Monday, August 23, 2010

Great Moments in Negotiations Part 2: The Hitchhiker’s Guide to Negotiations

Negotiations are inherently dramatic, which is one of the reasons that they often pop up in movies and TV shows. In a previous post, I took a look at a scene from The Dark Knight to see how knowing your BATNA can help you to negotiate like Batman. Today I’d like to examine a great negotiation scene from the beginning of Douglas Adams’ The Hitchhiker’s Guide to the Galaxy that sheds some light on pre-settlement settlements, the principal-agency problem, and the gap between positions and interests. If that sounds overwhelming, Don’t Panic—there are some good jokes, too. 

The Parties

Mr. Prosser: Mr. Prosser’s works for the local council. He wants to knock down Arthur Dent’s house with a bulldozer to make way for a new bypass.
Arthur Dent: Arthur has only just learned of the plan to knock down his house. He wants to prevent this from happening and, lacking any other form of recourse, has lain down in front of the bulldozer.
Ford Prefect: Arthur’s friend Ford has no personal stake in either building the bypass or saving Arthur’s house. He only wants to take his friend to the village pub. He is negotiating on behalf of his “client” Arthur.

The Negotiation

Mr. Prosser and Arthur Dent have been locked in a standstill all morning. Prosser has tried to convince Arthur to move and allow the demolition to continue by presenting his position through a series of what he considers to be logical arguments, but Arthur has refused to budge. Upon learning of the situation, Ford inserts himself into the negotiation. Ford’s discussion with Mr. Prosser begins with the following exchange:
“Has Mr. Dent come to his senses yet?”
“Can we for the moment,” called Ford, “assume that he hasn’t?”
“Well?” sighed Mr. Prosser.
“And can we also assume,” said Ford, “that he’s going to be staying here all day?
“So?”
“So all your men are going to be standing around all day doing nothing?”
“Could be, could be…”
Having clearly defined the standstill, Ford finds common ground between the two parties: Everybody can agree that nothing is going to change. Arthur won’t move and Prosser won’t retreat. As Ford puts it:
“Well, if you’re resigned to doing that anyway, you don’t actually need him to lie here all the time do you? …So if you would just take it as read that he’s actually here, then he and I could slip off down to the pub for half an hour. How does that sound?”
In short order, Ford proceeds to convince Mr. Prosser to take Arthur’s place in front of the bulldozer. In exchange for this, Ford offers to fill in for Mr. Prosser if he needs to take a break later.

What Went Right

Ford was able to negotiate a pre-settlement settlement (as coined by James J. Gillespie and Max H. Bazerman.) A pre-settlement settlement temporarily removes the pressure of having to come to a final agreement. For example, when a union and a company agree to extend the strike deadline so that good faith negotiations can continue, they are entering into a pre-settlement settlement.

A pre-settlement settlement often has the benefit of changing the tone of a negotiation since everybody needs to agree that they are progressing towards a negotiated agreement (even if the details still need to be worked out.)


What Went Wrong

Even if you aren’t familiar with any of the incarnations* of The Hitchhiker’s Guide to the Galaxy, you probably already figured out that Prosser knocked down Arthur Dent’s house a few minutes after Arthur and Ford went to the pub. Part of the problem was that a pre-settlement settlement depends on the good faith of all parties. Once the house was demolished, Prosser never needed to have any dealings with Arthur ever again, so preserving a trustworthy reputation was unimportant. There was nothing to keep Prosser in front of the bulldozer.

There was also another issue in play. Arthur had a principal-agency problem, which is what happens when somebody who is supposed to be acting on your behalf has a different set of interests than your own.** Ford (acting as Arthur's negotiator) knew perfectly well that Prosser was going to knock down Arthur's house... he just didn't care. The negotiation was essentially a show put on for the benefit of Arthur. Ford only cared about his own goal of getting Arthur to the pub as quickly as possible so they could both drink large quantities of beer.

Under all normal circumstances, you never want an agent who puts their self-interest above your interests. However, in this case, it actually worked out well for Arthur. What Arthur didn’t know was that it mattered “not at all” what happened to his house since the entire planet Earth was about to be vaporized out of existence. Furthermore, going to the pub with Ford allowed Arthur to become one of only two human beings to escape the destruction of the planet.

This entirely unrealistic and unlikely scenario does highlight a very real and common situation. There is often a gap between our stated positions (such as not wanting your house to be bulldozed) and our real underlying interests (such as needing a place to live.) As absurd as the scenario was, Ford served his client’s best interests by looking past the position Arthur was taking in the stalled negotiation with Prosser. Ideally, an agent and a principle will work together to identify the real interests before the negotiation starts.***

Further Reading: The Ultimate Hitchhiker’s Guide to the Galaxy, by Douglas Adams



* The Hitchhiker’s Guide to the Galaxy has many incarnations, including a radio show, a book, a television show, a video game, and a movie.
** Here's a more likely example of the principal-agency problem. Suppose you're suing somebody and your lawyer is working on commission. This theoretically gives your lawyer an incentive to get you the biggest settlement possible. The more you make, the more they make, right? Perhaps for a while, but after a certain point, your lawyer's profits may go down as they sink more time into your case. Your interest is in maximizing revenue, but your agent's interest is in maximizing profit. Your interests are not aligned.
*** For situations where there isn’t time for strategizing, everybody should at least know where their towel is.

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