How to sniff your way out of a bad deal

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Backstory

Two years ago I took a new job and moved across the country from San Francisco to New York City. If you’ve ever lived in New York you know that when you look for a place to live you rarely get to talk to the owner or landlord of the property. Instead, you have to negotiate your lease with a management company or a broker. A broker doesn’t care about establishing a trusting relationship with neither you nor with the landlord. Their sole purpose is to make the transaction happen, collect a fat commission and get out.

Since the entire market was flooded with management companies, I had no choice but to play along. After 2 months of fruitless visits to various apartments in West Village, Midtown, Murray Hill, Gramercy etc. the broker finally showed me a decent 2-bedroom apartment in East Village. Rent was about 25% higher than what I promised myself I’d pay when I moved to New York, but by then I was desperate enough to pay anything. 

They made it very clear that the apartment was on the market for a very limited time. They also made sure that a couple happened to drop by to check out the place as I was getting the grand tour (creating social proof & competition). I was backed into a corner (or so I thought) and eventually caved in and signed a 1-year lease. Horrible deal of course, with a few terms in the contract that made my life living hell only months later. My favorite clause was that I had to pay half of a month’s rent if I decided to change the name on the lease, and that I also had to pay the full amount of rent should I wish to break the contract. A very solid agreement for the management company.

To make things worse I was also blessed with a bad roommate. Two months into my lease I realized I HAD to move. There I was, locked into a bad 1-year contract…with hefty fees preventing me from moving out and a borderline crazy roommate preventing me from staying. My East Village purgatory was complete. How did I end up like this? Here’s what happened.

Negotiation Tactics

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Time constraints

The broker was well aware of my time constraints - I had to find new place asap. They took advantage of this by dragging me to one crappy apartment after another. Since I wasn’t their only client and the financial stability of their company was not exactly dependent on getting my business, they were fine with stalling. The more they dragged their feet, the better leverage they had on me. Time was not my friend.

Tip: Be aware of your time constraints and (if you can) create competition for your money. This will put pressure on the other side(s) to close the deal as soon as possible. Think about it this way - you’re engaged to get married and you have to set a date. Now picture a scenario where your girlfriend is engaged to you AND to another guy at the same time. Now how long would it take you to set a date for the wedding? This example is obviously a stretch, but the point is adding competition will neutralize your time constraints.

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Scarcity

The broker had only one decent apartment that matched my expectations and budget. They could have shown it to me on the first day I stopped by their office. They instead exposed me to poor alternatives to lower my expectations and eventually shift my price range up. The apartment I ended up with looked like the Versailles compared to its alternatives. Limited options meant limited bargaining power for me.

Tip: Always have a backup plan. Having more than one option gives you peace of mind in a negotiation because no matter what happens you know you can walk away and have an alternative to fall back on.

Stretching the price

The broker was well aware of my price range and showed me apartments that were slightly beyond that. Since their compensation was directly proportional to my monthly rent, their goal was to get me the most expensive place I could afford (not necessarily the best deal I could find).

These are only a few low-balling tactics I was exposed to in a very short period of time. Here’s a few more that salespeople frequently employ to close deals:

1. “Standard” deal terms (“This is our standard contract, take it or leave it”)

    How is a contract put together? In order to come up with terms for a contract, some people had to sit down one day and NEGOTIATE every clause of an agreement. They proposed and debated ideas and eventually came to a consensus about what the contract should include.

Tip: Just as a contract is done, it can be un-done. Don’t assume that something should be done a certain way just because “it has always been like this”. Propose the changes that you want - if they say yes then you’re all set. If they say no, you might be able to use this against your counterpart - “hey if you can’t give me X, can I at least get Y?”

2. Verbal agreements (“There’s no need to complicate the contract with an amendment. You have my word that… / I guarantee that…”)

    You can only enforce clauses that are part of a contract. If I’m selling you a product and I verbally promise you a certain return on investment, that’s great but it doesn’t give you any leverage whatsoever. What happens if I fail to deliver on my promise? If it’s not part of the contract, I’ll shrug, apologize and move on. The deal is consummated, money has changed hands and you have 0 leverage on the relationship. There’s nothing you can do to get compensated for your loss. At least not legally.

Tip: Always put promises down in writing. In a negotiation, it is in everyone’s interest to spell out important clauses. You can’t assume more than what the contract states, so make sure that any term you care about is clearly stated and explained.

3. Free trials (“Let’s sign the deal as is. We can run a 1-month trial and if things don’t work out we can always revisit the terms”)

    Now a free trial seems harmless, right? You don’t have to pay anything for the product. You get to try something out for fit and reserve the right to cancel it if anything doesn’t go as planned. A classic win-win situation, right? Hmm…not quite actually.

    Let’s look at the hidden price you are actually paying for this free trial. Picture yourself 1 month after a trial period with a vendor. By then you have probably communicated your choice to your peers and superiors. You have set wheels in motion in your organization to facilitate the collaboration with the new company and you’ve already engaged internal resources to put some effort into working with the vendor (engineers are writing code to test out the new APIs etc.). You’ve also interrupted discussions with other vendors, and as a result those relationships are getting colder.

