FEW WILL CLAIM TO have ever heard of the Preliminary and Secret Treaty between the French Republic and His Catholic Majesty the King of Spain, Concerning the Aggrandizement of His Royal Highness the Infant Duke of Parma in Italy and the Retrocession of Louisiana.1 And yet, this treaty, signed between France and Spain in 1800, would soon play a very important role in history. On the basis of this agreement, Spain returned to France the vast Louisiana Territory in North America that France had ceded to Spain in 1763 after France was defeated in the French and Indian War.
During the negotiations between Spain and France, Napoleon’s ambassador allegedly gave “the most solemn assurances” that France would not sell or cede the Louisiana Territory to any other country, but rather would return it to Spain if France wanted to dispossess it. When Napoleon decided to turn around and sell the land to the United States, it came as a surprise to the Spanish, the Americans, and even many in France. In 1803, the United States bought the Louisiana Territory from France for approximately four cents an acre. With the Louisiana Purchase, the United States doubled in size, acquiring land that would make up all or some of 15 future states.
The Spanish were furious, claiming that “the sale of this Province to the United States is founded in the violation of a promise so absolute as that it ought to be respected,” and asked the United States to “suspend the ratification and effect of a treaty which rests on such a basis.”2 The Americans interpreted this as little more than a reason to speed up ratification and get the deal done before things unraveled. The United States Minister to France, Robert Livingston, reported to Secretary of State James Madison: “I should have mentioned to you that I have strong reasons to believe that the Spanish cession contained an agreement not to part with Louisiana to any other power, this I have thro’ a channel that I think I can rely upon, and tho’ it will not affect our right it should hasten your measures in availing yourselves of the Treaty.”3
While the question of whether France had the right to sell has been debated by historians for a number of reasons, Madison found the Spanish argument weak: “The promise made by the French ambassador, that no alienation should be made, formed no part of the Treaty of retrocession to France and if it had, could have no effect on the purchase by the United States, which was made in good faith without notice from Spain of any such condition.”4 More importantly, the Americans were convinced that the Spanish would not attempt to stop the sale by force. A bigger problem for the United States was the potential for seller’s remorse on the part of France, as evidenced by French efforts to seemingly add last-minute conditions and to complicate and delay closure.5 Indeed, Napoleon had long wanted to keep the territory for France. As he explained: “I have proved the importance I attach to this province, since my first diplomatic act with Spain had the object of recovering it. I renounce it with the greatest regret: to attempt obstinately to retain it would be folly.”6 Why then did Napoleon part with the Louisiana Territory?
Why would the French sell land claimed by the Spanish to the Americans? Simply put, because of the British. France was at war with England. If all went exactly as planned, France could deal with the British as well as take possession of Louisiana. This was not looking likely. A slave revolt against the French in what is now the island of Haiti and Dominican Republic—along with bad weather that kept French ships stuck in the icy waters of Europe—depleted resources necessary to stave off the growing threat from England. To make matters still worse for the French, there was a risk that if they tried to hold on to Louisiana, the United States would decide to ally with England against France. This is because the Louisiana Territory included New Orleans, which was of great strategic importance to the United States. Having it in the hands of Napoleon caused tremendous anxiety for the Americans. In a letter to Robert Livingston, President Thomas Jefferson wrote:
The cession of Louisiana and the Floridas by Spain to France works most sorely on the U.S. . . . Of all nations of any consideration France is the one which hitherto has offered the fewest points on which we could have any conflict of right, and the most points of a communion of interests. From these causes we have ever looked to her as our natural friend, as one with which we never could have an occasion of difference. Her growth therefore we viewed as our own, her misfortunes ours. There is on the globe one single spot, the possessor of which is our natural and habitual enemy. It is New Orleans, through which the produce of three-eighths of our territory must pass to market, and from its fertility it will ere long yield more than half of our whole produce and contain more than half our inhabitants. France placing herself in that door assumes to us the attitude of defiance. Spain might have retained it quietly for years. . . . Not so can it ever be in the hands of France … these circumstances render it impossible that France and the U.S. can continue long friends when they meet in so irritable a position. They as well as we must be blind if they do not see this; and we must be very improvident if we do not begin to make arrangements on that hypothesis. The day that France takes possession of N. Orleans. . . . From that moment we must marry ourselves to the British fleet and nation. . . . This is not a state of things we seek or desire. It is one which this measure, if adopted by France, forces on us, as necessarily as any other cause, by the laws of nature, brings on its necessary effect … [France] does not need [Louisiana] in time of peace. And in war she could not depend on them because they would be so easily intercepted. I should suppose that all these considerations might in some proper form be brought into view of the government of France. . . . If France considers Louisiana however as indispensable for her views she might perhaps be willing to look about for arrangements which might reconcile it to our interests. If anything could do this it would be the ceding to us the island of New Orleans and the Floridas. This would certainly in a great degree remove the causes of jarring and irritation between us. . . . It would at any rate relieve us from the necessity of taking immediate measures for countervailing such an operation by arrangements in another quarter. . . . Every eye in the U.S. is now fixed on this affair of Louisiana. Perhaps nothing since the revolutionary war has produced more uneasy sensations through the body of the nation.7
