Negotiation Technique: Understand Our Perceptions of Gains and Losses | FBI Negotiator Chris Voss

So I refer to bending reality as understanding how people view losses and gains. And there's Nobel Prize winning behavioral economics theory that says people put a value of losses on at least twice what an equivalent gain is. And that's how people get their valuations distorted.

And actually the guys that came up with that theory said that losses are twice as heavy as gains, but then they've unofficially said really it's five to seven times as much; we just wrote down twice as much because we wanted fewer arguments. So losing $5 stings at least twice as much as gaining $5. Losing $5 feels like losing $10 or even $35; it's just a ridiculous skewing in our brains over loss.

Which is why when you're pitching a gain, if you think that what you're offering is worth $100 and you're only charging $80, well, based on prospect theory, they're not going to make that exchange. While to us that makes all the sense in the world because it's a gain. But if paying $80 for something, it's got to be worth at least $160 for them to want it. I mean, it's this crazy math that goes on in our heads over gains and losses. It just is. There's nothing we can do about it.

So understanding that, first of all, when I began to use an accusations audit to try to diminish those fears of lost, it gets a person back more into even gains. And then I realize that people are more likely to do things to avoid losses. In a negotiation, all I have to point out is what's actually going to be lost if this isn't done.

In some ways in a business world, a reverse of this is what I call taking people hostage to the future. If I can convince you that if you do all this work for me for nothing, that all this business will come your way as a result, which is actually what's done a lot in the business community.

Come and do this business for us at a cut rate and we'll introduce you to all this business, and you'll be fabulously wealthy as a result of our referrals. Well, if you buy into getting all that money for those referrals, now you're being taken hostage to the future and you'll do the business for nothing because you're afraid of losing those referrals. That's pretty common.

And after a while, people tend to catch on to it. The much wiser approach is for me to simply point out how not doing this deal is, in fact, costing you every day. If you do nothing, you lose. If you don't address this issue, it's going to cost to you.

So when the status quo becomes a loss, then people are more likely to make a decision to make a move because of prospect theory; just the fear of loss in our head is huge.