In this 10th episode, Jason Hartman starts the conversation analyzing the power of the brain. Later on the show, Jason brings on guest Lawrence Susskind, Ford Professor of Environmental & Urban Planning at MIT and Vice-Chair of the Program on Negotiation at Harvard Law School and author of Entrepreneurial Negotiation: Understanding and Managing The Relationships That Determine Your Entrepreneurial Success. The two talk about what urban development means in today’s age and ideas coming up that can help alleviate many of our cities’ difficulties. Jason and Lawrence also discuss the importance of negotiation and the mindset you should have when entering a negotiation.
When we found you and your podcast was like, Okay, this is what we should have done the first time. It’s like the properties make sense
the day you buy them.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:58
Welcome to Episode 1310 1310 and you know what that means it’s a 10th episode today. And that means we’re going to go off topic and discuss something other than directly related to personal finance, economics or real estate investing in the most historically proven asset class in the entire world. And, you know, a lot of times in the 10 shows before we get to our guest, I do talk a little shop with you, I talk a little business, talk about some real estate investing, but today, I’m really not gonna do that in the monologue portion. Today, we’re going to talk about what our brain is incredibly good at. We’ll get to our guest in a few minutes. But before we do that, there, I mean, our brain is good at many things. But there’s one thing it’s a really good app. I want you to just appreciate it for my I remember I was walking through a nightclub. And I said to one of our investment counselors who I happened to be with, who’s been on the show, I said, as we were walking through that nightclub, and there was so much going on absolute sensory overload, sound, lights, people, obstacles, I thought, it is absolutely incredible. The number of calculations our brains have to make, to just walk through an environment like that full of obstacles. Our reticular activating system is the part of our brain that filters things. And it is constantly filtering stuff. Right now. I know. You only want to be listening to me, right? Yes, you do. And there’s a lot going on out there. era that your senses can perceive. You can hear a lot of stuff in the background, you can see a lot of stuff in your field of vision and your peripheral vision. You know, you have tactile senses, you can smell things you can. I mean, there’s just all sorts of stuff going on. And you know, who says we don’t have more than five senses? I mean, certainly, we would have to admit that it the most basic thing if you don’t want to talk about telepathy or ESP or anything, whoo, we’d have to admit that equilibrium is a sense. So we at least have six.
Lawrence Susskind 3:38
No question about that.
Jason Hartman 3:40
I guess. Well, how do they categorize equilibrium? You know, your sense of balance? Do they categorize that under the kinesthetic sense? I don’t know. Maybe they do. Who knows? Who knows? So you’ve got all this stuff going on, in our brains are incredibly good at filtering out distractions. So We can focus I know you’re thinking, in today’s world, you can focus on anything and the attention spans have gone to hell in a handbasket. And you’re right. And my friend and author, who’s been on the show before Mitch Russo, he’ll be at profits in paradise this weekend, by the way, looking forward to seeing you Mitch. He talks a lot about strengthening the attention muscle, strengthening the attention muscle. And we must all try to do that, to increase our attention endurance. And I must admit, I’m not great at this by any means. You know, people use lots of techniques like the Pomodoro timer technique, which is basically and you can look in the app store for your smartphone, and there are lots of pomodoro timers, and this is something that’ll go for maybe 25 minutes. It’s just a timer. It’s no big deal. But you make a deal with yourself that for that 25 minutes, you’re just going to focus, focus, focus on one task. You’re going to get it done, you’re going to rock it out. Okay. So there are lots of techniques to strengthen the attention muscle as my friend Mitch talks about. And talk to him about it this weekend. If you are one of the brilliant and lucky people joining us this weekend at prophecy paradise, then asked Mitch about strengthen the attention muscle. It’s a really good, good thought. Good idea. Our brains are great at making a bazillion calculations to walk through a crowded place and obstacle course of people and sounds and sights and distractions. Our brains can just do that incredibly well. Hey, if you think your brain isn’t so amazing, I mean, it’s probably the most amazing thing in the universe, bar none. And check out the works of Michio Kaku, I’m not sure I’m pronouncing his name, right, but he’s just this brilliant. I don’t know what is he actually a physicist. Now he’s a scientist, but I think he’s actually a physicist. If I’m not mistaken, and he’s got some great books, and he talks about how the brain is the most amazing thing in the universe, you know, it just is it’s truly incredible. So a machine can’t walk through that nightclub in that example I gave you and not bump into people or get stuck. But a person can do it. Even a little kid can do it. You know, you don’t even have to have a very highly developed brain to do it. Anybody can do it, right. So that’s amazing. But there’s another thing our brain is really good at. It is awesome at avoiding this one big thing. And that one big thing is the recognition that we are all going to die. Yes, our mortality is something that the brain is incredibly good at avoiding. It doesn’t want to come to terms with this. And this is an article that I saw the other day by john Johnson in Loser. And I thought I’d just share a little bit of it with you because I thought it was interesting. Researchers say they’ve discovered a nifty little trick of the brain, it tries really hard to present the illusion that death is something that happens to the other guy, not you. It seems to be a defense mechanism. And this is according to researchers at an Israeli University. And essentially, we never get anything done. The researchers believe, if we were consumed by thoughts of our very certain demise, because so far one thing is for sure, every human on Earth has met their demise. Right? And, you know, it’s like, don’t take life so seriously, you’ll never get out alive, right? So maybe you can prolong it, maybe you can enjoy it more. You can have more length or more breath or maybe more of both and more power to you for that, but at least so far Knock on wood.
