Thinking About Thinking

Leave Something On The Table

Posted in Philosophy, Venture Capital by larrycheng on August 19, 2009

One of the best lessons I learned early in my career about negotiation is simple: always leave something on the table for the other party. 

To many, being a skilled negotiator means expertly and ruthlessly optimizing your self-interest.  Negotiating is about winning, or even better, beating the other party.  Satisfaction is knowing that you have left nothing on the table – you got everything the other party was willing to give and one more pound of flesh thereafter.  You have squeezed out every last dime.  I do not agree with this approach.

I think we all have to decide whether our primary objective is to win the negotiation or to win the relationship.  You can choose to go through life leaving a trail of dust comprised of those you interact with – seeing people as transactional resources to be drained at every opportunity.  Alternatively, you can go through life being fair and reasonable, not losing sight of the other party’s needs and appreciating that a good deal is one where both parties probably have given a little more than they wanted going in.  Both parties have left something on the table because they value the relationship as much as anything else. 

I really respect and prefer to work with those who adopt the latter approach.  I would say that all of my portfolio company CEO’s are of this mold.  They are people for whom a handshake still means something.  There is some old fashioned sensibility about them which is a high compliment in my mind.  They have the character to start off a negotiation with, “What’s important to you?”  There is no front-end posturing because that’s not necessary among friends and colleagues.  And they ultimately hope that as many people as possible become friends and colleagues over time. 

I’d like to think that operating in this manner, while perhaps not necessarily optimizing every short-term economic matter, does enhance long-term fiduciary value.  I guess it’s hard to know until you’ve seen a full body of work – but at least the ride will be an enjoyable one. 

12 Responses

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  1. Pete said, on August 19, 2009 at 7:38 pm

    I’ve come to this same conclusion working business development deals for software and internet companies. It’s important to get good terms, but execution determines whether two parties succeed together or fail. Good relationships are critical to high quality execution, and it is very difficult to save an adversarial relationship that was soured by an aggressive negotiation.

    A signed contract is the starting line, not the finish line!


    • larrycheng said, on August 26, 2009 at 12:38 pm

      Pete – couldn’t agree with this more: “A signed contract is the starting line, not the finish line!”.

  2. Des Pieri said, on August 20, 2009 at 5:47 pm

    Larry, your comment, “[My CEOs] are people for whom a handshake still means something” reminds me of Bob, one of the angel investors in a technology business I was in in the early nineties. Bob’s self-made wealth was from building and running commercial real estate in the DC area. Bob was a man who did everything — even building multimillion dollar commercial buildings — on a handshake. For Bob, it resulted in “enhanced long-term fiduciary value” because — even in down economies — his buildings were fully occupied.

    Though Bob was a modest man, I was able to extract this “handshake” story from him:

    The folks at McDonnell Douglas — not one of Bob’s current tenants — were looking to move their DC operation to larger office space. After lengthy discussion, Bob agreed to build a brand new building based on McDonnell Douglas’ commitment to be the anchor tenant and rent half the space. After they “shook on it” the MD guy said, “Let’s have the lawyers draw up the papers” to which Bob replied, “I’m willing to build the building based on the handshake. If we have the lawyers draw up a contract, then the lawyers can think of a dozen ways to break the contract in the future. But I’ve never found any lawyer who has figured out how to break a handshake.” So the deal was done.

    Months later, while the building was still under construction, Boeing announced that they were buying MD. As part of the acquisition, MD was no longer going to need the new office space; there was plenty of excess space in the building Boeing was currently renting. The MD guy was now worried; how was he going to tell his new boss at Boeing that MD was committed to this space in Bob’s building — and all based on a handshake? But before the MD guy called Bob, Bob called him and told him that Bob was going to let him out of the deal. Why? Because when they did the handshake there was no way the MD guy dreamed his company was to be bought. The MD guy was thrilled. And Bob was now stuck with a half-built building with no anchor tenant in a down economy.

    Weeks later the MD (now Boeing) guy called Bob to tell him that Boeing’s current landlord was playing hard ball. The Boeing lawyers found a way to get out of their lease early, which they would do if Bob was able to rent them the entire new building! He was!

    Because Bob was someone for whom “a handshake still meant something,” he was once again finishing a new building in a down economy that was fully rented.


    • This is one powerfully story. I always saw my father make deals on a handshake (I don’t recall him ever using and attorney for either of his companies) and now that I am running operations for startups, I wish “handshake” people were still alive every time another contract, MSA, etc. passes my desk.

  3. Twitted by venturehype said, on August 24, 2009 at 8:43 am

    […] This post was Twitted by venturehype […]

  4. Bernice Chee said, on August 25, 2009 at 4:12 pm

    Hi Larry,
    Nancy Kho directed me to your blog. I like what you’re writing!
    I also like the handshake story in one of your comments. My grandfather was a man who also built buildings on a handshake, but as a result, he was cheated many times. I guess there are people who still find it easy to “break a handshake”. My grandmother had fits over this, but my grandfather didn’t mind. He said that it was more important to be honest than to be rich. In the end, however, he was blessed multiple-fold for his integrity, financially as well as with a rich wealth of friends.

    • larrycheng said, on August 26, 2009 at 12:37 pm

      Bernice, I think for some people, a handshake means as much as a legal contract. But, I still think it’s wise business practice to legally document arrangements to protect against the scenarios that your grandfather went through.

  5. john abraham said, on August 26, 2009 at 10:21 pm

    Hello sheep. Personally I put my 9mm on the table, close by…that usually keeps the other side honest.

    Enjoy the reality.

    • larrycheng said, on August 26, 2009 at 10:23 pm

      Is it loaded?

    • john abraham said, on August 27, 2009 at 11:02 am

      Always. With a bullet in the chamber and the safety engaged. You’ve seen how that works.


  6. Jacinda Halaas said, on October 21, 2010 at 10:43 pm

    Very informative article. I’ve found your blog via Bing and I’m really happy about the information you provide in your articles. Btw your blogs layout is really messed up on the Kmelon browser. Would be cool if you could fix that. Anyhow keep up the good work!

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