The American delegation went to negotiate with the French. To their surprise, they were received by a delegation from Napoleon that wanted to sell the entire territory. There was clearly more behind this offer than a need to keep the United States from siding with England, which could have been accomplished simply by giving up New Orleans. The single biggest factor in Napoleon’s decision may have been his fear that the entire Louisiana Territory could be taken by the British if France was defeated in war. Better to give it to the Americans than to the British, reasoned Napoleon—and if doing so empowered the United States and gave the British more to contend with in the future, all the better. As Napoleon explained to one of his ministers: “I shall not keep a possession which will not be safe in our hands, which will perhaps be the cause of a clash with the Americans or perhaps make them cold towards me. On the contrary, I shall use it to bind them to me, to cause them to break with the British, and I shall create enemies against the latter who shall one day avenge us. My mind is made up. I shall give Louisiana to the United States.”8
The Americans were suddenly being offered more than they had expected, or had even prepared to negotiate. After finalizing the deal in an improvised process with dubious constitutional authority, James Monroe wrote to James Madison:
Could we have procur’d a part of the territory we shod. never have thot. of getting the whole; but the decision of the consul was to sell the whole, and we cod. not obtain any change in his mind on the subject. So peculiarly critical too was the moment, owing to the pressure of Engld. . . . that it seemed indispensable, to turn these several circumstances to our account, to meet this govt. on the scale it proposed & conclude a treaty with it on the terms we have without delay. I have no question or rather doubt of the advantage of the bargain to the UStates. . . . I shall not be surprised to hear that many of those who were ready to plunge into a war for a light portion of what is obtained, shod. now take another course and declaim agnst the govt. & its agents for getting too much. But the clamour will not avail them. It will disgrace them. We have obtaind more of what they professed to wish, than they had an idea of, and at a much less price, than they were willing to give for the little portion they expected to get.9
And so it was that the greatest land deal in history took place between a country that had questionable legal authority to sell and another that had questionable legal authority to buy.
The outcome you achieve will be a function of how carefully you consider the roles of all parties that are affecting a negotiation. A common mistake in negotiation is to think about relationships bilaterally—that is, to focus only on your relationship with the party across the table from you. For example, during the negotiations, the Americans could have evaluated only the dynamics of the US–France relationship. In this way of thinking, the United States might have imagined that the French would offer nothing, or at best, be willing to cede only New Orleans. They might also have assumed that if acquiring New Orleans were possible, it would be costly because Napoleon valued that possession highly.
As we have seen, the negotiation analysis changes when parties think trilaterally: evaluating not only the relationship that the parties have with each other, but the relationships each has with other parties. Once we consider the relationship between England and France, the behavior of the French becomes less surprising. It is even more understandable when we further consider the relationship between the United States and England vis-à-vis the French.
Of course, we can go further and discuss the value of “quadrilateral” or “pentagonal” analysis, but the basic point remains the same: the folly is to consider only the relationship—and to imagine only the possibilities—that exist in the direct relationship between the parties at the table. Negotiators who consider the role of third parties and assess their impact on those who are at the table are better equipped to anticipate the behavior of the other side and to strategize optimally.
When I advise on deals or conflicts, one of the first things I do in our strategy meeting is ask my client to map out the negotiation space. The negotiation space consists of all parties that are relevant to the negotiation. By “relevant” I mean one of two things: (a) any party that can influence this deal, and (b) any party that is influenced by the deal. If there are parties that can influence the deal, I will want to consider whether, when, and in what capacity we or others might benefit from bringing them in to the process (or from keeping them out). If there are parties that are influenced by the deal we are negotiating, I also want to keep an eye on them, because they are likely to have an incentive to make moves that could impact our strategy and outcomes.
