Greek Hubris
Trust is the most important asset in any negotiation because if you can't rely on the other 'players' to do what they say they will do, however gracelessly, then there's not much point in doing business since any agreement that is struck is bound to unravel, leaving everyone back where they started, arguably in an even worse position.
Negotiations between trade unions and employers can be fraught and difficult, yet normally these talks are conducted in a convivial, friendly spirit because even though the parties may come from competing positions, they have more that unites rather than divides them.
What is clear that the negotiating tactics of the Syriza-led government in Greece got just about everything wrong, whereas the apparently much more difficult task of agreeing a nuclear deal with Iran, via a host of rival world powers, seems to have succeeded.
To my mind the reason for Greece getting into such a terrible mess is pretty obvious: no one trusts the Greeks further than they could carry a grand piano up Mount Olympus.
Not only that, but Alexis Tsipras and his ridiculous finance minister Yanis Varoufakis came to the negotiating table with little but threats and a misplaced sense of hubris which backfired in spectacular fashion when the chips were finally laid down.
So as Daniel Finkelstein argues in this piece for The Times, we all have egos and personal or national pride, and while it's perfectly acceptable to bang the table during a heated negotiating session, metaphorically speaking, characterising your negotiating partners as 'terrorists' and 'Nazis' will never ever help you get the job done.
As Greece shows, threats will get you nowhere
By Daniel Finkelstein - The Times
In his EU negotiations the prime minister is more likely to win concessions by trustworthy and generous behaviour
The moment I learnt that Greece had appointed an expert in game theory as its finance minister, I knew it meant trouble. Yet I also thought perhaps we would learn a lesson or two that might help Britain’s own negotiations. And so it has proven.
It has always amused me that John Von Neumann, the man who in 1928 originally developed game theory as a formalised method of playing poker, was not, in practice, all that good at cards.
Yet while amusing, it is not entirely surprising. Game theory — the development of optimal strategies to act in situations where others are also creating strategies and may have different objectives to you — is immensely complicated in theory and even more complicated when you try to apply it.
It is only ever possible to find a clean, confident solution to a game theory problem when you simplify it a great deal for academic use. And even then the optimal solution often involves everybody going to jail or killing each other. In game theory, a satisfying end to the game, providing it with a stable equilibrium, can come when everyone playing it is dead.
Von Neumann became one of the leading proponents (the logician and mathematician Bertrand Russell was another) of a preventive war against the Soviet Union. He argued that the United States should drop a nuclear bomb on the Soviets before the Soviets developed their own bomb. He could, he said, show mathematically that this was a sound idea. “If you say why not bomb them tomorrow, I say why not today? If you say today at five o’clock, I say why not one o’clock?”
So the fact that Yanis Varoufakis is the author of a classic game theory textbook always seemed to me to promise that tears would flow.
Varoufakis believed that if his negotiating partners — the Germans, the IMF, the Commission — concluded he was a bit bonkers, a bit reckless, they would appreciate that he might crash the Greek economy and bring down the whole edifice of the euro on top of him. Persuading your adversary that you are mad is a classic game theory gambit. Richard Nixon tried using it in Vietnam.
Instead — predictably — what actually happened is that the Germans, the IMF and the Commission decided that if Varoufakis was bonkers and reckless maybe, erm, they shouldn’t lend the bonkers guy any money. He might be bonkers enough not to pay it back.
Appointing as finance minister the professor of double bluffing in the university’s department of bankruptcy studies turned out to be a disaster for Greece, securing a far worse deal than would have been available at the outset of discussions.
What does this mean for Britain? It means that something that is often asserted as common sense turns out to be quite the opposite of that.
It is often suggested that David Cameron ought to tell European leaders that if he cannot secure a good deal for Britain, he would lead his country out of the EU. If he doesn’t threaten that, goes the argument, how can he expect to make progress? They have to know that he is serious. Surely this is obvious.
Greece’s experience shows the flaw in this apparently simple reasoning.
When game theorists model single encounters between individuals with differing interests, the outcome is commonly that for both sides it is rational to cheat the other.
Yet when the game is repeated, this is no longer the case. In repeated games, the best strategy often turns out to be generosity and reciprocation. Trust plays the critical role. People reward trustworthy and generous behaviour by themselves acting in a trustworthy and generous way.
In his recent book Give and Take, the psychologist Adam Grant notes that being a “giver” rather than a “taker” can be surprisingly effective. Seeking advice from the person you are dealing with, using tentative rather than assertive ways of speaking, seeing things from the other person’s point of view, all work to secure better sales, bigger promotions and higher salaries.
Grant is not advocating being a doormat. He acknowledges that “givers” will often try to walk all over “takers”. But he does argue the people tend to reciprocate concessions and that trust is powerful.
By refusing to threaten to leave the European Union, David Cameron is sacrificing relatively little in the negotiations. After all, other nations are aware that Mr Cameron may lose a referendum if the deal isn’t right. So the threat is there without him making it explicitly.
And there is much to gain by not making it explicitly. The Greek crisis has demonstrated that the EU is incredibly anxious to remain together and it will do much to make that happen. It has also demonstrated that, in the end, there are limits to that instinct and you can reach those limits pretty quickly when trust breaks down.
By maintaining a sense of trust and community, David Cameron can achieve a much better deal than by an ultimatum. This doesn’t mean that the deal he gets will necessarily be acceptable to him or to the British people. It doesn’t — in the end — take away completely his right to say no to it or take away at all the country’s right to do that. It does mean that while negotiations proceed it is better they do so in an atmosphere of co-operation rather than in an atmosphere of crisis and last-chance saloons.
There is an eccentric proposal with which Boris Johnson’s name has been associated, that Britain should seek two referendums, turning down a first deal and then, after coming back for more, voting through an amended treaty.
