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“There’s no actual skill called business” - @naval
You can use these concepts to understand what game you’re playing, and how the best optimize for it.
Buying or selling a business is a highly emotional process, so optimize for long term, positive sum games.
Transcript
The most powerful concept nobody taught you in school is game theory. Here are three that will make you a disgustingly good negotiator. Number one, prisoner's dilemma. You and your best friend just got arrested. You're in separate cells with no communication. A detective walks in and offers you both a deal. Betray your friend. You get to walk free, but they get ten years. Stay silent, you both get one year. But here's the catch. If you betray each other, you both get five years. Much worse than if you just trusted each other and stayed quiet. Every negotiation runs the same calculation. The best negotiators know that cooperation beats self protection, but only after trust is established. Number two, ultimatum gain. You agree to buy a business for a million dollars. Weeks into due diligence, you've spent $8 on attorney fees, and the seller calls you asking for $50,000 more on the purchase price. You can accept the terms, or you can walk away and nobody gets a deal. The rational move might be accepting. You're already deep into the process on a million dollar deal, and 50,000 over ten years is doable. But humans aren't purely rational. Fairness better, and being taken advantage of is often worse than losing the deal altogether. So buyers reject out of principle and both people walk away with nothing. Three, zero sum. Most people walk into a negotiation thinking that one person wins and one person loses. That's zero sum thinking and it'll cost you deals. If the seller wants a price you can't justify, bridge the gap with a forgivable seller note no earn out or let them roll some equity. Suddenly, the seller gets what they want over time, and you can preserve your cash at close. Both sides win and your downside is protected. The pie just got bigger. That's non tier sum thinking, and it's the difference between buyers who close deals and buyers who couldn't close a good. Baltimore.