Co-Opetition - Adam M. Brandenburger [109]
Settlement escrows allow people to negotiate from behind a veil. Ordinarily, when you make a demand, you reveal your hand. Settlement escrows preserve the fog. You can say what you really need without giving away much information. When the parties in a negotiation feel safe enough to make reasonable demands, they’re much more likely to reach an agreement. There’s a much better chance that whenever there’s a mutually beneficial deal to be made, it will be made.
Gertner and Miller conceived of settlement escrows as an aid to pretrial negotiations. You may be willing to pay $100,000 to settle the matter, but you may not want the other side to know that—unless it’s willing to settle here and now. If it isn’t, revealing the fact that you’re willing to settle for $100,000 may be what tips the other side into deciding to go to court rather than to continue negotiations. The solution is for both parties to agree, at the outset, to use a settlement escrow.
The value of settlement escrows obviously isn’t limited to the legal arena. The idea could fly in a wide range of situations. You’re willing to pay a lot for an employee’s services, a parcel of land, or a patent, but you don’t want to tip your hand. The employee is willing to work for very little, the landholder is anxious to sell, or the inventor is keen to see his idea commercialized, but none of these people want to tip their hands, either. In all these cases, use of a settlement escrow would maintain a veil over the negotiations, allowing both parties to negotiate in good faith.
In a negotiation, what you know and what other people know aren’t the only things that matter. Do you know what others know? Do others know what you know? Do others know how much you know about what they know? The fact that you know something that others know, too, has very different consequences when others know that you know it.
The Cat in the Bag I have something unpleasant on my mind. I suspect that you know what’s on my mind. But do you know that I suspect you know? I believe that you might, but I don’t know for sure. There’s room for doubts, and that may be the best way to leave things. Some thoughts are better left unspoken.
Everything changes when I reveal what’s on my mind. Now you know for sure what I’m thinking. And you know that I know you know. You even know that I know all this. The fog lifts and the truth can no longer be hidden. As they say, the cat has been let out of the bag. And that’s a problem, because there’s no easy way to get a cat back in a bag.
In a marital dispute, the cat in the bag may be the threat of divorce. You may have it in the back of your mind to ask for a divorce if things can’t be worked out. You may believe that your spouse suspects as much. You may even think that your spouse senses that you believe your spouse suspects as much. But it’s still better to leave the threat unspoken. However serious the problems you and your spouse are having, there’s always a chance of working things out, provided the two of you are committed to trying. But once the threat of divorce is made explicit, it becomes much harder to make that commitment. Any doubts about what’s on your mind are now gone. You’ve just revealed that you’re contemplating life beyond the marriage. How can your spouse remain committed to trying to make the relationship work, knowing you’ve already got one foot out the door?
If you threaten a divorce unless certain conditions are met, you risk getting the response: “Oh, you want a divorce, do you? You got one.” You want the marriage, albeit with some changes, not a divorce. But it’s too late. The threat of divorce, now made explicit, can be self-fulfilling. It is better left implicit.
We began