Feedback to a Non-Competitive Bargainer

It's been a tough month to find the time to write a lot. I'm teaching a negotiation class to MBA's at Wharton, aside from all my other projects, and it's both great fun and very time consuming.

My students write weekly journal entries about their experiences in practice negotiation sessions. I use these journals to enter into a coaching dialogue with my students. For my feature article on this month's email newsletter, I want to quote some feedback I gave to one student, a very sweet and talented person whose natural style is not very competitive. I wanted to quote it because I have frequently given much this same feedback to others, and many newsletter subscribers may find it useful:

What you're experiencing is the power of the expectations game - your beliefs and expectations - on the outcome. Here's the psychology of how this may have played out for you: 1) "I'm too nice." 2) "I fear losing." 3) "She offered a good price - yay! I can relax." 4) "I had better throw another higher number out there." 5) "If I don't get my new number it's okay because I'm already ahead of where I feared I might be. I didn't lose." 6) "She can have her number."

If this is accurate, then by beginning with a fear based narrative, you set yourself up with an implicit goal: don't lose. Well, that makes sense: you're not a competitive type. But it's also true that, in life, you will sometimes be negotiating on behalf of others, and even if you're not competitive, very caring, relationship based people can adapt their expectations by recognizing 1) their needs and wants are as legitimate as anyone else's: you would not relax your attempt to help another, so why shortchange yourself? and 2) in many situations in life, the deals you strike will impact others, whose needs and wants are important, who rely on you to stand for them. Sometimes, non-competitive people can find the motivation to compete because they want to be able to serve others well. Maybe this will work for you, and maybe not, but I offer this set of ideas as a way to perhaps help you reframe your approach to negotiation, so that you can use your admirable relationship-based negotiating skills to maximum effect. There is much potential in you there.

We can go through the mechanics of the situation analysis of the bargaining interaction as you have done, and I think all your observations are on point. I have little to add other than to validate your thinking. But on another level, working to make technical adjustments will only go so far if you cannot find within yourself the space to believe that getting the best deal you can is a good thing. When we enter these situations "not to lose," poor outcomes are the habitual, self-fulfilling result. I will point out and emphasize, however, that you did very well getting the other side to make the first offer in this case (since your did not have an informational advantage going into the bargaining process). Well done.

I hope you take all this in the spirit in which it is intended. I'm quite pleased with your learning and progress. Keep it up! If my thoughts here feel off base to you, I certainly defer to your own knowledge of yourself as the final word: I don't know you well and am responding in large part through the lens of much of my experience working with many people over the years.

What's Really Propping Up The Economy

From Businessweek. This is just the beginning of the article. It's worth a whole read:

What's Really Propping Up The Economy

Since 2001, the health-care industry has added 1.7 million jobs. The rest of the private sector? None

COVER STORY PODCAST

If you really want to understand what makes the U.S. economy tick these days, don't go to Silicon Valley, Wall Street, or Washington. Just take a short trip to your local hospital. Park where you don't block the ambulances, and watch the unending flow of doctors, nurses, technicians, and support personnel. You'll have a front-row seat at the health-care economy.

For years, everyone from politicians on both sides of the aisle to corporate execs to your Aunt Tilly have justifiably bemoaned American health care -- the out-of-control costs, the vast inefficiencies, the lack of access, and the often inexplicable blunders.

Slide Show >>

But the very real problems with the health-care system mask a simple fact: Without it the nation's labor market would be in a deep coma. Since 2001, 1.7 million new jobs have been added in the health-care sector, which includes related industries such as pharmaceuticals and health insurance. Meanwhile, the number of private-sector jobs outside of health care is no higher than it was five years ago.

Sure, housing has been a bonanza for homebuilders, real estate agents, and mortgage brokers. Together they have added more than 900,000 jobs since 2001. But the pressures of globalization and new technology have wreaked havoc on the rest of the labor market: Factories are still closing, retailers are shrinking, and the finance and insurance sector, outside of real estate lending and health insurers, has generated few additional jobs.

Perhaps most surprising, information technology, the great electronic promise of the 1990s, has turned into one of the biggest job-growth disappointments of all time. Despite the splashy success of companies such as Google (GOOG ) and Yahoo! (YHOO ), businesses at the core of the information economy -- software, semiconductors, telecom, and the whole gamut of Web companies -- have lost more than 1.1 million jobs in the past five years. Those businesses employ fewer Americans today than they did in 1998, when the Internet frenzy kicked into high gear.