Yet the others in the negotiations are only human. They have egos and pride. They have voters to satisfy. They have their own national interests. They have their own newspapers to give quotes to and editorial writers to convince. Understanding that — looking at how they feel about the negotiations — is vital to getting a good deal.
How would they feel about us coming back for more? When trust is exhausted and they begin to feel that much is being asked without much being given, the risk of a two-referendum approach are huge.
For those who couldn’t care about Cameron’s talks, and don’t think they will yield much anyway, none of this matters, of course. And most of the people urging him to threaten withdrawal fall into this category. They actually want failure.
Yet those who want the negotiations to succeed should not be urging David Cameron to play one of Varoufakis’s games.
The moment I learnt that Greece had appointed an expert in game theory as its finance minister, I knew it meant trouble. Yet I also thought perhaps we would learn a lesson or two that might help Britain’s own negotiations. And so it has proven.
It has always amused me that John Von Neumann, the man who in 1928 originally developed game theory as a formalised method of playing poker, was not, in practice, all that good at cards.
Yet while amusing, it is not entirely surprising. Game theory — the development of optimal strategies to act in situations where others are also creating strategies and may have different objectives to you — is immensely complicated in theory and even more complicated when you try to apply it.
It is only ever possible to find a clean, confident solution to a game theory problem when you simplify it a great deal for academic use. And even then the optimal solution often involves everybody going to jail or killing each other. In game theory, a satisfying end to the game, providing it with a stable equilibrium, can come when everyone playing it is dead.
Von Neumann became one of the leading proponents (the logician and mathematician Bertrand Russell was another) of a preventive war against the Soviet Union. He argued that the United States should drop a nuclear bomb on the Soviets before the Soviets developed their own bomb. He could, he said, show mathematically that this was a sound idea. “If you say why not bomb them tomorrow, I say why not today? If you say today at five o’clock, I say why not one o’clock?”
So the fact that Yanis Varoufakis is the author of a classic game theory textbook always seemed to me to promise that tears would flow.
Varoufakis believed that if his negotiating partners — the Germans, the IMF, the Commission — concluded he was a bit bonkers, a bit reckless, they would appreciate that he might crash the Greek economy and bring down the whole edifice of the euro on top of him. Persuading your adversary that you are mad is a classic game theory gambit. Richard Nixon tried using it in Vietnam.
Instead — predictably — what actually happened is that the Germans, the IMF and the Commission decided that if Varoufakis was bonkers and reckless maybe, erm, they shouldn’t lend the bonkers guy any money. He might be bonkers enough not to pay it back.
Appointing as finance minister the professor of double bluffing in the university’s department of bankruptcy studies turned out to be a disaster for Greece, securing a far worse deal than would have been available at the outset of discussions.
What does this mean for Britain? It means that something that is often asserted as common sense turns out to be quite the opposite of that.
It is often suggested that David Cameron ought to tell European leaders that if he cannot secure a good deal for Britain, he would lead his country out of the EU. If he doesn’t threaten that, goes the argument, how can he expect to make progress? They have to know that he is serious. Surely this is obvious.
Greece’s experience shows the flaw in this apparently simple reasoning.
When game theorists model single encounters between individuals with differing interests, the outcome is commonly that for both sides it is rational to cheat the other.
Yet when the game is repeated, this is no longer the case. In repeated games, the best strategy often turns out to be generosity and reciprocation. Trust plays the critical role. People reward trustworthy and generous behaviour by themselves acting in a trustworthy and generous way.
In his recent book Give and Take, the psychologist Adam Grant notes that being a “giver” rather than a “taker” can be surprisingly effective. Seeking advice from the person you are dealing with, using tentative rather than assertive ways of speaking, seeing things from the other person’s point of view, all work to secure better sales, bigger promotions and higher salaries.
Grant is not advocating being a doormat. He acknowledges that “givers” will often try to walk all over “takers”. But he does argue the people tend to reciprocate concessions and that trust is powerful.
By refusing to threaten to leave the European Union, David Cameron is sacrificing relatively little in the negotiations. After all, other nations are aware that Mr Cameron may lose a referendum if the deal isn’t right. So the threat is there without him making it explicitly.
And there is much to gain by not making it explicitly. The Greek crisis has demonstrated that the EU is incredibly anxious to remain together and it will do much to make that happen. It has also demonstrated that, in the end, there are limits to that instinct and you can reach those limits pretty quickly when trust breaks down.
By maintaining a sense of trust and community, David Cameron can achieve a much better deal than by an ultimatum. This doesn’t mean that the deal he gets will necessarily be acceptable to him or to the British people. It doesn’t — in the end — take away completely his right to say no to it or take away at all the country’s right to do that. It does mean that while negotiations proceed it is better they do so in an atmosphere of co-operation rather than in an atmosphere of crisis and last-chance saloons.
There is an eccentric proposal with which Boris Johnson’s name has been associated, that Britain should seek two referendums, turning down a first deal and then, after coming back for more, voting through an amended treaty.
Yet the others in the negotiations are only human. They have egos and pride. They have voters to satisfy. They have their own national interests. They have their own newspapers to give quotes to and editorial writers to convince. Understanding that — looking at how they feel about the negotiations — is vital to getting a good deal.
How would they feel about us coming back for more? When trust is exhausted and they begin to feel that much is being asked without much being given, the risk of a two-referendum approach are huge.
For those who couldn’t care about Cameron’s talks, and don’t think they will yield much anyway, none of this matters, of course. And most of the people urging him to threaten withdrawal fall into this category. They actually want failure.
Yet those who want the negotiations to succeed should not be urging David Cameron to play one of Varoufakis’s games.