Jason Hartman 8:03
Watch the dogs gonna freak out now because I did that knock on wood. Nobody has gotten out alive, right? So here’s what they did. And this is really fascinating. You know, I’ve talked about fMRI or functional magnetic resonance imaging machines, right? It’s an amazing technology because the technology of Mr. Eyes is amazing in and of itself, right? To use these powerful magnets to slice literally in pictures, little pieces of any part of your body to slice them up, not literally, but photographically, I guess I should say, or magnetically, really, and the magnetic waves turn them into photos. Okay, now, granted, I know there’s a lot of people listening that think I’m just a total amateur right now. We have a lot of clients and listeners who are doctors and who are probably ready to ologists and they’re thinking, shut up, Jason, you know nothing about this, okay? I don’t I’ve met I know, not even enough to be dangerous. But the fMRI is the amazing thing, because that’s the machine that can look at the way our brains behave in real time. It’s literally the closest thing we’ve gotten so far to mind reading, and a mind reading ain’t too far away if he asked me, because if they can tell what parts of your brain light up when they say certain things, do you play certain sounds, show certain pictures. You know, there’s a lot of sexuality research going on in this field, too. And so you know, a woman I heard a news story recently a woman went into the machine, and, you know, had the whole experience. I’ll leave it at that. This is a family friendly show. They watch the way her brain lit up mean, you know, we can all try and describe things and the way we feel about this, that or the other thing, but there’s no misinterpretation, really, of what areas of the brain are active or inactive, based on certain stimuli, a smell of a thought, a sound, a picture, whatever. So it’s truly amazing. So what they did in this study to figure out how our brains are so good at just death, denial. I mean, it’s incredible. The researchers showed test subjects, a series of pictures. Some of these pictures were actually accompanied by the words death or burial. And they monitored brain activity, as they were showing these things right. And when the subjects saw their own images, accompanied by these words, like death or burial, the part of the brain associated with making predictions about the future just totally shut down. It became an act of it. It basically said, I’m not going to admit this, I’m not going to admit that this is real. I’m just gonna deny it. That’s what our brains do. But here’s the thing. It did remain active when it saw the same pictures and words, accompanied by photos of others. So we don’t deny that it will happen to everybody else, but we do deny that it will happen to us. Why does this matter? Why am I telling you this? Well, because I think it speaks a lot to real estate investing. Yes, you knew I’d bring it back somehow to that. It speaks a lot to just the concept of investing. It speaks a lot to urgency. It speaks a lot to planning for our future. Okay, now, to sort of go off on another kind of a tangent on this. I want to bring you back to 1988 1988 19884 years after the namesake of George Orwell’s famous book 1984. And in 1988, a rather iconic movie was released. You probably seen it. It was called cocktail. And the star of the movie was Tom Cruise. And I don’t know if you remember that movie very much. But let me just play a little part of the trailer to jog your memory. And hopefully you won’t let the part of your brain that remembers the past shut down. You’ll keep it active. We’re looking at you in the fMRI machine. Right now.
Lawrence Susskind 12:45
One square mile of this saloon lies and greatest concentration of wealth.
Lawrence Susskind 12:53
How was a bartender?
Jason Hartman 12:55
Can you get his hands on me?
Lawrence Susskind 12:56
This is the big time you’re ready for the big Young Mr. Flanagan
Lawrence Susskind 13:13
many ways to fool a customer. You learn them. Yes, Obi Wan, you get the women.
