Laying the Foundations For a Successful Deal admin December 4, 2011

Laying the Foundations For a Successful Deal

(More Ruminations on the U.S. Debt Deal and Your Divorce)

Why was the U.S. debt deal clever?

So in the last article, we saw how the negotiators on the U.S. debt ceiling did a very clever trick to make sure that both sides kept to the agreement: they included a clause that if no deal was made by a certain deadline, an alternative scenario would be triggered automatically, a scenario that neither party wanted.

There was actually something else that was nice about it, too. Namely, that in the first phase of the talks back in the summer, whilst they did not reach an agreement, they did draw up an agreement about the agreement.

What do we mean by an agreement about the agreement?

If you are involved in a contentious negotiation where emotions are high and very different perspectives involved, it can be extremely difficult to reach a deal. However, coming to an agreement about the agreement can be easier and, once in place, makes the final deal much easier to reach.

For example, you are divorcing and you know you have to divide out the money, the records, the pets and the kids. It’s going to be tough, isn’t it: “Yes, actually, I do want Kevin and the Bowie bootleg…Ok, you get Kevin, I get Bowie and the dog…What do you mean, you don’t want Kevin?”.

Better to not dive straight into the horse-trading, instead start by agreeing a few principles up front. Agree first, for example, that both sides want to avoid enriching the lawyers and impacting the kids. Agree, therefore, that it should be conducted amicably and fairly. Agree, next, what your definitions of fair might be and how you might be able to come to a fair division. Agree what to do if there are any sticking points. And so on.

These kinds of discussions up-front are much easier to agree on (after all, nothing of content is yet at stake). And once done, resolving the actual details of the deal is much more straightforward. What is more, they usually set the emotional tone of the discussions at a much calmer level.

Why was the debt deal not so clever?

They drew up an agreement about the agreement and both sides

were incentivised to settle because the alternative was too awful to contemplate.

And yet, still it failed – no deal was reached. How comes? Well, that deserves an article to itself.