Trump do in a class on Best Negotiating Practices?
The original New York Times book review had an intriguing closing comment, perhaps prophetic for current Trump loyalists: “Mr. Trump makes one believe for a moment in the American dream again.’’ After an introductory chapter that chronicles a week-in-the-life of Mr. Trump, Chapter 2 tackles the substance (and style) of his deal-making prowess – The Elements of the Deal – opening with an autobiographical perspective:
"My style of deal–making is quite simple and straightforward," he writes. "I aim very high, and then I just keep pushing and pushing to get what I'm after. Sometimes I settle for less than I sought, but in most cases I still end up with what I want."
He then illustrates 11 key elements of “the deal”, which are articulately summarized in a recent Business Insider article. When I ponder a highly successful negotiation that yields win–win results, 6 of Trump’s eleven Key Elements resonate quite loudly with me (we will revisit the remaining five later in Part II of this blog).
1– THINK BIG
The first and perhaps most important Key Element is Trump’s call to action: Think Big! He urges “If you’re going to be thinking anyway, you might as well think big”. This is Negotiating 101 – and so is definitely worth exploring further. Any negotiation eventually produces some give and take; you rarely close at your very first offer. In fact, be forewarned – if you do close at your very first offer, you may have used persuasion, not negotiation, and later, the other side may have “remorse” about the deal.
But in a normal give and take, to maximize your results you start by opening big, as you will inevitably come down off of that first offer through the course of bargaining. What Trump misses is that if you start so aggressively that your opening is indefensible, you lose credibility and trust. So think big, but be sure that you can make a substantive, realistic case for your first offer – you want to be taken seriously on every offer that follows.
Trump tries to separate himself from lesser negotiators:
“Most people think small, because most people are afraid of success, afraid of making decisions, afraid of winning.”
I disagree. The negotiators I work with may be less skilled, fear conflict or lack confidence, but they do want success. So I challenge you to quell your anxiety, and most importantly, do not negotiate against yourself before you ever sit across the table from a negotiating partner – go ahead, stretch and think big.
2– PROTECT THE DOWNSIDE, AND THE UPSIDE WILL TAKE CARE OF ITSELF
Donald Trump is a realist, well, maybe more of a pragmatist, too. His 2nd Key Element is "Protect the Downside and the Upside Will Take Care of Itself." To me, this means that although he thinks big, he definitely considers his “bottom line”, so that he knows when to stop in any negotiation – self-protection, if you will. In negotiating parlance, we define a Negotiating Envelope (also known as the Zone of Possible Agreement) – two end points that establish your Most Desired Outcome (MDO) by thinking big, but also your Least Acceptable Alternative (LAA) that protects your downside, by contemplating the lowest you are willing to go. Savvy negotiators push themselves, stretching when they set their objectives initially, and then confidently open at the negotiation table, but only after privately setting a walk-away point. This focus on your plan will frame your success.
3– KNOW YOUR MARKET
I wholeheartedly support Mr. Trump for emphasizing Planning – preparation is critical in any negotiation – actually, the more prepared you are before you sit down at the table, the more confident you will be. And we know that Donald Trump does not lack for confidence. This idea is echoed in another of Trump’s Key Elements – "Know Your Market." He may mean this primarily in the real-estate/business sense, but any good negotiator knows that the more prepared you are, the more you increase your chances of success. Think through not only your Negotiating Envelope, but also the other side’s, consider what the other side is most likely to offer – and really want. The best negotiators spend much more time planning and preparing than they ever do in the actual negotiation. Never sit down with the other side until you have thoroughly vetted (or at least thought about) not only your own negotiating strategy, but your negotiating partner’s, too. Our refrain is, “A failure to plan is a plan for failure.”
4– MAXIMIZE YOUR OPTIONS
During the planning phase of negotiations, do not get fixated on only one approach – having back up options gives you leverage. Trump knows this, as he commands us to "Maximize Your Options:"
“I never get too attached to one deal or one approach.... I always come up with at least a half dozen approaches to making it (a deal) work, because anything can happen, even to the best–laid plans.”