Jason Hartman 13:20
Okay, so that’s a little bit of this fun movie. But there was something really interesting in this movie. And I actually remembered doing this myself. I remember I was on a plane flight home from my first long distance relationship. My girlfriend in Vancouver, Canada. I was on a plane flight home from seeing her in Vancouver. And, you know, I just pulled out a notebook that I had with me, and I started doing the assignment that Tom Cruise’s Professor made his class to In that movie, do remember what it was. The assignment was to write their obituary. That was the assignment. They had to write their obituary. And you know what? I think that’s a pretty valid assignment. Because, you know, when you look back on your life, what do you want it to mean? What significance would it have? What would you have accomplished? What would you have done? And hey, you know, life is not all about money and finance, but that’s what the shows about okay? So I’ll just take it from that perspective. There’s lots more to life than money and personal finance and investing and economics and all that good stuff, but it’s certainly part of life and it should not be denied that it is a big part of life, no question about it. So if you don’t have goals and pursue them and make decisions quickly, as soon as all the facts are Right. You know that great quote I’ve shared with you many times and go after things. It’s like in the movie, they talk about Coughlin’s law right. That was his bartender mentor, where he became this really good bartender and then, you know, businessman later after that and fell in love and you know, it’s kind of this romantic comedy sort of movie right? But Coughlin’s law. Right? He said it was about cocktails and dreams. You know, these these guys were both ambitious. And when he says out that window lies the greatest concentration of wealth, and we’re talking about New York City, so a lot of the movie is about Tom Cruise, who didn’t have a college degree and couldn’t get into the corporate world and, you know, was kind of laughed out of every job. He applied for every interview he did, because he didn’t have the degree right and take how times have changed thankfully, because, you know, that doesn’t really matter so much anymore, but it used to right it used to so he took it upon himself that he had to go after this with gusto. on his own. I just remember that though I thought that was a pretty good assignment. You know, write your own obituary, so maybe it’s an assignment you want to do. And when I saw this article about how we’re so good at not admitting that we have this certain amount of limited time on earth, and we don’t know how much time we have, we just don’t know. Right? I mean, no matter how healthy you are, no matter how successful you are, that can be taken away in like, one minute from now. Okay, one minute from now, that could all end. Okay. So, no one is immortal. No one is invincible. And we’ve got a play like it matters. One last thing and then we’ll get to our guests. All of us have flown on a plane, of course, right on a commercial flight. Many of you will be doing that as you come to profits in Paradise, our conference this weekend. So we look forward to seeing you there. Thanks for flying with us. And when we get on that plane, and you know, once they’ve closed the cabin doors and they’re about to take off, what’s the thing, right? The mandated rule all around the planet is that the flight attendants have to take us through the safety procedures. How do you fasten your seat belt? What if there’s a sudden loss in cabin pressure? What do you do with the oxygen mask? The bag won’t inflate. Where are the exits? The closest exit may be behind you follow the lights as the floor has those lights that light up in in an emergency. You know, so all of this stuff, right? You got a slide down the slide. What if it’s a water landing? There’s a flotation device under your seat. How do you put the flotation device on? It has a whistle. It has a strobe light. I mean, people have thought about all this stuff for us. Isn’t that great, right? But none of us are paying attention. None of us pay attention to this. None of us pay attention to the safety drill. We don’t pay attention to it. We don’t care. It’s like a total interruption. We’re listening to a great podcast like this one. And we’re really annoyed that they’re talking over the speaker system about the safety procedures. But guess what? That plane ride starts to get bumpy, or that plane starts going down, or those oxygen masks suddenly pop out from the ceiling. And guess what? We all bring a whole new presence to that experience. Don’t wait. We’re going to pay attention, like nothing else matters. Okay? We are going to bring our a game to that experience, because our lives will depend on it. So what if we played the game of investing? I mean, of course, the game of life in general, right? But hey, shows about investing. So that’s what I’m talking about. What if we played that game? Like it really, really mattered? What if we just brought our a game to it all the time. Like, it was critical, like it was life and death. And you know what? It might be life and death. Because many, many people and well not many people, the vast majority of people will retire into poverty, they won’t be able to afford good medical care, and good clean housing and healthy food. So it is life and death. The only problem is, you know, that urgency doesn’t show up quickly. It shows up very, very slowly and cumulatively over time. It’s just a very slow feedback mechanism. But we can trick it right, we can just make a decision that we’re going to play like it matters. And we’re going to play that way, every single day. I guess the last thing I’ll say about this, because we really do have to get to Our guests, you know, I tend to ramble. A friend of mine was recently diagnosed with leukemia. And fortunately, at least so far, he has made an astonishing recovery. I it’s actually nothing short of incredible. It really is. So I’m so happy for him. But you should have seen the change in him. When I was talking to him, right after he was diagnosed. I mean, this was a total surprise. It came out of completely out of the blue. He didn’t expect it at all. You know, he just wasn’t feeling well. So we went to the doctor, and it’s like, they said, tomorrow morning, at 8am you have to show up for chemotherapy. He was just living a normal life but not feeling so great. And wow. Talk about a change in a moment’s notice. Right. You know, he was understandably terrified, and he’s now made a miraculous recovery. Which is great. But the kind of urgency that I noticed in his speech after that happened was it really makes you think, what if we could bring that type of urgency more into our lives, so that we could achieve greater things, have, you know, more fulfillment, better relationships, more financial security, whatever it is, right? You know, better health, I mean, talk about something that gives you a very slow feedback, loop health, very slow feedback loop. And that’s the problem with it. So we got to have some urgency with that, too. If we have bad health habits, it’s important that we bring our a game to that and reform those habits and play like it really, really matters. Like that plane is going down, and now they’re talking about the safety procedures and we are listening with intensity. So that’s my thought for now. All right, we got to get to our guest. We look forward to seeing those of you who are coming this weekend the prophets in paradise. And just a few months after that we’ve got meet the Masters coming up in Southern California. So we’re getting ready to announce that very soon. So stay tuned for that. And let’s get to our guests and talk about our 10th show stuff. Here we go.
