Most people are risk sensitive, especially when they are pushed to make a choice and money is involved. This sensitivity is fuelled by the attention we develop for negative aspects of things and bad news. The feeling of pain is also greater than the pleasure of gain.
If given a chance at an opportunity with a high potential payoff but an uncertain outcome, most will choose to stay home. In a study carried out in 2000, twelve subjects worked on a decision-making task with two alternatives: (a) a small reward at a high probability of reinforcement (non-risky option), and (b) a larger reward at a much smaller reinforcement probability (risky option), All but one subject showed a strong preference for the non-risky alternative.
Of course, some of us are perennial risk takers. Mark Zuckerberg is one of them. He thinks that “In a world of change, the bigger risk is not taking any risk.” Mark Zuckerberg’s case is an exception, though. I’m not saying that we don’t or shouldn’t take risks in life, but, in general, human beings avoid risk. In turn, negotiations often fail because a party feels that they’re being exposed to too much risk (financial loss, judgment by their peers, etc.). Risk is often the first obstacle to buying.
Negotiators are often over focused on their own needs and words. They swipe the risk of their counter-part under the rug.
Therefore, one of your missions as a negotiator is to clear away as much risk as possible and offer comfort to the people you negotiate with. For instance, you can offer some warranties to your counterpart, guarantee a purchase, show supportive facts, clarify your reputation, or even develop further rapport.
If people trust you, they will be more willing to take risks. While setting up a wine fund in 2011, I had to tour to raise money. Wine is an alternative asset, and many people are unfamiliar with it. Investors weren’t easy to convince. In the end, those who took the risk were the ones who trusted me and saw me as a credible person. They’d come to my dinners and see me associated with authorities in the industry. They’d see me investing my own money in the fund and would be convinced by the true performance of wine as an asset class in the past twenty years.
You should learn to detect risk-taking persons, but it’s important to remember that people may take risks in one domain but not another. Just because you drive over the speed limit doesn’t mean that you’re prepared to take financial risks.
Emotions such as anger or joy usually push people to take more risks. Lack of self-control makes people more daring as well. Some negotiators work to trigger these emotions in others for just this reason.
