Master Negotiators Reveal Their Secrets

The basics of negotiation are pretty well known -- look for mutual gain, don't be the first to name a price, don't be afraid to say no. But with just about everyone out there familiar with these techniques, it follows that those looking for an upper hand will need to master more advanced skills.

Enter hedge fund manager James Altucher. On his blog recently the investor, author and entrepreneur admits to no natural gift for negotiating, but claims to have met many master dealmakers and learned their secrets. In his post he lays out three tricks of some of the world's best negotiators:

• The Nicker-and-Dimer. I once went to an ancient coin exhibit with the Dr. Larry Brilliant (I know. It's like a name out of a science fiction novel but that's his name). He was former CEO of Softnet, then he was head of Google Charities. Before all of that he cured smallpox in India. Anyway, we were shopping for ancient Israeli coins together and he told me this: When you are negotiating, always have more items on your negotiating list than the other guy. If you are selling your company, it's not just about the price of the company. It's about the size of the earnout, the goals that need to be achieved, salary, salaries for your employees, free car service forever, what's your title, etc etc. When it gets down to the nutâ€"and-bolts negotiation you can give up the nickels and take the dimes. Then it seems like the other guy is winning, but you're still getting everything you really want.
• The Idiot. I was once partners in a VC fund with an ex-managing director at CS First Boston. He was a genius negotiator and everyone liked doing business with him. His favorite technique in the middle of a negotiation would be to raise his hands up in the air and say, "Listen. Let's take a step back here. Pretend I'm a complete idiot and walk me through this deal." He had no fear pretending he was the dumbest guy in the room even though he was probably the smartest. He would ask any question he wanted and everyone liked being smart in front of him by answering in as much detail as possible. Then he would say, "OK, I think I get it but I'm not sure. I need to spend a few days thinking about it." He would completely slow the pace down. And then on every item he would add more tiny items (the nickel and dime approach) and would just wear everyone down.
• The Math Trick. This one is from Steve Elkes. He negotiated for thestreet.com when they bought Stockpickr.com, a company I started, so I was able to see his negotiating first hand and unfortunately for me, he was on the other side of the table. "The Math" technique is this: before the negotiation even begins, you state a common sense, very straightforward, mathematical formula that everyone should use to value the property, service, business, etc. So for stockpickr, Steve said, how about we all agree to pay 10 times next year's earnings for Stockpickr. I immediately said yes since I had modeled out what I thought were enormous earnings based on the advertising rates, the rate our traffic was growing, etc. I thought this was a no-brainer. Steve would then use "The Idiot" technique. "I don't know what advertising rates really are," he said, "so how about we just talk to the head of sales here and see." Then it's suddenly out of both our hands and in the hands of an impartial guy who carefully explained to me why advertising rates weren't as high as they seemed. And since we had a formula we already agreed to, I was whittled down to agree to the number that the formula spat out.

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