We are all going to learn how to negotiate
Sunday, January 1, 2017 9:16 AM
I had the privilege in the early 1980s to work for an engineer named Ron.
Ron and I were tasked with rebuilding a paper machine in Wickliffe, Ky. (out west, right at the confluence of the Ohio and Mississippi rivers). Ron was the project manager and I was his assistant. Our budget was $40 million, which sounds like a lot until you realize how vast the scope of the project was.
Ron’s father had been a used car salesman. Many a time, I told Ron that negotiating must have been in his DNA. Further, I often told him that he apparently never paid retail for a loaf of bread or a pair of shoes.
I sat in amazement as he and I worked with a boatload of suppliers on our project, and Ron negotiated prices, terms and delivery. I had never seen anything like it.
The crowning achievement was when higher-ups in New York told us we had to buy a certain piece of equipment. It was late in the project’s development phase. Our budget was nearly all spent and we had $1 million allocated for this item. The problem was the supplier wanted $2 million.
The supplier did not know we were required to buy from them. I watched, slack-jawed, while Ron got this supplier to sell us this item for $1 million in a period of about five hours.
Again, I had never seen anything like it in my life.
We are about to all learn the lessons of negotiation – if we are paying attention. Our teacher will be President-elect Donald Trump.
Look what he has done already and he isn’t even in office yet. Carrier is keeping about 1,000 jobs in Indianapolis. Ford is rethinking sending jobs to Mexico. Apple is thinking about building iPhones in the United States. US Steel says they may rehire 11,000 employees. But the coup de grace, up to this point, has been Boeing backing off on the price of the new Air Force One.
What he is showing us is the difference between free-market capitalism and a regulated economy. Those comfortable with the idea of a regulated economy do not understand this. A regulated economy will allow you to walk; a free-market economy will allow us to fly. We are about to fly.
When there are negotiations, sellers become clever in determining how to cut costs. In a regulated economy, sellers become clever at how to raise costs. Sellers have always been great negotiators in a regulated economy, for they use every regulation as an excuse to raise prices.
As I wrote about a few weeks ago ("Oh, for the days of Jimmy Carter"), the most regulated and most expensive piece of our economy is the health care industry. As I further stated, it is also one of the most disastrous in terms of danger to human life.
If hospitals published their prices and were forced to publish their rate of deaths due to errors, health care would go from a regulated industry to a free-market industry with lower death rates and significantly lowers costs. I’ll hazard a guess that this industry would drop its costs to the GDP by 50 percent.
We are just getting started on the negotiation education that the Trump presidency and his family are going to bring to us. Just before I started writing this column, I was reading a story about Ivanka Trump, husband Jared, and their children flying Jet Blue in coach (it was noteworthy because they were heckled by a passenger). This is not exactly negotiations, but what a great example. Compare this to the vacation costs of the current White House occupant.
Again, while not negotiations, this sets the tone for negotiations.
One thing I learned from Ron was this – start by asking the seller why they can’t just give you the goods or services they are offering. One way or another, Ron ask this question every time we sat down in negotiations. And he wasn’t embarrassed to do so.
I think Trump has the same skills, and if we are all watching and listening, we can pick up on this and apply it directly to our own personal dealings while the Trump administration goes about getting good deals for the taxpayers.
Jim Thompson, formerly of Marshall, is a graduate of Hillsboro High School and the University of Cincinnati. He resides in Duluth, Ga. and is a columnist for The Highland County Press.