Plan B and Plan C, alternatives to any deal you are negotiating, are what we call BATNAs in negotiating parlance. BATNA – the Best Alternative to a Negotiated Agreement – means you have leverage, and power, at the table. A BATNA is a well–conceived plan that you are willing and able to execute if no agreement can be reached. You want the other side to worry that you may walk away from the table and execute your own plan B – and you know Trump plays that card. Now Trump may bluff at times – sometimes it feels like he is bluffing when we watch him campaigning – but it is clear that he knows the value of BATNAs.
5– USE YOUR LEVERAGE
BATNAs clearly provide leverage, but they are not the only way to gain leverage at the negotiating table. What is leverage? Trump defines it well:
“Leverage is having something the other guy wants. Or better yet, needs. Or best of all, simply can’t do without”.
These are what we call Interests – you want to delve into the other side’s underlying interests, why they want what they want.
In his book, Trump describes a time when he was interested in buying a corporate jet – he really wanted a 727 but it cost $30 million at that time, so he had his brokers looking for a G-4, going for only $18 million. Serendipitously, Trump discovered that Diamond Shamrock, a Texas oil and gas company, was in serious financial difficulty, even while its executives had been enjoying the perks of a decked–out 727. Not surprisingly, new management now wanted to ditch the jet, as well as shake up the executive team.
Trump made a call, starting with some pleasantries, and expressed interest in Diamond Shamrock's jet. It was clear to him that the new CEO wanted to deal. Trump then low-balled an offer at $4 million, admitting to himself even that this was absurd. But knowing the other company was in desperate financial shape gave him leverage. Indeed, Diamond Shamrock countered at only $10M, as unloading its corporate jet was a primary Interest. Both sides agreed at $8M, a tremendous price for a refurbished jet with all sorts of fancy amenities – just Trump’s style.
In this case, Trump leveraged his knowledge of Diamond Shamrock’s financial troubles, and its need to both lose a costly asset and send a message to Wall Street around a new management team at the helm. In negotiation, we often think about what we need – but to really hit a home run, you need to spend more time thinking about what the other side needs, and why they need it. If you know what they need, and you can deliver it without a huge cost to you, then you have leverage – the upper hand!
The final Key Element in Trump’s book that I really value is "Have Fun!" His view is almost child-like: “The real excitement is playing the game,” and he maintains that he has a very good time making deals, especially all of the deals described in his book. This may sound like boasting, but still, I applaud this advice to have fun. People who have fun while engaging in otherwise stressful activities – think parenting, mountain climbing, negotiating – excel more than others.
Collaborating to reach a solution can be energizing, socially gratifying, and filled with surprises. If you approach the agreement with the spirit of cooperation and collaboration (rather than conflict), not only will you enjoy it more, but you will get a better result – for both sides! Many people shy away from negotiating because they view it as conflict; someone has to lose, right? Well, not necessarily; both sides can win. Interest–based, collaborative negotiations yield better results. Trump may lose sight of this from time to time, but that doesn't mean his advice to have fun won't help you become a better negotiator.
What didn’t I agree with in The Art of the Deal?
I believe that we can all become better negotiators – by learning, by practicing, by experience. Trump, on the other hand, believes only some lucky few have an inherent capability to dazzle at deal–making. He asserts, “More than anything else, I think deal–making is an ability you’re born with. It’s in the genes.” I respectfully beg to differ; we can all improve, by enhancing our current negotiation skill set, adding some better strategies, and reinforcing our confidence.
Donald Trump plays hardball a bit more than necessary, probably because he comes from an old–school perspective. Uber–competitive tactics do not foster long-term collaborative partnerships in business – but it is his style, that is obvious. There were also strategies and behaviors that Trump missed in his 11 Key Elements – skills that can be invaluable to a negotiator.
Finally, I give Trump a PASS in Negotiating Fundamentals, but I would say he is a low B student.
Come back for Part II, when I lay out essential concepts that Trump may miss (or misuse), which will transform you from a good negotiator to a great negotiator, regardless of your DNA. Become an A+ negotiator!