In the following post, D’Amore-McKim School of Business Associate Professor Edward Wertheim examines the unique and sometimes extreme negotiating style of President Donald Trump.
Most politicians make a great effort to present a public persona that highlights characteristics they feel are viewed positively in their culture. Other characteristics, some of which may be critical to being a successful politician, are hidden behind a “mask.” President Trump is not a traditional politician; he exhibits traits and behaviors most others would try to hide. While he seems to relish displaying his public persona, his actions (including his Twitter posts) present a window through the “mask” (assuming there is one in this case).
For instance, his negotiation style is easy to understand, because we have his ghost-written book, The Art of the Deal, and we have his many public actions. While most negotiations take place behind the scenes, Trump seems to prefer to do at least some of his negotiating in public, which is different from how most other politicians and business people act.
One of the obvious tactics we see is his penchant for extreme anchors. This tactic, not unusual for aggressive negotiators, is illustrated in The Art of the Deal, which states, “A new 727 sells for approximately $30 million. A G-4, which is one fourth the size, goes for about $18 million… I offered $5 million, which was obviously ridiculously low. They countered at $10 million, and at that point I knew I had a great deal, regardless of how the negotiation ended.” (p.365)
Other examples of his use of extreme anchors are apparent in his public statements during the campaign, including phrases like, “…total and complete shutdown of the entry of Muslims to the United States,” “…deport every single one of the country’s estimated 11 million illegal immigrants,” or “…consider shutting down the government in a fight to defund Planned Parenthood.”
Extreme anchors can be an effective negotiating tactic:
- They can intimidate an opponent and throw an opponent off “their game,” causing the opponent to make concessions that might not be made otherwise;
- If credible, they can give more room to maneuver; when compromises need to be made, it gives more room to “look reasonable” with a small concession that leaves most of the extreme anchor intact; and
- If the sides “split the difference,” the resulting “mid-point” may end up closer to your side as a result of the extreme anchor.
But there are risks:
- Some people (and countries) aren’t intimidated, and extreme anchors can cause reciprocal extreme counteroffers, anger, or “walking away;” the gains can be short term and negative consequences resulting from resentment may not be immediately apparent. If opponents feel they have been bullied into a “bad” deal, they may wait for the chance to get even;
- Extreme offers may limit the latitude of those who must follow and negotiate with the other party. Face saving may become a factor and negatively impact the negotiation;
- If the extreme anchor is a bluff or is perceived as a bluff, the counterpart may call the bluff, resulting in a standoff with its potential for escalation of the conflict. There are examples in history of the catastrophic consequences of bluffing anchors intended to intimidate;
- The returns from this approach tend to diminish over time, particularly as the approach becomes known to negotiating partners who over time will tend to ignore the anchor; and
- This approach to negotiations is not recommended for healthy long-term relationships.
Overall, does this work for Donald Trump? It is debatable, but Trump feels it works and cites his wealth and successful projects as evidence. Do the same skills that are applied to a real estate board, city council, union, or contractor work when applied to Iran, Mexico, China, Russia, or a spouse for that matter? For better or worse, we will find out. The fallout from a miscalculation with a contractor is one thing; the fallout from a miscalculation with China or Iran is another.