The Luck Factor
Est. time: 10 min.
- Allowing for the role of luck in the negotiation process
- Seeing how your mindset affects your responses to unexpected events
- Appreciating how luck complicates learning from experience
Imagine that you just negotiated a great deal on a new home. That’s not surprising, given how well you managed the process from start to finish. You studied the local real estate market and discovered the seller's motives for listing the property. You even created mutual gain by allowing the seller to stay in the house for several weeks after closing, since you'll be leaving on vacation anyway. And, to top it off, your timing was impeccable. The day after papers were signed, another potential buyer appeared, offering much more than you did. Fortunately for you, they were too late.
Hats off to you! But here's an unsettling question: Did you succeed because you were smart or merely because you were lucky?
Imagine a parallel universe with a carbon copy of you, an identical seller, and the exact same house. That "other you" prepared and negotiated exactly the same way you did. But in this alternative world, one thing was different: The competing buyer showed up two days earlier. Because they made a higher bid, the other you had to pay much more to avoid losing out entirely.
Condolences to your double, of course. But remember that your doppelganger was just as masterful a negotiator as you are, just not so lucky. This misfortune could just as well have befallen the real you.
Luck, both bad and good, often looms large in negotiation. It's rarely acknowledged by practitioners or studied by scholars in the field, but ignore it at your peril. By its very nature, luck can't be controlled, yet it can be intelligently managed, beginning with how you think about it.
Before digging deeper, please launch the activity below to assess your own "luck factor." There are no right or wrong answers on this quiz. Just pick whichever response ("true" or "false") tends to be closer to your experience.
Right Place/Right Time
In 1942 an Austrian émigré took a wrong turn in a New York City night club and ended up at the table of Broadway lyricist Alan Jay Lerner. The Austrian was a struggling composer named Frederick Loewe. They struck up a casual conversation, which ultimately turned into a long collaboration that produced hits like My Fair Lady, Camelot, and Brigadoon.
If Lerner hadn’t gone to that club that night, or if Loewe hadn't wandered by, perhaps they might have bumped into each other at some later point and gone on to make great music together—but probably not. Lucky them (and lucky us). What we can never know, of course, is the number and nature of near misses—the possible collaborators whose paths didn't quite cross and, hence, whose songs we never got to hear.
So it is in negotiation. And so it is with whom you meet and when you see them. Call it chance or call it luck, but your success at fashioning collaborative agreements depends in part on whom you happen to encounter, what they need from you at that particular time, and what they can provide you in return.
The module began with the story of you and a doppelganger, both equally skilled and diligent when it comes to negotiation. But one you (the real one) was able to buy a lovely house at an excellent price. Through no fault of their own, your double had to pay much more just because the stars were aligned for you, not them.
Silicon Valley venture capitalist Arthur Rock attributes much of his success largely to luck. His early investment in Apple not only paid off handsomely itself, but also opened doors to other lucrative opportunities. "I am the luckiest man around," he says
Unlike Rock, many successful business people believe that their professional achievements are a testament to their own intelligence, vision, and virtue (or some high-powered cocktail of all three). Harvard Business School Professors Francesca Gino and Gary Pisano state that it is all too common for executives to attribute the success of their organizations to their own insights and managerial skills and to ignore or downplay random events or external factors beyond their control.
Researchers have confirmed this finding and, as Gino and Pisano note, have further found that when examining the bad performance of others, people tend to do the exact opposite. That is, when they see other people's success, they explain it as being the result of pure luck (and regard other people's failures as due to their incompetence).
This double-standard is both vain and dangerous. Believing that your successes are due to your brilliance and that any failures are a matter of bad luck, distorts your learning. That's especially true when it comes to negotiation because it provides poor feedback. High performance—doing everything right—doesn't guarantee outstanding results if fortune isn’t on your side. Even after a negotiation is over, luck still complicates the picture and may make us mislearn from experience. Negotiation is a wicked learning environment, because you seldom know the whole story.
What lesson should you draw, for example, if you walk away from the bargaining table empty handed? It could be that there simply was no room for agreement. Alternatively, perhaps one side overplayed its hand. Maybe neither party was very creative. Or maybe you had the bad luck to be matched up with someone who simply wasn't open to reason.
You should be modest, therefore, about your apparent successes and circumspect about your seeming failures. Baseball is a so-called game of inches in which the margin between victory and defeat can be razor thin. A screaming line drive may land just foul or land fair, sparking a ninth-inning rally. Over a full season, such bounces tend to even out. Similarly, in the negotiations we undertake over the years, luck more or less balances out for most of us.
In particular cases, it boils down to having a clear-eyed view of what's in your control and what isn't. You may not have the luxury of choosing your negotiating partners. And you certainly can't dictate how they're feeling on a given day, how they weigh their alternatives to coming to agreement with you, or if some external event will help you or them. Thus, where you end up—with a great outcome, a merely adequate one, or no deal at all—depends significantly on your luck with respect to who's across the table, how they plays the game, and whether they're open to persuasion.
Of course, much still depends on how well you play whatever cards you've been dealt. That includes your skill at reading others’ tendencies and your ability to influence them positively and spot opportunities to spark mutual gain. Psychological research also shows that in preparing for negotiation, you can prime yourself to look for the upside by taking just a few minutes to list your goals and the steps you can take to achieve them. You might also take a cue from the classic Kenny Rogers song "The Gambler". In both poker and negotiation, the secret lies in knowing what to throw away and what to keep.
Uncertainty complicates planning any endeavor. For some people, that uncertainty can be paralyzing. Eileen Shapiro and Howard Stevenson, authors of Make Your Own Luck, say that, "Of course, acting in the face of uncertainty is scary, because you are acting before all the facts are in—though in truth you are always acting before all the facts are in, whether you are doing what you planned to do or making a shift based on new information."
Shapiro and Stevenson write about strategy and decision-making generally, but their advice is particularly apt in negotiation.
- Identify your major goals, they advise, then map out multiple paths to reach them.
- Don't try to account for too many possibilities (otherwise the complexity of your map will make it impossible to comprehend).
- Assess the various tracks you might follow, not just to pick the best, but to keep other options open.
- Take a hard-headed look at how much "smagic" (their term for luck) will be needed to reach your objective.
In addition, remember to:
- Accept the luck factor in negotiation. Your results - whether good or bad - are never all of your own doing.
- Consider best- and worst-case scenarios.
- Make ongoing learning a priority as you negotiate.
Felda Hardymon, Tom Nicholas, and Liz Kind, "Arthur Rock," Harvard Business School Case 813-138.
Eileen C. Shapiro and Howard H. Stevenson, Make Your Own Luck: 12 Practical Steps to Taking Smarter Risks in Business, Portfolio, 2005.
Michael Wheeler, Chapter 12, "Wicked Learning" in The Art of Negotiation: How to Improvise Agreement in a Chaotic World, Simon & Schuster, 2013.
Richard Wiseman, The Luck Factor: The Four Essential Principles, Miramax Books, 2004.