In the case of the Louisiana Purchase, the negotiation space consisted not only of the United States, England, France, and Spain, but also the people who were actually making the decisions. Companies and countries don’t make decisions, people do. Napoleon is not the same as “France.” The negotiation space also consisted of lawmakers in the United States who might facilitate or obstruct the deal, and the slaves in Haiti and their oppressors, because any change in the outcome of that revolt could influence whether France still feared losing the war to England. The more you “zoom out” to see the negotiation in the broader context, the more accurate will be your understanding of the other side’s likely behavior, and the more likely you are to wisely revise your strategy when relevant events take place elsewhere in the negotiation space. Meanwhile, a failure to map out and analyze the negotiation space leaves you vulnerable, because you miss opportunities when they arise, and you are unable to see all of the barriers you face or all of the levers available to you.
When it comes to understanding the other parties in the deal, what precisely are we to understand about them? I have developed a framework (ICAP) to help organize your thinking around four critical factors: each party’s interests, constraints, alternatives, and perspective. Here are the kinds of questions that each of these raises:
• Interests: What do the other parties value? What do they want and why? What are their relative priorities? Why are they doing this deal? Why now rather than last month or next year? What do they worry about? What objectives are they trying to achieve with this negotiation? Are their interests likely to change over time? If so, how?
• Constraints: What are the things they can and cannot do? On which issues do they have more or less flexibility? On which issues are their hands completely tied? What is causing them to be constrained? How might their constraints change over time? Are there other parties with whom we might negotiate on their side who would be less constrained?
• Alternatives: What happens to them if there is no deal? Are their outside options strong or weak? Are their alternatives likely to improve or deteriorate over time? How might their alternatives be shaped?
• Perspective: How are they seeing this deal? What is their mind-set? Where does this negotiation fit into the portfolio of deals they are doing? Is this a high or low priority for them? Are they thinking strategically or tactically? Long-term or short-term? Is this negotiation occupying a large or small portion of their organization’s attention?
An ICAP analysis at the outset of negotiations—and updating the analysis as the deal progresses—can be crucial. The better you understand their interests, the more likely you will be able to structure deals that create value for all parties, and to overcome deadlock. Understanding constraints is important because there will be times when even the concessions you deserve will not be possible to obtain because the other side’s hands are truly tied in those areas. In such cases, you will be more likely to achieve your objectives if you know what is and is not achievable, and which type of deal structure is actually viable. The more carefully you have assessed their alternatives, the better you understand the value you are bringing to the table, and the leverage that you have. Finally, when you understand the perspective—psychological, cultural, or organizational—with which they are approaching this deal, you are better positioned to anticipate the types of barriers that might emerge. You are also more likely to take the steps that can help reshape their perspective to one that may be more amenable to effective and productive deal making.
James Sebenius and David Lax, authors of 3D Negotiation, highlight the importance of tactics that take place “away from the table.” As they correctly and comprehensively illustrate, there are often times when your ability to influence the deal through direct engagement with the other side is limited. In such cases especially, it becomes crucial to consider the role that others in the negotiation space might play in your strategy. As in the case with US interests in the Louisiana Territory, one’s greatest source of leverage may have nothing to do with traditional measures of power (US willingness to go to war with France), and everything to do with the dynamics elsewhere in the negotiation space (heightened French fears caused by a slave revolt in Haiti and bad weather in Europe).
The lesson of the Louisiana Purchase may have been even simpler for 19th-century Americans: just wait for the British to scare the wits out of your enemies and be there to gather the spoils. The French were not the only ones to fall victim to this dynamic. In the aftermath of the Crimean War (1853–56), in which Russia had been defeated by an alliance that included England, France, and the Ottoman Empire, Tsar Alexander II began to fear that he might lose control of Russia’s Alaskan territory in a future war with England. Like Napoleon a half century earlier, the tsar reasoned that it was far better for the land to go to the Americans in exchange for some cash than to the British in exchange for nothing. When substantive negotiations were finally conducted in 1867, the Americans agreed to purchase the land. Not to be outdone by his predecessor, Secretary of State William Seward made the purchase of the vast region for a price of two cents per acre.10
When it comes to evaluating the action away from the table and how it can influence the negotiation, there are three assessments worth making:
Static Assessment: How does the existence of third parties influence the interests, constraints, alternatives, and perspectives of all parties in the negotiation?
