This will be
ignored as usual by those who can’t grasp the message. That, in and of itself, is truly tragic. What
Professor Honig describes below mirrors the change we as a Teacher’s Union made
with
the collaboration of the school district from “confrontational” (same
as distributive) to “collaborative” (essentially integrative) bargaining. The
instant we did so, things changed immeasurably for the better for all parties
involved. This article resonates with me because personal experience confirms the principles involved.
This is simply best, most cogent and elegantly simple
explanation into the inexplicably destructive negotiating processes of the President,
by Prof. David Honig of Indiana University. His analysis is not based on
partisan issues, but on the issues relevant to his skill in an area where the President
has left smoldering relationships with the rest of the world at almost every
turn.
“I’m going to
get a little wonky and write about Donald Trump and negotiations. For those who
don't know, I'm an adjunct professor at Indiana University - Robert H. McKinney
School of Law and I teach negotiations. Okay, here goes.
Donald Trump,
as most of us know, is the credited author of "The Art of the Deal,"
a book that was actually ghost written by a man named Tony Schwartz, who was
given access to Trump and wrote based upon his observations. If you've read The
Art of the Deal, or if you've followed Trump lately, you'll know, even if you
didn't know the label, that he sees all deal making as what we call
"distributive bargaining."
Distributive bargaining always has a winner and a loser. It happens
when there is a fixed quantity of something and two sides are fighting over how
it gets distributed. Think of it as a pie and you're fighting over who gets how
many pieces. In Trump's world, the bargaining was for a building, or for
construction work, or subcontractors. He perceives a successful bargain as one
in which there is a winner and a loser, so if he pays less than the seller
wants, he wins. The more he saves the more he wins.
The other type
of bargaining is called integrative bargaining. In integrative bargaining the
two sides don't have a complete conflict of interest, and it is possible to
reach mutually beneficial agreements. Think of it, not a single pie to be
divided by two hungry people, but as a baker and a caterer negotiating over how
many pies will be baked at what prices, and the nature of their ongoing
relationship after this one gig is over.
The problem
with Trump is that he sees only distributive bargaining in an international
world that requires integrative bargaining. He can raise tariffs, but so can
other countries. He can't demand they not respond. There is no defined end to
the negotiation and there is no simple winner and loser. There are always more
pies to be baked. Further, negotiations aren't binary. China's choices aren't
(a) buy soybeans from US farmers, or (b) don't buy soybeans. They can also (c)
buy soybeans from Russia, or Argentina, or Brazil, or Canada, etc. That
completely strips the distributive bargainer of his power to win or lose, to
control the negotiation.
One of the risks of distributive bargaining is bad will. In
a one-time distributive bargain, e.g. negotiating with the cabinet maker in
your casino about whether you're going to pay his whole bill or demand a
discount, you don't have to worry about your ongoing credibility or the next
deal. If you do that to the cabinet maker, you can bet he won't agree to do the
cabinets in your next casino, and you're going to have to find another cabinet
maker. (Ed: note Trump has burned bridges with caterers and unions which simply
won’t work for him any more in exactly the manner described by Professor Honig.
In one case he completely stiffed a caterer, not because they did a poor job, rather
he refused to pay because, “You get so much favorable status by working for me
that you should do it for free” (yes, really!)
There isn't another Canada. So, when you approach international
negotiation, in a world as complex as ours, with integrated economies and
multiple buyers and sellers, you simply must approach them through integrative
bargaining. If you attempt distributive bargaining, success is impossible. And
we see that already.
Trump has
raised tariffs on China. China responded, in addition to raising tariffs on US
goods, by dropping all its soybean orders from the US and buying them from
Russia. The effect is not only to cause tremendous harm to US farmers, but also
to increase Russian revenue, making Russia less susceptible to sanctions and
boycotts, increasing its economic and political power in the world, and
reducing ours. Trump saw steel and aluminum and thought it would be an easy
win, because
he saw only steel and aluminum. He
sees every negotiation as distributive. China saw it as integrative, and
integrated Russia and its soybean purchase orders into a far more complex
negotiation ecosystem.
Trump has the
same weakness politically. For every winner there must be a loser. And that's
just not how politics works, not over the long run. For people who study
negotiations, this is incredibly basic stuff, negotiations 101, definitions you
learn before you even start talking about styles and tactics. And here's
another huge problem for us.
Trump is
utterly convinced that his experience in a closely held real estate company has
prepared him to run a nation, and therefore he rejects the advice of people who
spent entire careers studying the nuances of international negotiations and
diplomacy. But the leaders on the other side of the table have not eschewed
expertise, they have embraced it. And that means they look at Trump and, given
his very limited tool chest and his blindly distributive understanding of
negotiation, they know exactly what he is going to do and exactly how to
respond to it.
From a
professional negotiation point of view, Trump isn't even bringing checkers to a
chess match. He's bringing a quarter that he insists of flipping for heads or
tails, while everybody else is studying the chess board to decide whether it’s
better to open with Najdorf or Grünfeld.”
— David
Honig
Because this relates to another recent op/ed discussion (of
mine with friends) in the specific area of tariffs, I’m enclosing that blog
link. Those who should read it know who they are, lol.
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