Jason Hartman 22:34
It’s my pleasure to welcome Lauren sustained to the show. He is a Ford professor of environmental and urban planning at MIT. He’s vice chair of the program on negotiation at Harvard Law School, director of the science impact collaborative at MIT, founder and Chief Knowledge Officer of the consensus building, Institute, and author of entrepreneurial negotiation, understanding and managing the relationships that determine your entrepreneurial success. Laurence welcome. How are you? I’m fine. Thank you very much. It’s good to have you. So are you in Boston? I’m in Boston. Absolutely. Fantastic. Okay, just want to check where you were, you said you were at the Harvard faculty lounge. Before we get into the topic of negotiation, one that affects everybody’s lives and something I’ve done for a living. For most of my life, look at negotiating real estate deals, especially. Let’s talk a little bit about one of my sort of hobbies, I guess. And that’s urban planning. I’ve always found the way cities grow the way their plan the way real estate is planned is it’s pretty fascinating that it has such wide ranging impact on on the way we live, the way we socialize, I often think, you know, what is the most important art form in the world? And I’d have to say it’s architecture number one. And just my own opinion, I think music is probably number two. But everybody’s welcome to disagree with me, that’s just my and, you know, architecture that, I guess would include urban Planning I I’d say, because we live in it, you know, we interact with it all the time. Tell us a little bit about your thoughts about urban planning what’s good, what’s bad and and then let’s talk about negotiation.
Lawrence Susskind 24:10
Well, I’ve been teaching urban planning it at MIT for next years, 50 years. And I’ve seen it change a lot what people expect an urban planner to be able to do and what they think urban plans are so posts to accomplish. My view is that planning urban planning is the purposeful intervention through a complex web of institutions to improve the quality of life in places and spaces. And that kind of intervention needs to be collaborative. And so while architects and architecture calls up images of a single person, sitting at a drafting table, drawing an image and saying this is a synthesis It’s elegant, it’s purposeful. It’s what we need. Urban Planning is much more about a process of catalyzing collaboration amongst a whole set of different actors, and the physical form that results are changing all the time. So what you need are agreements at various points in time about what are the most important problems that need attention. And then there’s going to usually be some principles of stress and sacrifice, and those need to be negotiated. And then you make a change. And then you keep monitoring what people say and feel and what the market says. And you just keep on doing that. So plan is no longer what we’re educating people to produce. It’s a planning process. And it’s very much a collaborative process that engages lots of stakeholders and decision makers.
Jason Hartman 25:56
You know, it’s interesting when you look at the way America grew. Grew up versus I mean, I’ve been to 83 countries now versus almost every country. You know, America has a love affair with the automobile back in the 50s you know, the oil companies and the tire companies I guess Goodyear especially they bought up a lot of these railroads and ripped them up which is a shame you know and I don’t mind the automobile I love it and you know we’re about to have self driving autonomous automobiles in the not too distant future here I think. But I really love walking based communities when you can walk to retail when it gives people the opportunity to socialize and and not just be in the burbs and come in and out of your garage and never know your neighbors type of thing. What do you think about that? What are the trends? What are we see this movement over the last maybe couple of decades where you know that urban cores have been revitalized, a little bit and a lot of cities but, you know, you compare America to virtually any city in Europe and they’re very dense. The vertical or America’s flat, you know, it’s just just spread out mostly. Any thoughts about that?
