We won the nuclear negotiations in 1994, but we actually lost

We won the nuclear negotiations in 1994, but we actually lost

In my opinion, one of the motivations for America’s withdrawal from the JCPOA was that our negotiating team (Zarif) did not give too many points to the American side and we somehow won the negotiations, but the reality is that winning is not always good.

For example, we have a concept called the winner’s curse in auction. You see, in an English auction, the auction usually starts at a base price, then each participant raises the price. The goods finally go to the person who offered the highest price.

Now that product has a common value among all the participants and the price offered by each of the participants is actually an estimate of the value of that product, then the average price of the offers can be considered as the intrinsic value of that asset. so what

The problem is that the person who won the auction usually bid higher than the average bid price (=intrinsic value). So even though this person won the auction, he probably lost in reality!

Another example is the negotiation of venture capitalists (VC) with startups in fundraising rounds. Suppose a startup wants to increase its capital by 20 billion tomans to expand its market share. Until today, all the shares of this startup have been owned by its founders.

The value of this startup is 20 billion Tomans, and if it wants to raise capital by 20 billion Tomans, the ownership will be divided 50% and 50% between the founders and the VC. Now suppose that the VC cleverly managed to convince the founders of the startup that “No! Your startup is worth 10 billion tomans!

Now, if this startup wants to increase its capital by 20 billion tomans, the VC will own 67% of the shares, and the founders will own only 33%. In fact, the VC was able to take a greater ownership percentage of that startup with a specific capital (20 billion tomans)!

But has that VC really won? Probably not, because after a while the founders will say to themselves that we have lost our heads and that we, who were once the owners of our business, are now considered to be just an employee!

So they lose their motivation little by little and probably soon they will leave that startup and the value of that startup will go to zero! you saw? VC thought he was the winner, but he lost, he lost badly! The story of the JCPOA is the same.

In negotiation, there are different ways to impose our demands on the other party. For example, we can use the salami strategy, that is, break down our demands and propose them to the other party over time. A strategy well executed by Zarif.

The other party may not understand in the heat of the negotiations and we will blow the horn of victory, but he will finally wake up from his sleep and realize what he has been up to and since then he will do his best to fulfill his promise. What Trump did well!

Our negotiating team should have known who had the upper hand and out of humility, gave him a bigger share and guaranteed his interests to stay at the negotiating table. We won the nuclear negotiations in 1994, but we actually lost.

Oracle of Omaha

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This post is written by se1445