ATTITUDE SHIFT
Meanwhile, hospitaL administrators like Steven Altschuler, president of Children's Hospital of Philadelphia, are on a hiring spree. Altschuler has added the equivalent of 4,000 new full-time jobs since he took over six years ago, almost doubling the hospital's workforce. To put this in perspective, all the nonhealth-care businesses in the Philadelphia area combined added virtually no jobs over the same stretch.

Altschuler plans to add 3,000 more employees over the next five years as the hospital, one of the nation's leading pediatric centers, spends $1.7 billion to expand. Next up is a new 1.2 million-square-foot research facility that will be packed with well-paid scientists and support staff. "Health care is the major engine for the economy of the city of Philadelphia," says Altschuler.

The City of Brotherly Love is hardly alone. Across the country, state and local politicians, desperate for growth, are crafting their economic development strategies around biotech and health care. California will pour $3 billion into stem cell research over the next 10 years, and other areas are on the same path. "Our downtown business leaders and politicians have traditionally considered health care as a cost center, not as an economic engine," says Baiju R. Shah, a former McKinsey & Co. consultant who runs Cleveland's BioEnterprise, a nonprofit founded four years ago to stimulate the local health-care and bioscience industries. "But people are waking up."

What they're waking up to is the true underpinnings of the much vaunted American job machine. The U.S. unemployment rate is 4.7%, compared with 8.2% and 8.9%, respectively, in Germany and France. But the health-care systems of those two countries added very few jobs from 1997 to 2004, according to new data from the Organization for Economic Cooperation & Development, while U.S. hospitals and physician offices never stopped growing. Take away health-care hiring in the U.S., and quicker than you can say cardiac bypass, the U.S. unemployment rate would be 1 to 2 percentage points higher.

Almost invisibly, health care has become the main American job program for the 21st century, replacing, at least for the moment, all the other industries that are vanishing from the landscape. With more than $2 trillion in spending -- half public, half private -- health care is propping up local job markets in the Northeast, Midwest, and South, the regions hit hardest by globalization and the collapse of manufacturing (map).

Health care is highly labor intensive, so most of that $2 trillion ends up in the pockets of workers. And at least so far, there's little leakage abroad in terms of patient care. "Health care is all home-produced," says Princeton University economist and health-care expert Uwe Reinhardt. The good news is that if the housing market falls into a deep swoon, health care could provide enough new jobs to prevent a wider recession. In August, health-services employment rose by 35,000, double the increase in construction and far outstripping any other sector.

John Maynard Keynes would nod approvingly if he were alive. Seventy years ago, the elegant British economist proposed that in tough times the government could and should spend large sums of money to create jobs and stimulate growth. His theories are out of fashion, but substitute "health care" for "government," and that's exactly what is happening today.

Make no mistake, though: The U.S. could eventually pay a big economic price for all these jobs. Ballooning government spending on health care is a major reason why Washington is running an enormous budget deficit, since federal outlays for health care totaled more than $600 billion in 2005, or roughly one quarter of the whole federal budget. Rising prices for medical care are making it harder for the average American to afford health insurance, leaving 47 million uninsured.

Moreover, as the high cost of health care lowers the competitiveness of U.S. corporations, it may accelerate the outflow of jobs in a self-reinforcing cycle. In fact, one explanation for the huge U.S. trade deficit is that the country is borrowing from overseas to fund creation of health-care jobs.

There's another enormous long-term problem: If current trends continue, 30% to 40% of all new jobs created over the next 25 years will be in health care. That sort of lopsided job creation is not the blueprint for a well-functioning economy. One solution would be to make health care less labor-intensive by investing a lot more in information technology. "Low productivity in health is mostly a product of low investment," says Harvard University economist Dale Jorgenson.

For now, though, health-care hiring is providing a safety net in areas where manufacturing and retailing are no longer dependable sources of jobs. Take Johnstown, Pa., a town that once hummed with activity from local steel mills, coal mines, and nearby factories. As most of these businesses closed, the town emptied out, going from a population of 63,000 in 1950 to 23,000 today.

Now, Conemaugh Health System, with about 5,000 workers, is the biggest employer in town. "Everyone has a Conemaugh parking sticker on their car," says Linda D. Suter, 48, who's in her second year at the nursing school Conemaugh operates. Suter's dad worked at a factory in a nearby town, now closed, that made backyard swing sets for kids.