Lawrence Susskind 27:07
Well, we got a big country, a lot of space and pieces of the country have developed in different ways at different times. We certainly have a lot of large cities. And as you said, those cities are going through a process of transformation for a whole series of reasons. And you get a lot of spaces that are much lower density, and they’re not likely to increase in density. In the near term, what you’re likely to see are the big cities continuing to spread and capture more of the surrounding area. And it’s not unlikely that two thirds of the population will live in what’s called a metropolitan urbanized areas and the not very distant future. And I don’t think we’re going to see that suddenly reverse we Had periods of time where people said, Let’s plan smaller scale cities and connect them by efficient transportation. And the problem is that that kind of centralized planning never had a chance in America, the market rules. And we try to deal with some of the problems created by what the market does for certain groups. But we’re have a number of big cities and then a lot of low density open spaces. And I don’t expect that pattern to change anytime soon.
Jason Hartman 28:35
What do you think about the self driving car? the impacts of that I think it’s going to be a pretty major deal. If you asked me, I think that’s going to be a game changer. It’s going to free up a lot of real estate, because parking lots won’t be needed so much if there’s sort of cars on demand cars as a service kind of concept. I think it changes the real estate game a little bit and I’ll just tell you why. You know, I’ve long said that the The three major value drivers in real estate and we have a lot of real estate investors listening to our shows are, of course, we all we’ve all heard it location, location and location. But I think even though geography is important, it’ll become less important than ever, as transportation becomes easier and more convenient. Now, the one thing that has to happen is energy costs needs to stay low. But if it does, you know, if the car will just drive you places and you can take a nap or do your work or whatever, while the car takes you someplace,
Lawrence Susskind 29:33
that’s pretty big, big deal. If he asked me, I agree with you. I think autonomous vehicles could have a variety of important effects. I don’t think the transition is going to be easy because a lot of people are going to be concerned that autonomous vehicles put cars on the road in ways that scare people and even if they are safer for a variety of technical reasons. That doesn’t mean folks are going to be ready to accept them. And we certainly have examples already of cities in the United States where experiments with autonomous vehicles have met with very harsh, negative reactions from citizens. So I think they could make a big change for myself. I personally rather see a different idea of personalized rapid transit, but on six systems, so imagine along all the existing sidewalks, there were what would look like monorails except there’s individual or double or triple or quadruple cars, and you just go up a couple steps and get in one and put in what you want to get to when it takes you there. And nobody’s on the road. Right? But you gotta you gotta build those tracks.
Jason Hartman 30:45
I mean, that’s a lot of infrastructure you like
Lawrence Susskind 30:48
you mean sort of a people mover type of concept, or what do you mean, except that they’re pods, and people are in them. And so there was people mover people, folks, that About the airport and just you know, moving from one area of departure to another, right? The infrastructure is not that expensive. And you already have the rights of way. And you get the streets back. Just from a real estate standpoint, think about what that means. Yeah. What kind of distances what those go that what is that I sort of like within the blocks? Or is it long distance? Or what what is that there are models, my MIT colleagues have made models of different kinds of systems. And you could have systems at different scales. But I meant the the idea of autonomy of the vehicle. People say, Oh, good, I can have all the benefits of a car without having to own and maintain a car, right, but you still going to have traffic, and you may make it more efficient, but you’re still going to have traffic. But what if you could take all the traffic away all the delays away all the air pollution away and use existing rights to play no costs for that and If you could swap the value added by taking all the roads and reusing them for development activity and walking and biking and other kinds of movement activity, and then use that to invest in the creation of the personal rapid transit and talking about in dense areas, traffic in Boston is terrible. Oh, sure. I know. I know. And autonomous vehicles may make it run a little bit more smoothly, but it isn’t going to reduce the worst traffic at key hours because the less you rebuild the parkways and the highways and the roadways. Yeah, you can gain some efficiency by having the cars run more smoothly and the network was a lot together. Right?
Jason Hartman 32:39
Yeah, yeah, no, you can, but I’ve heard that the packing density of an autonomous vehicle could be six times what we have now and of course, if their network together, they plan routes, they go faster, they can go 90 miles an hour right off bumper to bumper, you know in theory now remains to be seen if it all works. But the question for you on this sort of personal Rapid Transit this kind of mini monorail or maybe I’ll call it, it’s a little pod that holds maybe up to six people that would require building all that track, though, and that’s the expensive part. I mean, whenever you gotta build rail, whether it be monorail, or you know, old fashioned rail,
Lawrence Susskind 33:20
that’s a lot of money to do it, isn’t it? If you’re thinking of monorail where you have long cars that have to run on tracks, but think about just stringing wire. Having these pods and the pods move along the wire you don’t it’s not the same kind of Oh, what do you mean like a ski lift, sort of
Lawrence Susskind 33:41
something like that,
Lawrence Susskind 33:42
or gondola, right, but you can have as many of these as you want. And they just keep coming every few seconds. And you have to stop and have a wait for people to get on. And then they just program in where they want to go. And you have a very highly network multi directional system that drops you off where you want to No, but it’s literally a cable. It’s a cable like a gondola, right? Yeah.
