Recently, I negotiated a contract. Poorly.
I got a request for a project quote from a customer and I had all my ducks in a row. I knew the value we brought for them, I knew our competition’s pricing (what the client already pays for), I knew they considered us more experienced than our competition, and that they needed help urgently.
In spite of all of this, I gave them a price that was 16% below our competitors’. The customer said yes instantly, which immediately proved that I left a lot of money on the table.
Why did I do that?
In this post I break down what my attempt to understand why this happened and how I can improve for the future.
If you’ve ever done it too, stick with me to uncover what keeps us from making truly rational decisions.
Over the last two years I’ve had to make a lot of choices. Because of / thanks to starting a new venture, I went into “decision overdrive” and stayed there for over 24 months.
I had to make a bunch of decisions ranging from choosing partners to hiring people and firing people, from choosing between customers and suppliers to starting relationships and ending them. The works!
Most of these decisions did not go as planned.
It was an intense period of personal development to which I’m still adding new layers.
Since I am strongly introverted (despite my social knack every now and then), I spend a lot of time in my head dissecting contexts, trying to figure out what is the best decision. I try to anticipate situations and understand what went bad in the past, to avoid repeating the mistake in the future.
But no matter how hard I tried and how much I knew, I still “fucked up”: I made that bad hire, I negotiated that contract poorly, I got into that bad relationship, I got out of that good relationship. It’s nothing new or surprising. It happens to people every day. But what makes me tick is that I made the bad decision even when I knew it was the wrong choice to begin with.
So, coming back to my last contract negotiation: why did I do that?
I had all the information to make a good choice and I knew the customer would say yes to a higher fee and be happy with it. I went over this question in my mind again and again to no avail. I could not understand it to save my life!
There are no rational decisions
A short lesson from robotics
What shed a light on my dilemma is something I stumbled onto that psychology has known for a while: there are no rational decisions, everything is emotional.
In my context, I made the choices I was ready to make, the only ones I could make as a result of the fight between my fears, my desires, my insecurities, and my best interest.
I quoted the lower price because I was afraid. I had never messed up a deal that size… and didn’t want to start now. And all of my rational thoughts could not fight that.
All that time, I thought my decision-making process looked like this:
How I thought my decision-making process works
How the decision-making process really works
But after doing more reading and analyzing the issue, I realized that the process of reaching a decision really is this:
Now I know that reason influences emotion and emotion drives action. If reason can’t influence emotion, then nothing changes.
So what does robotics have to do with all of this?
In the context of my internal struggle, the first robotics book I read (Vehicles by Valentino Braitenberg) started to make sense on a whole new level.
In this book about building robots, the first circuits that are built into the machines are “emotion circuits”. An electrical wire for fear, another for love, another for hunger, etc. These wires are connected directly to functions: motors, actuators – the things that make the robot move. Everything else is built on top of that: like intelligence and reason.
But from the way the emotional wires are connected, those are the ones that “tell” the robot when to move and how to move. They have priority. And it is the same with us. What you feel has priority. Your decisions change because your emotions change.
You can make a good decision for a bad reason and a bad decision from a good reason. Fear and anger can lead you to a good choice, just as trust and confidence can lead you to a bad one.
If you made a good decision out of fear, when you become braver, you might make the wrong choice for the same reason! This happens because your main emotional driver for making that decision changed.
When you fail because of the wrong decision, chances are you will make the right one the next time.
Because you do not want to feel the pain of failure again. What may surprise you is that, throughout this process, your knowledge may remain the same. However, your emotional maturity and stability will not.
A hidden meaning into the “fail fast” mantra
Until now I thought “fail fast” meant that, no matter how much you know, some things are unpredictable. So trying a lot of things to learn fast and get to the “good result” quicker is a good way to speed up the process. In reality, I believe “failing fast” is just as much about “growing fast”.
I think this is the true meaning of “fail fast”. Feel all there is to feel, as fast and as intensely as possible. Analyse it. Understand it. This is how you can grow into the person that makes the right decisions for the long term. You can learn everything from books but you can’t properly execute on it until you are mature enough to apply it under pressure.
You are an important variable in the entrepreneurial game, in your organisation, in the game of life. You are a variable that changes. To succeed, you need a layer of stability which you can build yourself through a strong decision-making process. The options are there: you can delay a decision, you can be overly cautious, or you can take unnecessary risks. No matter your choice, this affects the outcome of any type of initiative, irrespective of your job, country, background or mission.
Knowing something is not enough. You create value when you’re able to apply your knowledge under pressure, when you have skin in the game but can maintain a clear head and a strong sense of direction.
Whatever you go on to do next after you’re done reading this, remember this:
There are no rational decisions.
We, humans, are emotional creatures and that’s not bound to change anytime soon.
Reason influences emotion and emotion drives action. If reason can’t influence emotion, then nothing changes.
Your decisions change because your emotions change. Pay attention to your emotions and how you might trick yourself into thinking you’re rational when you’re not.
You can make a good decision for a bad reason and a bad decision from a good reason.
“Failing fast” is about “growing fast” because it gives you the chance to experience a rich set of events that teach you a lot about yourself and others (if you’re willing to learn that is).
How about you? What is your experience with decisions?
When did you make the wrong decision, although you knew it was the wrong one? Why did you do it?
Photo credit: Nik MacMillan