Frank Kosnowsky sold appliances at the Sears (SHLD ) in Johnstown for 10 years, starting right out of high school. But he got fed up with the way the company was changing and started thinking about going to nursing school. "One day I had a disagreement with my boss, and the application went right in," says Kosnowsky, 29. "I wanted something that had a future." He worked part-time at Sears while he went to nursing school. Now, three years later, he's the first and only male nurse working at Conemaugh's neonatal intensive-care unit -- a career far different than that of his coal miner dad.

Suter and Kosnowsky live smack in the middle of the "Health Belt" that stretches from New England down through New York and Pennsylvania, across the Midwest and down through most of the South. These are areas where health care has been the major source of job growth over the past five years.

Nowhere is that truer than in Cleveland. There, Cleveland Clinic, with 29,000 employees, is the biggest employer by far. Next-largest is another hospital system, University Hospitals Health System, with 21,600 staffers. Then comes insurer Progressive Corp. (PGR ) and KeyCorp., each with fewer than 10,000 workers in the area. Cleveland Clinic's performance is pretty good for an outfit that started in 1921 with four docs in a building they planned to turn into a hotel if their vision didn't pay off.

Beyond its immediate employment tallies, the Clinic has a huge multiplier effect on the local economy. CEO Dr. Delos M. Cosgrove says it supports perhaps 75,000 jobs in all in the area, ranging from Clinic staffers to workers at hotels and restaurants -- which patients and their families use in more than 2.9 million patient visits per year -- to 3,000 suppliers to the Clinic.

Only a few years ago manufacturers were Cleveland's job engines. Companies such as machine-tool giant Warner & Swasey Co. don't even exist anymore. Conglomerate TRW was sold in 2002, and parts of it moved away. Fittingly, the Clinic now occupies its former headquarters, which TRW donated.

Health care has been one of the few economic bright spots in the Detroit area, too. Nancy M. Schlichting heads the sprawling Henry Ford Health System, founded by the great man himself in 1915. Schlichting is overseeing the construction of a new 300-bed hospital in West Bloomfield, Mich., a suburb of Detroit, which will eventually generate the equivalent of 1,200 full-time jobs. This expansion comes at a time when Ford Motor Co. (F ) is considering big layoffs.

Then there's North Carolina. Since 2001 it has seen a total job increase of 24,000, or 0.6%. Meager enough -- but take out the 60,000 jobs added by health care, and the state's jobs would have decreased by 36,000. Employment in manufacturing, retailing, trucking, utilities, and information all fell. And construction added only 5,000 jobs, a mere fraction of health care's contribution.

Oddly enough, the retirement meccas of Florida and Arizona are among the least dependent on health-care jobs for growth. Over the past five years the two states have gotten only 10% and 15%, respectively, of their new jobs from health-care services -- hospitals, doctor's offices, and nursing homes. Phoenix showed a job gain of 240,000, but only 30,000 were in health care. That's partly because the influx of elderly has been balanced by a rise in younger workers, too.

Is the health-care economy a good deal for workers? It is for Patricia A. McDonald, a second-year student nurse at Conemaugh. Before going to nursing school, McDonald, 46, sold insurance door-to-door, often driving close to 1,000 miles a week in rural areas to make cold calls. Her take in sales commissions was $35,000 to $40,000 a year, but that was before deducting expenses. Registered nurses in the Johnstown area, by comparison, are paid an average of almost $43,000 -- with no traveling. "This will be much better," says McDonald.

Unlike many other industries, health care offers a full range of jobs, from home health aides making very low wages through technicians and nurses making middle-class salaries up to well-paid doctors. On average, annual pay in private health services is $43,700, slightly above the private-sector average of $42,600.

World Oil Prices Down

My friend Hale Stewart sends the following today via email:

Gas prices are coming down for several reasons:

1.) The end of the Israeli -- Palestinian conflict.

2.) High US inventories of oil, gasoline and other oil derivatives.

3.) The end of the summer driving season.

4.) The EU/Iran chief negotiator announced today that "misunderstandings" with Iran were cleared up. I have no idea what that means. This is a big event because the Iranian situation has created a floor in oil prices for the last 6 months or so.

A drop in oil prices will ease inflationary pressures in the US. This will encourage the Federal Reserve to maintain its "wait and see" attitude regarding US interest rates.

However, it's always important to remember the oil market is extremely volatile. A random event could completely change this scenario. In addition, the oil market is technically oversold right now, implying a rebound to the previous floor of around $70/bbl may be in the cards.