Jason Hartman 34:04
Oh, interesting. Oh, that’s interesting. Yeah, I haven’t seen that before. Well, anything more on urban planning, let’s leave that subject and talk about how these urban plans come about through the process of negotiation.
Lawrence Susskind 34:17
Right, right. We have no choice in both urban and rural areas, but to involve people in decisions about how developments going to happen and how conservation is going to happen in ways that affect them. There’s no way to go and back and say they’re experts decide this for us. So there is no development activity at any scale in the United States, where there won’t be some process of conversation in which people have a chance to have to say the problem most of the time has been the model people have of that is a town meeting and somebody presents the proposal and then people go to a microphone and yell and scream. for two minutes, and then they have a parade of such folks. And at the end of it, some agencies got to figure out what to do in light of all that noise. But we have now the technology to engage very large numbers of people in conversations in which it’s not just vote on some pre made choices. It’s let’s have a collaborative discussion about improving the design of this development activity or this development plan. And the negotiations can be assisted in a way now that allow a lot more people into the conversation to invent the choices, give them a lot more information about the forecast of the impact, and then have some selected set of people who represent different segments of the population in a face to face negotiation, try to problem solve, and come up with proposals to those with the formal authority to make decisions. So I don’t see any scale of development where we couldn’t do a better job of both allowing people in preparing them to participate, and then carrying that through to the point of seeking informed, consensual proposals to elected and appointed officials.
Jason Hartman 36:20
Okay, so that was actually just kind of a good segue. We don’t have to talk about negotiations in urban planning, per se. But let’s talk about negotiations in general. I mean, everybody negotiates all the time, whether we realize it or not, we are all negotiating all day long. Even if it’s not our business, we’re negotiating with our kids or our loved ones or, you know, the person that’s selling us something. How do we become better negotiators?
Lawrence Susskind 36:49
I think the single most important thing people could do to improve their negotiations is to become a bit more reflective. That is before you start Think about what the interests of the other side’s going to be. As you’re going, take a break and see how’s it going for you and the other side, when you’re done, think about what you learn from that negotiation and what you want to try differently the next time. In other words, I don’t think this is an issue of memorizing from some pages of a book 10 tricks about how to make deals, and then you’re all set. You’ll do better forever. I think each person needs to improve their personal theory of negotiation practice through reflection before during and after negotiations. It would make it and I’m not conceited and what how I teach and what I do to help people prepare for negotiations and reflect they get better when they reflect.
Jason Hartman 37:48
Yeah, no question about it. So the old saying, you know, walk a mile and the other Indians moccasins before passing judgment, right. Or, Stephen Covey said, you know, and I don’t remember Exactly what he said, but look at it from the other person’s point of view. And I think that is very important. You know, interestingly, a lot of times, when we’re in a negotiation, the other party doesn’t really even want, what they say they want exactly are what we think they want. When we really dissect it a little more, we really realize maybe we can give it to them and create a win win solution in a different way. Right and a whole from a whole different kind of
Lawrence Susskind 38:32
point of view. It’s a hugely important point that you make, I wish more people heard it and understood it and accepted it. People do not understand that other people may take a strong position, but in fact, that’s just one way of meeting their interests. And if you don’t ask a lot of questions and propose a lot of alternatives, you’ve got no chance of discovering the way of meeting their interest pretty well. Your interest very well. Hmm.
Jason Hartman 39:02
Yeah, no question about it. You know, it’s amazing how when you dissect something, for example, a real estate example, you know, the the sort of the nothing down guys will talk about this, which I think there’s a little bit of a myth in the whole nothing down thing, but in concept. The same is true. You know, you’re dealing with someone who wants to sell their property, and they say, Well, I want to sell the property so I can have cash to pay off this loan that I have. Well, what if you don’t give them the cash, you just agree to assume the loan for them and pay the loan? Then, you know, that’s the concept, right? They didn’t even want what they said they wanted. Right. But they didn’t realize I mean, it’s our job to think more creatively about how to get to the same place in a different way, isn’t it?
