He who knows how to negotiate is not the one who wins every deal. But the one who is absolutely sure of his/her minimum acceptable standards, for every deal.
(There is an excellent article on Bebee by Barry Hodge that gave me the idea for writing this article, along with my own thoughts and experiences. Give it a read, it’s a good article.)
Elon Musk
The name Elon Musk is one that I’m sure most of you are familiar with. However, to those who are not, he is the Co-founder/CEO of Tesla, an American automobile company and the largest producer of electric cars in the world. He is also running another company called Space X that is currently working on building space-crafts for commercial space travel, which he believes is the future of travel. (Like taking a trip to the moon!). He also plans to launch spacecraft travel on Earth, with the aim of making any journey less than an hour, at the price of an economy class airline ticket. Oh, and he’s also a Founder of PayPal.
Needless to say, Mr. Elon Musk is a billionaire, a visionary and an inspiring leader. But more than all of that he is a man who knows how to negotiate.
The PayPal Story
The year was 2001 and Paypal was planning on expanding it’s operations on a much larger scale! eBay, the multinational e-commerce corporation offered Musk 400 million USD to purchase the company. He said no, even though PayPal wasn’t quite as big as it is today because he was optimistic about what it could be worth in the future. Not to be done, eBay revised their offer to 800 million USD. But Musk still said no!
Towards the end of 2002, Musk was offered 1.5 billion USD by eBay, to which he finally agreed. He initially argued against the offer and then decided to sell as they were able to meet his minimum acceptable price. (Also, there was a talk about eBay creating it’s own online payment platform)
Now, one might argue that Elon Musk was doing well for himself, so he could afford to sit back and wait for them to increase the offer. Or he didn’t need them to purchase it, and you would be right. Except he is visionary!Author in Source Title
In the opening paragraph, you read about his accomplishments, his businesses and his plans for the future. A man like that is not going to just sit back without proper cause.
Now allow me to give you some perspective on how Elon Musk was able to hold off on the temptation to sell.
Chandu
I have a friend, let’s call him ‘Chandhu’. He once told me that there were ‘friends’ in his life that he stopped being friends with. I responded that it’s natural for anyone to lose touch, but he shook his head at me and said,
“No! I stopped being friends with them. I told them I don’t want to be friends with them, don’t want to talk to them, don’t want to hear from them and that was it.”
“But why?” I asked him.
“They wouldn’t give me their time and I always gave mine when they needed me. I was willing to let go of that, but they couldn’t even communicate what was going on or why couldn’t they give me their time. Well, they don’t get to disrespect AND ignore me, and then expect me to put up with it. But more than that I just didn’t feel like I could trust them anymore.”
“But, if you keep that attitude you’re going to lose a lot of people from your life.”
To which he replied. “I don’t want 100 ‘friends! I just need 5 REAL ones! It’s not about giving me time, it’s about trust and honesty. If I can’t get at least that from the people I call MY FRIENDS, then it’s better not have them in my life at all!”
Now, I wouldn’t advice adopting Chandu’s philosophy when it comes to dealing with your friends. He’s short-tempered and has a very aggressive approach towards life.
But I do admire his crystal clear clarity on the kind of people he wants in his life, what he wants from them and his ability to let go if they don’t meet his minimum requirements.
And these are the two factors that determine the strength of your negotiation skills. Which is what I relate to when I think of Elon Musk and his decision to reject Ebay’s initial offer. And, Chandu’s decision to let go of his friends.
The Mind Set
1.Minimum Acceptable Standards:
In one of my previous articles, ‘Handle, Diffuse and Resolve your Conflicts! Use them to get Closer to your Goals!‘, I touched upon this subject, in the section Loose The battle, Win The War. Where I talk about accepting alternative solutions IF it takes you closer to your goals!
When it comes to a negotiation, it is the same principle. The difference is that in a negotiation, you’re going in with a set of minimum standards based on your future plans.
Elon Musk had future plans. He was negotiating with his minimum acceptable price in mind, based on those plans. Now he was able to reject Ebay initial two offers because there were nowhere close to his minimum price.
Chandu was able to permanently let go of his friends because they were not meeting his minimum expectations from his relationships. Causing him to deem them as being ‘not worthy of his time’ (which is him thinking ahead).
For Elon Musk and Chandu, they were clear on what they wanted considering their future. Hence..
2. Choosing to Walk Away
The strongest negotiating position is being able to permanently walk away, from a situation/deal that does not meet your minimum expectations.
The goal of this is to communicate to the other party that you are coming from a place of demand and abundance. Causing the other party to re-think their offer.
Now in the case of Elon Musk, it worked out for him.
In the case of Chandu, it didn’t.
So it can go either way. However, the point is both of them were ready to walk away. So even if eBay had not come back to Elon Musk, he would have been okay with it, simply because it does not meet his minimum price (minimum acceptable standards), deeming it not a worthy deal.
And that is the mindset of a Strong Negotiator!
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Originally published at bebee