    What happens if you suddenly realize your choice was a big mistake? You can either:

      a) explain to your boss that the trial was a failure. That you need at least another month to re-evaluate other options, and that you have just wasted a month of your engineers’ time to work on a project that lead to nowhere. Or…

      b) cover up the shortcomings of the vendor and find a way to make things work despite the clear shortcomings of the new product.

Tip: Think long and hard before starting “free” trials. You should be ready to buy the service at full price and also make sure that your reputation is not tarnished if the trial fails. The vendor will always play down the hidden costs of using up the “free” trial, you should be fully aware of them though.

4. Limited authority (“Let me talk to my boss about this and I’ll get back to you”)

    When you hear anything along the lines of “let me talk to X about this”, it usually means that the person you’re negotiating with is buying time to evaluate the situation. If they really have to ask for someone else’s opinion (a superior), then why are you not directly talking to that person? Why waste everyone’s time with intermediaries when you can negotiate directly with the decision-maker? Assuming you have the authority to make a deal, it is absolutely fair to expect the same from your counterparty. If the French President flies to Washington D.C. to discuss a new nuclear policy, does he negotiate the terms with Obama’s janitor or with Obama himself?

Tip: Always ask to speak directly with the person in charge, or you will end up going in circles trying to pin down even the most basic terms of an agreement. If your counterpart needs to consult with some imaginary superior at every step, adopt a “take it or leave it” position and be ready to walk away from the deal. Your time is important, so act like it.

5. Any discount hides an even bigger discount (“Our standard deal is this. However, I’m giving you a 30% discount because you are a trusted partner”)

    When someone offers you a discount for a product or service, expect that you will have to pay full price sometime in the future. For instance, if you subscribe to Pandora and get a 50% discount for the first 6 months, you’re actually signing up to pay the full $4.99/month after the grace period. Although this may seem obvious, it’s easy to judge a deal only by its short term benefits.

    The discount is meant to give you the illusion of a bargain, the impression that the product you’re buying is worth a lot more than what you’re paying. Although this may very well be true, it’s also true that you can always push for an even higher discount. If they say offer 30% off, push for 50%. If they give you 50%, ask for 70% off.

Tip: If you have enough leverage in the negotiation (you would probably have 0 leverage in the Pandora example, but a lot more when buying a used car; Pandora’s business doesn’t depend on your $5/month, but the used car salesman’s commission does), it’s always a good idea to ask for a higher discount. If you push hard enough, you will most likely get it.

That’s me in Downtown New York City

That’s me in Downtown New York City

ArtistAbove and Beyond
Title200
AlbumTrance Around the World

Electronic Music 101

This post is about electronic music and what you could be missing by ignoring it.

I listen to trance and progressive, which are subgenres of electronic music. There are two DJs who revolutionized trance - Tiesto and Paul van Dyk. Later on came Armin van Buuren and others, but Tiesto and PvD are the ones who did the pioneer work.

Tiesto is the most popular DJ in history. He was the official DJ for the 2004 Olympic Games in Greece and released Parade of the Athletes the same year. In the past four years, Tiesto has become too commercial and it’s hard work to distinguish the good from the BS. If you want to start off with some great quality Tiesto, listen to Summerbreeze, the best album he released. 

Paul van Dyk (PvD) was voted the #1 DJ by fans worldwide for 5+ years in a row. (DJ Mag’s Top 100 is the most prestigious award in electronic music). PvD’s 2006 concert in Bucharest was the best I’ve ever attended. DMAO for 4+ hours! Paul van Dyk has the most energy infused live performances. He’s really great at building up the momentum and keeping you on your toes. If you want to experience the true “state of trance”, check out his tour schedule and be sure to see him live. If you don’t have the time/money/enthusiasm to do that, listen to some Vonyc Sessions from 2006/2007.

Armin van Buuren (AvB) is one of the en-vogue trance DJs of the younger generation. His masterpiece is A State of Trance, a weekly two hour mix released on radio stations across the globe (most notably Digitally Imported FM). If you want some earth-shattering AvB, look for these episodes of ASOT 234, 265, 285, 312, 325. His iTunes podcast is no good btw. I’ve seen Armin @ McCarren Pool in NYC, the show was not as good as PvD’s or Tiesto’s, but I had seen the last two in Eastern Europe, which might explain the better show.

Above and Beyond are the new guys around the block, ready to explode into a trance sensation. The group is formed of Brits and a Fin (check out their website). A & B release a weekly two-hour podcast called Trance Around the World (amazing jingle, check it out when you get a chance!). I wouldn’t be surprised if they topped the DJ charts in the near future. Currently DJ Mag ranks them 4th after Guetta (ewwww, having Guetta there makes me wonder why Lady Gaga is not part of the top). Their best podcasts are Anjunabeats Volume 6Anjunabeats Volume 7 and TATW 200. Above and Beyond release top quality trance with deep house influences (see AnjunaDeep).

OK, so there you have it. Quality electronic music, that is where it’s at. Below you’ll find my ranked preferences. Thanks for reading this and I hope to hear from you if you have questions!

Best weekly show:

  1. ASOT (2006 & 2007) (AvB)
  2. Vonyc Sessions (PvD)
  3. Trance Around The World (Above and Beyond)
  4. Club Life (Tiesto, not that exciting)

Best DJ:

  1. Paul van Dyk
  2. Tiesto
  3. Armin van Buuren
  4. Above and Beyond