Lawrence Susskind 39:44
I think that’s perfectly said. It’s the distinction between the positions as for sure and Yuri setting Getting to Yes, it’s the distinction between the positions people pay and the interest underlying those positions and they Take a position because they think they have to take a position because that’s as much thought as they put into it. And then people fight about the position instead of saying, but why do you want that? Why do you think 6.8 is the right? whatever percentage? What if I got you something better than that? They said, What would you do that? Well help me understand what’s most important to you listen to what some most important to me. Let’s see if we can invent something that gets your underlying interest net. And don’t worry about the position you started with, but not with wires, treating negotiation as collaborative problem solving. That’s what we have to teach people to do. Right?
Jason Hartman 40:42
Yeah, absolutely. So it has, you know, and I think the on what I’m about to say the feeling on this has changed over the years, possibly, but you tell me, some negotiators would say, you know, the first one to mention a number loses. Maybe you’ve heard that But others would say, you’re better off mentioning a number first, because you sort of create the frame, you create the playing field, for example, like I’m trying to acquire another business right now. And it’s not for sale. So there’s no asking price. And it’s pretty touchy to deal with the seller because, of course, the seller wants as much as he can get. And me as the buyer, I want to pay as little as possible. Right. So how do we meet? It’s some agreement that’s mutually beneficial there. So is it better for me to mention the number first, or is it better to let him mentioned the number first?
Lawrence Susskind 41:35
So there’s lots of research now, serious scholarly research on the dynamic you’re describing, which is called anchoring at people read my colleague, Max bazerman at Harvard Business School, one of the most important authors on this subject, and the very simple response to your question is, if you know a lot about the other person’s alternatives, the market in general recent transactions Related to this, if you really understand what the options are going to be that the person you’re talking to is going to have, then by all means anchor first, because then you will be in the space of possible zone of possible agreement, and you’ll edit in the direction that’s best for you. But you’ll know what the zone of possible agreement is. If you don’t have that information. It’s a mistake to anchor first, because you’d be cutting off all kinds of possible advantage for yourself. So it’s much better in the situation you described to say to this person, I think I’m interested in buying your company. What do you think would be a fair basis for considering the value and you want them to tell you how they think about the value, you’re not asking for a number, you’re avoiding anchoring, because you have no idea. But if they say to you, well, this is our profitability the last few years. This is our business plan going forward. We don’t Have any competition, and so we think will double and they give you all that information, then you have a basis for calculating compared to other investments you can make. Well, this is what I would then say I would offer and then could ankling is advantageous to the reasons that you mentioned. But it’s this advantageous, if you don’t have a sense of what the other person’s alternatives are, and how to think about the zone of possible agreement. Yeah, very, very
Jason Hartman 43:28
this very interesting. Yeah. Okay, so the answer is anchoring. It depends, right? There’s not a but it depends on
Lawrence Susskind 43:35
something specific, right? Okay, depends on what knowledge you can put together with confidence about the zone of possible agreement, and the other options the other person has, and the less confident you are about that. Then what questions you want to ask to see if you can get a better picture of what the zone of possible agreement is. I have a book called Good for you. Great for me, which explains This in some detail,
Jason Hartman 44:02
very interesting. And I wish I would have done what you just said, was to ask him how he would arrive at the value. The same goes for real estate investors, you know, ask the seller how they would earn rather than asking you and I think you said rather than asking for a number, just ask for the methodology and make the other side explain that. What I did, and it remains to be seen whether I’ll be successful in my negotiations, is I didn’t mention a number. And we’ve been talking for a while now. And I have still not mentioned a number. I did though, mention my rationale and my methodology. And I said, you know, the standard multiples in this industry are this amount, you know, you’re doing quite a bit of the work. So we we need to assume we’d have to pay someone to do that work in order to have a value. And I still haven’t mentioned a number and neither has he. So no, who’s got a number here. You know, he says The typical thing, well, I don’t really need to sell it,
Lawrence Susskind 45:02
etc, etc, which is what you’ll hear from most sellers is another move you could make at this point, which is to say, if we value your company this way, then I could offer you something in this range from this to this. But if we valued at this way, then I would have to offer you something in this range from this to this. What do you think? Yeah. Okay, so you’re offering contingent options without a commitment? Yeah, that’s a good idea just keeps the conversation moving forward. You know, I didn’t want to throw out a number and insult to die, because that’s what a
Jason Hartman 45:37
negotiation is a prickly thing, isn’t it?
