The way that I think about negotiation, arbitrage, and frequent flyer miles all tie back to one scene in an obscure 1984 file, Over the Brooklyn Bridge.
Elliott Gould plays a man with a dream to open a restaurant in Manhattan who finds the perfect opportunity. He asks his uncle, played by Sid Caesar, for funding and Caesar agrees — on the condition he leave his Catholic girlfriend (Margaux Hemingway) and marry a “nice Jewish girl.” Seven year old Sarah Michelle Gellar has an uncredited role.
I haven’t watched this movie in almost 30 years but I still recall a scene where Sid Caesar takes Elliott Gould to meet with the men they’re making a deal with.
- Gould has already been given a price that he was inclined to accept. Caesar goes back and shaves $5,000 off the price.
- To Elliott Gould’s character this was pointless, it antagonized their deal partners over a rounding error in price.
- But Caesar asks where else in your life will you be able to make $5,000 with one hour’s work?
Here are the key lessons:
- In any deal you make both parties are coming out ahead (or else the deal wouldn’t be made). Almost every time both sides are leaving some value on the table.
- Don’t be lazy and leave value on the table. Make one last run at lowering the price or gaining some modest concession even when you’ve reached the point you’re happy with a potential deal. You can especially find something that’s low cost for the other party to provide but that you still value, easy to give and might as well ask for.
- But effort has a price (there’s an opportunity cost to time and energy) so the juice has to be worth the squeeze.
Most of us don’t make $5,000 per hour or even $250 per hour. In fact your hourly rate at work (if you’re salaried, as a rough approximation divide by 2080) doesn’t mean that each incremental hour at the margin is ‘worth’ your hourly rate.
Some hours are worth more (when you’re burning the candle at both ends, at the margin an additional hour should be more expensive, in some sense the theory behind overtime) but there are plenty of unproductive hours you can trade off too. Is playing video games or watching sports worth hundreds of dollars an hour to you, i.e. would you be willing to pay hundreds of dollars to play video games for an hour?
Do the math. Most opportunities to maximize are worth your time, but don’t drive 30 minutes to the lowest-cost place to buy money orders and save $10 on them if it costs you a few dollars in gas and an extra total hour of your time.
Over the Brooklyn Bridge cost just $4 million to make but box office receipts totaled less than $1 million. I should probably re-watch it, just for that scene. A big chunk of the value created by that movie wasn’t captured by the production company. It was captured by me.
There’s also a fine line between getting 11th hour concessions and losing trust with your deal partner for future deals. Consider what you give away down the line in opportunity cost. In some areas, like commercial real estate, you have a greater than trivial chance of having a deal opportunity from the same counterparty in the future.
I’m more of the mentality that unless you’re never going to be doing business with an individual in the future you’re better off building goodwill and a solid foundation for future endeavors and interactions. You also need to consider how last minute renegotiation will affect your reputation. Grasping at comparative small change can poison a relationship and then you’re stuck in a rotten position of your own making.
Forget all the philosophy, how did the movie end?
@ Gary — Being greedy doesn’t always work out in your favor. Sometimes the other party just walks…
Keep in mind that saving $1000 is more like saving $1400+ because (depending on where you live) that what need to earn to net $1000 (federal and perhaps state income tax, Medicare (x2 if you’re self employed) and sales tax on the amount not saved.
@Steve — my federal, state, and city income tax rate is closer to a sum of 50%. So when I save $1k it’s the same as earning $2k at work. Yes, I’m bragging that I make more than most people, and I live in a city cosmopolitan enough to have a city income tax.
Not every deal savings or cut is worth chasing. That being said I do like to maximize my benefits.
It’s an available in full on YouTube.
https://youtu.be/WP34y99KyVw?si=JHNANmXDZRKauKbm
Amusing to listen to corporate clowns talk about value of goodwill and dangers of not pushing too hard or offend the other side. Easy argument to make when it’s not your balance sheet. For people with little or no balance sheet (most Americans and characters in this movie) this is comically bad advice. The current deal may consume most of their balance sheet and they have zero visibility on how to pay for the next deal. Take the money now and use it productively. Will the corporate types of here happily take a lower total comp this year to build goodwill for next year? Unlikely. If you will, please come work for my company. I’ll happily underpay you and won’t lose a minute of sleep if you leave in a few months. It’s still free money to me. I zero problem with someone pushing for every last dollar. In cultures where employees know they won’t be penalized to speaking up, building goodwill is a less relevant currency.
@ HVC — You will also be dead like the rest of us within 80 years. Try being a nicer person.
Max Pallas posted the youtube link…here’s the link timed to the scene in question:
https://youtu.be/WP34y99KyVw?t=1848
@Gene — Bullshit. I’m not an old geezer with terrible genetics or a curmudgeon’s attitude like yours. I’ll be living long enough to outearn and dunk on your great-grandkids’ great-grandkids, assuming your lineage is unethical enough to even procreate. (A-holes like you should not be reproducing.)
@HVC
Look who’s being an a-hole. Congratulations Chump Fool!
So what happened to my nice comment about me being cautionary tale against negotiation greed? All names were fictitious like most the article pictures. Odd you would censor that, because its contrary to the article?
Being sure to extract the last nickel from every transaction reminds me that Delta charges premium prices for a premium product.
I kept the shiksa (never called my wife that), but now my mom likes her better than she likes me! And her grandkids are much nicer than her own kids with more love of Judaism. Who knew?
In my previous M&A work, once the price is negotiated, that’s it. If a more senior person comes back in and tries to lower it, the answer is a (nice) but firm no. If you say yes, you have just undermined not only trust between the two parties, but also trust between your initial negotiator and the new ‘senior’ person. If they insist, then walk away, because IMHO you simply can’t do business in the long run with those types of people.
As for ‘saving’ money, to make money, I would love someone to blog about simply earning more money. There are soooo many opportunities to make and earn more, and unlike saving money (where there is an absolute finite limit… i.e., you can’t save more than 100% of what you make, and it’s more like 30% max), that’s no so with making more.
With earning more, the sky is the limit! And I’ve also learned that the more I spend (and also actually give away), I make back 10x more in eventually. It’s amazing.
This was an excellent movie which I remember well. I see it’s on Amazon Prime and I’ll now watch it with my kids.
This article is a gem! The negotiation scene from “Over the Brooklyn Bridge” brings out some real-world wisdom. Your point about leaving value on the table resonates with everyday situations. And that reminder to make the extra effort for savings? I also try to save money by looking for different coupon websites like EMUCoupon a real time-saver for snagging discounts effortlessly. It’s like the low-cost, high-value move you talk about. Your insights are a game-changer for making every deal count! Cheers to smarter negotiations and savvy savings!