“Succession” Just Showed How Master Negotiators Set Anchors to Outsmart, Outmaneuver, and Get the Best Deal Possible
The latest episode of “Succession” has once again captivated viewers with its compelling portrayal of the art of negotiation. In a tense scene, billionaire tech CEO Lukas Mattson demonstrates his masterful negotiation skills by setting a powerful anchor that leaves the Roys, Kendall and Roman, off balance and uncertain.
The episode revolves around the negotiation of the GoJo/Waystar Royco deal, and Mattson takes advantage of the home field advantage by forcing Kendall and Roman to a remote mountaintop location. As they prepare to begin the negotiations, Mattson throws a curveball with an initial offer that seems ludicrous: “I want to buy your entire operation for the price of one… single dollar.”
The Roys are taken aback by the audacity of the offer, unsure how to respond. But then, Mattson reveals his true intentions. He doesn’t want just a part of the company; he wants it all. The real offer is set at $187 per share, a significantly higher number than the initial anchor of one dollar.
This tactic of setting an anchor is a powerful negotiating strategy, and it is not limited to fictional TV dramas. Anchors play a crucial role in negotiations, as the first number introduced greatly influences the perception of value throughout the process. Research conducted by Harvard Business School has shown that when the seller makes the first offer, the final price tends to be higher than if the buyer had made the first offer. Similarly, if the buyer sets a low anchor with their initial offer, the final price is likely to be lower.
Anchors have such a strong influence because of our cognitive biases. We tend to give more weight to the first piece of information we receive, regardless of its actual value. For example, when we see a car priced at $40,000, we instinctively assume that it must be worth close to that amount. This bias is the reason why almost ninety percent of negotiated outcomes align with the first offer, regardless of its justification.
Anchors have a significant impact in various contexts beyond negotiations. In retail, setting limits on the number of items per customer can lead to increased sales. For example, if protein drinks are on sale with a limit of four per customer, customers are more likely to buy two or three, even if they initially intended to purchase only one. Similarly, businesses often offer a high-priced premium service to make a lower-priced option seem more affordable and enticing.
Returning to the negotiation scene in “Succession,” Mattson strategically used the initial offer of one dollar to set an anchor. This made his subsequent offer of $187 per share appear more favorable and substantial in comparison. In a personal anecdote, the author recalls a similar experience where his grandfather set an anchor by jokingly assigning him the task of cleaning twenty horse stalls. When the actual number turned out to be ten, it felt like a significant relief and a more manageable task.
However, it’s essential to understand how to avoid falling prey to set anchors. The key is to determine your own limits, what you are willing to pay or do, and stick to them. For example, when buying a house, the list price becomes irrelevant. What truly matters is your determined value based on market knowledge, comparable properties, local conditions, and personal considerations.
Suppose you determine that a house is worth $350,000 based on careful analysis. In that case, it becomes your anchor, and the listed price becomes irrelevant noise. Research supports this approach, as the advantageous effect of a first offer is eliminated when the other party possesses information inconsistent with that offer. Knowledge truly is power, and being armed with data and reasoning can neutralize the potential emotional influence of an anchor.
In the case of Kendall and Roman in “Succession,” they walked into the negotiation with a clear understanding of their bottom line. Mattson’s initial offer of one dollar was rendered irrelevant because they had already determined their price. The subsequent offer of $187 per share was only relevant in relation to their predetermined value.
By knowing what you are willing to accept or pay, you can effectively counteract the anchors that others try to set. This knowledge gives you the confidence and clarity to navigate the negotiation process with a focus on your own objectives.
Negotiations are often a delicate dance of power dynamics, psychological tactics, and strategic maneuvering. The ability to set and counter anchors can be a game-changer in achieving the best deal possible. By understanding the influence of anchors and staying grounded in your own valuation, you can maintain control and make decisions based on objective criteria rather than being swayed by initial offers or unrealistic anchors.
The lesson from “Succession” and personal experiences, such as the author’s encounter with cleaning horse stalls, underscores the importance of being aware of the anchoring effect in various aspects of life. Whether it’s negotiating a business deal, purchasing a product, or even determining the value of a house, having a clear understanding of your own parameters allows you to make informed decisions and avoid being unduly influenced by arbitrary anchors.
By: Mr. WWK