As part of our brown bag lunch program, Farecast CEO Hugh Crean visited Redfin Friday for a talk on the Art of the Deal. Hugh was a corporate development bigshot at Priceline, and an equity analyst at the fierce DLJ investment bank before that. He talked about something I’ve never been good at, which is how to negotiate deals.
Here are a few of Hugh’s tips:
Know both sides of a deal: understand before being understood. Always enter a deal asking “what do you need?” You can learn everything you need to know simply by asking, which gives you the same advantage as a poker player who is last to bet. I once read an obituary of a legendary sports agent whose signature opening move was to never be first to open his mouth; squaring off with general managers who knew his game and wanted to beat him at it, the two sides would start off by staring at each other in silence for five minutes. Looking for this anecdote, I came across this beauty of a quote from Leigh Steinberg: “it’s fine not to be a totally finished person.” George Burns took Steinberg to his first baseball game.
Establish the boundaries of what is negotiable, and then don’t cross those boundaries; it just irritates people.
Both sides have to win. Hugh said, “always be direct and straight with people. You can’t trick people into taking a bad deal.” There is a particular kind of wheeler-dealer who sees business as a matter of being savvy rather than creating value, of finding new ways to screw people, but most deals depend on both sides getting what they need. Richard Parsons, the CEO of Time-Warner, is famous for this philosophy.
Keep it simple: hard deals, complicated deals never get done. If you get too fancy, people find ways not to do a deal. Time kills deals.
But for the most part, time is out of your control. Accept that you can’t make a deal happen on your own.
If things don’t work out, keep smiling and move on. Life is short, and no deal is easy.
Always know the decisionmaker. Be direct: “Are you the person who ultimately makes the decision? What is your process? What is the best way to work with you?” But also treat everyone as important, from the janitor to the CEO (Hugh worked the room so thoroughly before his presentation started that I started to worry he would recruit all of our employees away); if someone is in the room while a deal is being negotiated, she is there for a reason.
I can’t help but add one bit of advice I got from my old boss, John Kunze:
Be prepared: most people believe that their quick wits and dazzling personality will carry the day in a negotiation; this in part stems from the idea that a negotiation is the fun part of business, the part you see enacted in the movies. I can’t count the number of times I’ve been negotiating a now-or-never deal and wanted to hit the pause button, so I could look up an old contract (“what did we pay last time?”) or ask a stupid question (“how many shares were there outstanding again?”). What this means is that when the chips were down, I wasn’t prepared. Like anything else, a lot of deal-making is knowing the value of what you’re getting or giving, and thinking through what you’re prepared to exchange for it. Without preparation, executives can waltz into a deal two months in the making and give away the farm.
Aside from the advice, there were some good moments during Hugh’s talk:
My third-favorite moment was when Hugh began talking about how to tell when the opposing side is uncomfortable: legs are moving, hands are moving, neck veins become engorged, hair gets brushed away, people blink faster (in a panic, I tried to remember if I did any of these things while Hugh was opening things up with his Farecast pitch, which was so good that I found it THREATENING). Hugh’s catalog of human frailty reminded me of a blog posting on how to spot liars (for example: when you change the subject, a liar is relieved to move on). Hugh said that you can talk more slowly to calm a room, or more loudly to pick it up.
My second-favorite moment was when Hugh answered a question from Bridgette about how to handle a situation in which a negotiator was trying to bypass her to get a deal done. The plucky Bostonian stuck out his jaw and said “If anyone comes at you in this life, FIGHT.”
And my all-time favorite moment was when Hugh told a story about his younger brother, a boxer who fought against heavyweights half-again his size, in places like Maine, while the audience (older? fat? sometimes not even paying attention?) was served dinner (steak? probably not even with a vegetable). Hugh’s brother got mauled but, he told Hugh, “when the bell rang we were at 50 – 50.” I love that story.
It came to mind this morning while I was chewing over one last story, written by the great Michael Lewis for today’s New York Times on football coach Bill Parcells, who, after his divorce, keeps everything precious to him in a manila folder, including an anecdote written on yellowed paper about a fight fought three decades ago:
He didn’t see the Hart-Antuofermo fight in person but was told about it, years ago, by a friend and boxing trainer, Teddy Atlas. It stuck in his mind and now strikes him as relevant. Seated, at first, he begins to read aloud from the pages: how in this fight 29 years ago Hart was a well-known big puncher heavily favored against the unknown Vito Antuofermo, how Hart knocked Antuofermo all over the ring, how Antuofermo had no apparent physical gifts except “he bled well.” “But,” Parcells reads, “he had other attributes you couldn’t see.” Antuofermo absorbed the punishment dealt out by his natural superior, and he did it so well that Hart became discouraged. In the fifth round, Hart began to tire, not physically but mentally. Seizing on the moment, Antuofermo attacked and delivered a series of quick blows that knocked Hart down, ending the fight.
The Redskins video is still frozen on the screen behind Parcells. He is no longer sitting but is now on his feet. “This is the interesting part,” he says, then reads:
“When the fighters went back to their makeshift locker rooms, only a thin curtain was between them. Hart’s room was quiet, but on the other side he could hear Antuofermo’s cornermen talking about who would take the fighter to the hospital. Finally he heard Antuofermo say, ‘Every time he hit me with that left hook to the body, I was sure I was going to quit. After the second round, I thought if he hit me there again, I’d quit. I thought the same thing after the fourth round. Then he didn’t hit me no more.’
“At that moment, Hart began to weep. It was really soft at first. Then harder. He was crying because for the first time he understood that Antuofermo had felt the same way he had and worse. The only thing that separated the guy talking from the guy crying was what they had done. The coward and the hero feel the same emotions. They’re both human.”