Lawrence Susskind 45:40
How can it make us better leaders? I think you have a chapter head on that, right. I think leadership, at least the service model of leadership that I teach about requires persuading and influencing people who you report to who report to you and Working with you to take action. And if you want someone to take action, giving them reasons, is a good idea instead of demands. And so a model of leadership that focuses on helping people understand the reasons you’re asking to do something, I would put a premium on it. I also think that leadership has to worry about at any level in any kind of context, has to worry about building trust. And if you want people to follow or to do what you want them to do, they need to be able to rely on you that you need to build trust. And we know that building trust requires saying what you mean, and meaning what you say. And so leaders who are not really prepared enough to tell people the reasons to do things, and who just tell them to do it without in any way Taking the concerns of the person you’re talking to too hard, aren’t going to build trust.
Jason Hartman 47:05
Yeah, I couldn’t agree more. Absolutely. That’s the foundational basis for everything. And you know, what’s interesting about trust is it not only matters with humans, but it matters with animals. A few years back, I got my first puppy and I’d never raised a puppy have many dogs but never a puppy. It was really interesting to learn about Dog Training sort of from the beginning. And you know, a dog that is tabula rasa, just blank, natural, God given programming, if the animal doesn’t trust you, you’re not going to get anything done with training, even an animal you make the animal trust you by being consistent and reliable and not teasing and you know, taunting and if you put the food down, never taken away, right, things like that. Those are all trust gestures. So it even works. Human to animal that’s very interesting. What else would you like people to know about negotiation? Just to wrap this up for us,
Lawrence Susskind 48:05
I think a lot of the things that people want to get done that require getting others to do what you want, when you want the way you want our negotiations. And as you said, we’ve negotiated all the time, and people are unaware that they have an approach to negotiation, even if they don’t remember explicitly learning it. And if they don’t reflect on it, it could be the reason they don’t get the results that they want, have a new book on entrepreneurial negotiation, and which all kinds of students in the dorm rooms at MIT are starting companies. And they think it’s the essence of the building the company is the idea. And they don’t get that they’re going to have partners and investors and supply chains and consumers and regulators that are going to be nothing but negotiations. They say, Well, I know I invented this thing I know about it. I can handle it, right and they have no No training in negotiation, which is why so many new ventures fail? Yeah, no, we try to teach students that we’re glad they’re entrepreneurial. I’m glad they want to do stuff. But they must figure out that doing stuff requires all kinds of interactions that really are negotiations. And there are better and worse ways of proceeding. And it’s not that hard to learn some ways of building trust and getting people to do what you want and persuading them and influencing them, even in unequal power situations, and then continuing to reflect and get better at it, but not if you’re not aware that.
Jason Hartman 49:39
Yeah, that’s interesting. And you know, now that you mentioned your MIT students, you made me think of something else. And that is not just the negotiation and what the messages back and forth between the parties, but I would say the platform on which you’re communicating, the millennial generation has just got to get away from text based communication. If you asked me, they’ve got to start talking to each other. It’s a mate. I mean, just boggles my mind that people think they can start and run businesses on text messages. Are you kidding me? So much more complexity to this stuff. And there’s so much more nuance to it. Do you have any thoughts about that just before you go, I mean, am I wrong?
Lawrence Susskind 50:22
No, I don’t think you’re wrong. It’s just not helpful that saying that it’s going to cause a reaction. Yeah, I think what we need to do in all of the online teaching that I’m doing now, about entrepreneurial negotiation, as people doing live face to face negotiations, with a random person also taking the online course every week, and you can’t send them an email you your face to face. You have to be able to express your views. If you can’t read the unspoken things that are going on, you’re missing half the data. You need to the negotiations. It’s not just stop just texting. It’s don’t give up access to all this important nonverbal information that can help you succeed at what you’re trying to do.
Jason Hartman 51:09
agree more. There is so much more data in voice space communication, and even more in person, or at least video communication with some degree of body language. Absolutely agree completely. Lawrence, how many books do you have? My gosh, you’ve got a library of your own books?
Lawrence Susskind 51:31
Well, yes, but also I write them with colleagues. When I want to learn about a new thing, I find someone who knows way more than I do, or even a student willing to work much harder than I can just on that one thing and we write together and that’s why there’s 20 books. Well, it’s a while though,
Jason Hartman 51:49
yes, good for you, good for you. give out your website and tell people where they can find out more about you.
Lawrence Susskind 51:54
Well, entrepreneurial negotiation calm. It’s about the entrepreneurship book, but Lawrence Kind as if it were one word if you SS can d.mit.edu fantastic. Lawrence, thanks so much for joining us. Thanks for the invitation love to talk with you. Thank you.
Jason Hartman 52:12
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
This transcript was generated by https://otter.ai