Dynamic Assessment: How is third-party influence changing over time? That is, are the other side’s alternatives improving or worsening? Are constraints tightening or loosening? Are interests evolving?
Strategic Assessment: How might we engage with third parties to influence the negotiation? Might they be willing to put pressure on the other side? Might they agree to subsidize the deal? Would doing a deal with a third party change the power dynamics in our favor?
Sometimes, we can leverage the existence of third parties to achieve our objectives (static). Other times, our success hinges on anticipating a changing landscape (dynamic). And then there are situations where we must actively engage with third parties to create the conditions for success (strategic).
It is not entirely obvious whether the US negotiators were thinking trilaterally and had a great strategy, or whether they simply got lucky. While some have lauded this deal as President Jefferson’s greatest contribution to the United States, and others have fawned over the remarkably low price negotiated by the Americans, there are less adulatory interpretations of the event as well. President Jefferson’s political nemesis, Alexander Hamilton, saw the outcome as having more to do with good fortune and opportune timing than with astute bargaining:
This purchase has been made during the period of Mr. Jefferson’s presidency, and, will, doubtless, give eclat to his administration. Every man, however, possessed of the least candour and reflection will readily acknowledge that the acquisition has been solely owing to a fortuitous concurrence of unforseen and unexpected circumstances, and not to any wise or vigorous measures on the part of the American government. . . . To the deadly climate of St. Domingo, and to the courage and obstinate resistance made by its black inhabitants are we indebted for the obstacles which delayed the colonization of Louisiana, till the auspicious moment, when a rupture between England and France gave a new turn to the projects of the latter, and destroyed at once all her schemes as to this favourite object of her ambition.11
Hamilton may have had a point. But that does not mean the opportunity, when it arose, could not have been bungled. Sometimes, you deserve credit for having updated your strategy effectively in real time as the impact of distal elements in the negotiation space came into focus. Sometimes, the most important thing a negotiator can do is to be logistically prepared, politically organized, and psychologically ready to seal the deal if and when the stars align and the timing is right. If the groundwork for a deal has not been laid in anticipation of a window of opportunity that might eventually open, that opportunity could be lost. The earlier one conducts a comprehensive analysis of the negotiation space and the sooner one assesses all of the levers that can be pushed and pulled to shape the deal, the more likely is success, even when the endgame is not visible at the outset.
When the negotiation space is large, the road ahead is long, and a path to agreement is difficult to envision, negotiators often feel that “prepare for good fortune” is just a nice way of saying “wait until you get lucky.” As a result, they adopt a short-term, tactical approach to deal making and fail to create the conditions necessary for achieving long-term objectives. The underlying assumption is that it is useless to strategize when the future is uncertain and too many factors are out of your control. This is a mistake. When reaching agreement seems a distant hope and nothing you can do today will guarantee success, it is useful to instead think about how you can improve positioning and create option value.
To improve positioning, we audit the weaknesses in our current negotiation capability and take actions to chip away at those problems. This way, we are better positioned for deal making should an opportunity arise. For example, we might need to bolster our outside options, build coalitions, strengthen the value of our offering, build trust, and so on.
If the problem is that we have limited strategic options (e.g., too few paths that can lead to success), we might invest in creating option value: taking costly actions today that will generate additional degrees of freedom in the future. For example, you might create back channels with a terrorist organization even when there is no appetite for negotiation and you are waging an aggressive military campaign; this is costly and risky, but it creates the option of negotiating in the future if your calculus changes.
To appreciate the value of improving position and creating option value even when there is no agreement in sight, consider the deal-making process that resulted in the acquisition of basketball star James Harden by the Houston Rockets. In a simple trade, you would make one move: for example, give the other team some of your players in exchange for receiving your preferred player.12 But if you don’t have what the other team wants, you might need to make a few moves to first improve your position. In the case of the Houston Rockets, in a strategy that unfolded over five years and involved 14 separate moves, General Manager Daryl Morey built up the necessary assets—the right mix of players and draft picks—to acquire James Harden from the Oklahoma City Thunder. When it came time to make the deal in 2012, Houston was able to offer Oklahoma City two players (one acquired via trade, and the other by a draft pick that was itself acquired via trade), a first-round draft pick belonging to Dallas, a first-round draft pick belonging to Toronto, and a second-round draft pick belonging to Charlotte. When it was over, Houston had acquired one of the best young talents in the league.
