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.