Venture Hacks

This is the first in an ongoing series called Books for Entrepreneurs. We’ll use these posts to recommend books that we’ve found useful as entrepreneurs (duh).

Our first book is Bargaining for Advantage by G. Richard Shell. Richard is a professor at Wharton and this is my favorite negotiation book period. It synthesizes the principled negotiation of Getting to Yes with the psychology of persuasion in Influence.

Jim Pitkow recommended this book while we were raising Songbird‘s Series A. Since then, I have referred to it again and again while writing posts for Venture Hacks and answering questions from entrepreneurs.

Make sure you don’t read this book if these questions are irrelevant to you: Should I be the first to open? Should I open optimistically or reasonably? What sort of concession strategy works best?

Here’s a small sample of what you’ll find in Bargaining for Advantage:

What is leverage?

Everybody talks about leverage in negotiations but very few people know what it means. My favorite chapter, “Leverage” defines it (emphasis added):

“A better way to understand leverage is to think about which side, at any given moment, has the most to lose from a failure to agree… the party with the most to lose has the least leverage; the party with the least to lose has the most leverage.

“Leverage often flows to the party that exerts the greatest control over and appears most comfortable with the present situation.

“To gain real leverage, you must eventually persuade the other party that he or she has something concrete to lose in the transaction if the deal falls through.

“Positive leverage: Every time the other party says “I want” in a negotiation, you should hear the pleasant sound of a weight dropping on your side of the leverages scales. [Positive leverage is the ability to provide things your opponent wants.]

“Negative leverage: Threat leverage [that] gets people’s attention because… potential losses loom larger in the human mind than do equivalent gains. But a word of warning is in order: Making even subtle threats is like dealing with explosives. [Negative leverage is the ability to hurt your opponent.]

“Normative leverage: [Normative leverage is the ability to apply general norms or your opponent’s standards and norms to advance your position.] You maximize your normative leverage when the standards, norms, and themes you assert are ones the other party views as legitimate and relevant to the resolution of your differences. Attack [your opponent’s] standard only as a last resort.

“This way of thinking about leverage also points to more sophisticated ways of enhancing your leverage that go beyond just improving your BATNA. Your goal is to alter the situation (or at least the other party’s perception of the situation) so you have less to lose, the other side has more to lose, or both.”

Bargaining for Advantage includes detailed examples that make the theory of leverage concrete.

Read the book to learn about opening, making concessions, closing, the rogue’s gallery of tactics, …

Related: The Monk and the Riddle, Inside Intuit.