Not even Daryl Morey, who negotiated the deal, knew exactly where all of the moves would eventually end. Signing Harden was one possible endpoint, but there were other potential plays and opportunities that could have arisen on the basis of the preparatory maneuvers. So was it just luck? Or was it a perfectly crafted strategy? Neither. Thinking back to his role, Morey reflected on how he improved his positioning and created option value to increase the likelihood of a successful outcome:
With each transaction, I look to put the odds in our favor as much as possible both on the move made at the time but also for the myriad of possible outcomes in the future. Each move in the Harden trade was made with the end in mind of trading for a superstar of Harden’s caliber. Each move worked together to increase not only the value of what we could trade but also the mix of what we could trade. By the end, we had players that could help a team win now or in the future. We had draft picks in different range of risk/reward. We could save a team significant room on the salary cap. Salary cap savings ended up not being part of the trade but we were ready if it was. . . . Once you accept that you don’t have all the answers and the job is just to shift the odds in your favor, it really opens up great things such as this trade.13
Just because the future is uncertain and there is much you cannot control does not mean you cannot adopt a strategic, long-term perspective. In especially difficult and protracted negotiations, you have to be willing to make wise sacrifices in the short run, and even to take steps that seem counterproductive except for the fact that you are keeping an eye on how today’s gambits will help you create and exploit future opportunities.
As we have discussed, some people respond to complexity and uncertainty by assuming that having a strategy is useless. Others make a different mistake: they rush to embrace a strategy earlier than is necessary or wise. This happens even when there is no objective reason to sacrifice strategic flexibility, and when it makes sense to keep multiple options open. In my experience, when multiple options are on the table (e.g., different strategies, or a choice among doing different deals), and continued discussion has failed to identify a clear winner, there comes a time when people are tired of deliberating and there is a psychological need for closure. As a result, an interesting and potentially dangerous shift takes place in the room: as soon as there is some degree of momentum behind one of the options, people stop discussing the pros and cons of each option rationally. Instead, they begin to overweight factors that favor the currently preferred option and to selectively seek out “cons” for the option that has less support. This reflects what psychologists have called the confirmation bias. Because people want to be able to devote their enthusiasm and entire attention to one approach, and to start implementing it, they no longer evaluate all options as fairly or comprehensively as they should.
There is an added organizational factor that compounds the psychological bias. Different strategies, or different types of deals, often require you to employ different resources, bring different people on board, and expend different kinds of social and political capital. As a result, once you go too far down one path, it becomes difficult to switch. There comes a point when there is simply too much organizational momentum and too much strategy-specific investment towards one course of action; a change is psychologically, organizationally, and politically difficult.
During the Cuban Missile Crisis, President Kennedy was adamant that no options be discarded a moment sooner than necessary. Even after it was clear that the gradual strategy (quarantine, coalition-building, and negotiation) was wiser than the aggressive option (military strikes), the president asked that each option continue to be refined as if it were to be the chosen strategy. In fact, until the very last moment that JFK went on national television to announce the course of action he planned to pursue, he had two speeches fully prepared for him in case any last-minute information or analysis suggested they were pursuing the wrong strategy. Based on documents that were made available to the public only a few years ago, had a change in strategy been necessary, the following would have been the opening lines of his address:
My fellow Americans, with a heavy heart, and in necessary fulfillment of my oath of office, I have ordered—and the United States Air Force has now carried out—military operations with conventional weapons only, to remove a major nuclear weapons build-up from the soil of Cuba.14
Until the absolute last moment, the president was prepared psychologically, organizationally, and politically to change course if a wiser approach could be identified.
In this chapter, we looked at complex environments where there is much that you cannot control. As we have seen, even in the face of uncertainty, it is possible to strategize effectively; you can improve your position, create option value, and keep all options on the table until you have greater clarity or are forced to choose. We have also seen that you are more likely to overcome deadlock and resolve conflicts if you map out the negotiation space, think trilaterally, and consider how to leverage the action that takes place away from the bargaining table.
Even so, sometimes the hardest situations are not the most complex. Sometimes a situation is difficult because it is so simple: the negotiation space is already well understood, and no one else is going to swoop in to save the day or provide you the leverage you need; there is no option of preparing for good fortune because time is up and, to make matters worse, the other side holds all the cards and they are not in the mood to treat you nicely. Your options are few, none of them are good, and they are getting worse. What levers do you have then? How does empathy help you here? Let’s find out.