Become a Smarter Negotiator By Using Prospect Theory

Want to make someone an offer they can't refuse? Understand how our minds are hung up on loss aversion, says former FBI negotiator Chris Voss.

In 2002, Daniel Kahneman and Amos Tversky won the Nobel Prize in Economics for a behavioral theory they created and refined between 1979 and 1992: prospect theory. It explained how people weigh up risks in decision making, and part of its findings revealed that we are inherently loss averse, meaning we give at least twice as much decision-making weight to the idea of losses than gains. Losing $5, explains former FBI negotiator Chris Voss, feels like losing $10, and the prospect of gaining $5 will feel joyless coompared to the fear of losing $5. This can be leveraged in negotiations simply by pointing out what is going to be lost if a deal isn’t made, or something isn’t done. The "crazy mathematics" we do in our heads isn’t rational, but understanding it will give you an upper hand in your next negotiation. Chris Voss's book is Never Split the Difference: Negotiating as if Your Life Depended On It.

Keep reading Show less
Quantcast