An easing of inflationary pressures will be more than welcome as the domestic US housing market corrects itself. Hoefully, consumer confidence won't become too battered, though it's already been showing signs of deterioration.

Quotes of Note

"Do not look back in anger, or forward in fear, but around in awareness." -- James Thurber

"Every man has a right to his opinion, but no man has a right to be wrong in his facts." -- Bernard Mannes Baruch

"We should be careful to get out of an experience only the wisdom that is in it - and stop there; lest we be like the cat that sits down on a hot stove-lid. She will never sit down on a hot stove-lid again - and that is well; but also she will never sit down on a cold one anymore." -- Mark Twain

Pop! Goes the Housing Market

Well, I'm back from the Labor Day weekend. For those of you in the United States, I hope you enjoyed the late summer holiday. Now's it's back to documenting the housing market slowdown in the US. This is from Bloomberg today, with emphasis added in bold:

U.S. Home-Price Gains Slow as Housing Slump Deepens (Update4)

By Kathleen M. Howley

Sept. 5 (Bloomberg) -- U.S. home-price growth slowed during the second quarter from a year earlier in the sharpest three- month plunge on record, according to a government report issued today that indicates this year's housing slump is deepening.

"The wheels are coming off the housing market,'' said Scott Anderson, an economist at Wells Fargo & Co. in Minneapolis.

Prices for single-family homes rose an average of 1.17 percent during the period, compared with 3.65 percent growth in the second quarter of 2005, according to a report issued today by Office of Federal Housing Enterprise in Washington. The drop was the biggest since the agency began keeping records in 1975. The report doesn't give an average price, only the percent of change.

The quarterly slowdown came during the "spring selling season,'' when about half of a year's home sales typically occur, suggesting the housing market may be slowing more rapidly than economists including Anderson initially predicted. In 2005, the last of five record years for home sales and price gains, the second quarter was the strongest, according to Ofheo data.

"The housing market is cooling in a very significant way,'' Ofheo Director James Lockhart said in today's report.

Five states showed price declines during the quarter, led my Michigan, down 0.72 percent, Massachusetts, falling 0.44 percent, and Maine, dropping 0.2 percent. The biggest gainers were New Mexico, up 4.22 percent, Oregon, rising 3.99 percent, and Idaho, increasing 3.78 percent. New York rose 0.9 percent and New Jersey gained 1.85 percent.

Overstating Gains?

The housing sector may be weaker than the report indicates because the index excludes condominium and luxury home sales, said Robert Mellman, an economist at JP Morgan Chase & Co. in New York. The index measures changes of values for single-family properties that have loans bought or securitized by Fannie Mae or Freddie Mac. It excludes houses that have mortgages higher than $417,000, the maximum allowed in 2006 for loans bought by the government-chartered companies.

"To the extent that pricing at the high end of the market and pricing for condos are especially weak, the Ofheo index may be overstating price gains,'' Mellman said in a note to clients.

Sales of existing houses and condominiums declined to an annual rate of 6.69 million in the second quarter from a 7.19 million pace a year earlier, the National Association of Realtors said on Aug. 15. The median price for a condominium dropped 0.3 percent to $225,800 from a year ago, the first decline on record, while the median for a single-family home rose 3.7 percent to $227,500, the slowest pace in six years.

Contracts Plunge

Contracts to buy previously owned homes plunged in July by the most since the terror attacks of September 2001, the real estate trade group said in a Sept. 1 report. Its index of signed purchase agreements fell 7 percent to 105.6 after no change in June.

Home sales and construction account for 6 percent of the U.S. gross domestic product, said Michael Darda, chief economist at MKM Partners in Greenwich, Connecticut. Adding ancillary purchases such as new furnishings and renovations, the housing sector influences as much as 23 percent of GDP, according to the Joint Center for Housing Studies at Harvard University in Cambridge.

Rising home prices also spur consumer spending by loosening the wallets of homeowners who feel wealthier as their net worth increases, said Drew Matus, economist at Lehman Brothers Inc. in New York.

Consumer Spending

"If you believe consumers are spending some of the money they think they're getting from their homes, then you can anticipate if those home prices level off or fall,'' that consumer spending growth may slow, Matus said.

Benny Goodman: Sing Sing Sing

A bit of an old swing classic, with drum work by Gene Krupa and Harry James doing a trumpet solo: