If you’re thinking about buying a house, one of your first moves may be to choose a real estate agent who can advise you through the process. If you want a big-name publisher to buy your book, you probably will try to sign on an experienced literary agent as your counselor and advocate. Less formally, it’s common to ask for negotiating advice from more experienced coworkers and other colleagues.
In tense negotiations, we often choose to consult an expert for advice, preferably someone who has carried out hundreds of similar deals with great success. When we consult with others on our negotiations, we must weigh their advice against our own opinions and research. Past research finds that we tend to undervalue advice from others and overvalue our own point of view, even when we’re inexperienced at the task at hand.
That’s not necessarily a bad thing, given that an agent’s incentives will almost always diverge in some way from our own. Whether they recognize it consciously or not (and research suggests that most don’t), even the most ethical agents routinely face a conflict of interest between recommending what’s best for you versus what would benefit them the most financially. A real estate agent may sincerely want to get you a great deal on a house. But because she will gain the most financially from a quick deal at a high price, she may advise you to make a higher bid than she would make if she were bidding on the house for herself.
Unfortunately, the state of mind that commonly drives us to hire agents in the first place—anxiety—makes us highly susceptible to their advice, including bad advice, according to a new study by researchers Francesca Gino of Harvard Business School and Alison Wood Brooks and Maurice Schweitzer of the Wharton School of the University of Pennsylvania. Their findings have significant implications for those of us who become anxious when faced with challenging negotiations.
Accepting biased advice
To explore the link between anxiety and advice, Gino, Brooks, and Schweitzer conducted several experiments in which participants were asked to engage in a decision-making task, such as estimating someone’s weight or completing a difficult math problem. In most of the experiments, the participants then were made to feel either anxious (for instance, by listening to the theme music from the movie Psycho or writing about a past experience that made them feel very anxious) or neutral (by listening to more peaceful music or writing about routine experiences). Finally, they were given the opportunity to receive advice, purportedly from another participant, before having a chance to revise their initial estimates.
Overall, anxious individuals were more receptive to advice even when it should have been obvious that the advice was of poor quality and when the advice giver had a clear conflict of interest.
In one experiment, for example, participants were asked to estimate the amount of money in various jars of coins (shown on a computer screen) and were told that they would be paid a bonus for their accuracy. Some of the participants were asked if they wanted to receive advice from a supposed participant who, they were told, would be paid more if the final estimates of the person they were advising were high (rather than accurate). That is, the participants knew that the advisers would benefit financially if their estimates were off the mark. Despite this clear conflict of interest, anxious participants were very receptive to the biased advice. By contrast, those in a neutral state saw the situation more clearly and rejected the bad advice much more often.
Balancing confidence and anxiety
What caused anxious decision makers to be especially trusting of advice, whether good or bad? Lack of confidence in their judgments.
That’s an interesting finding, given abundant research showing that negotiators and other decision makers are generally too confident in their judgments. The common tendency to focus on our own perspective and overlook the other side’s bargaining position can cause us to become overconfident of our abilities and odds of success, according to University of California—Berkeley professor Don A. Moore. But if self-analysis prior to negotiation leaves us feeling insecure and anxious about how we’ll perform, we might choose to avoid the situation altogether—or bring in an adviser or agent to help us.
Overall, the research suggests that a myopic focus on our own point of view can lead us to be either unrealistically overconfident or overly anxious about our negotiating ability. Strong anxiety, in turn, can cause us to place too much confidence in our advisers’ abilities and give too much weight to their advice.
These findings lead to the following three pieces of negotiation advice:
1. Get some perspective. To accurately appraise your bargaining strength, you’ll need to take the other side’s perspective. Before negotiating and during the process itself, analyze your counterpart’s underlying interests, needs, motivations, and alternatives thoroughly.
2. Face your anxiety head-on. Thorough preparation and relaxation strategies can alleviate anxiety, but don’t feel you need to vanquish it altogether. Gino, Brooks, and Schweitzer suggest that small amounts of anxiety may be “very constructive,” helping you concentrate and take the task seriously.
3. Maintain a healthy skepticism. Whenever you decide to consult with negotiating advisers—but especially when you are anxious— be sure to vet them carefully, identify potential conflicts of interest, and factor their biases into the advice you receive.
Related BATNA Article: Ethics in Negotiation – How to Avoid Deception in Employment Negotiations
Resource: “Anxiety, Advice, and the Ability to Discern: Feeling Anxious Motivates Individuals to Seek and Use Advice,” by Francesca Gino, Alison Wood Brooks, and Maurice E. Schweitzer. Journal of Personality and Social Psychology, 2012.
The excellent real estate professionals I know are all about the relationship and not about the immediate gratification from the sale. Don’t get me wrong, great agents love winning the deal for their clients and not leaving their client’s money on the table. They, and I know, that the compensation on one transaction does not a career make….and they put all their expertise and experience in to building their business through referrals. And you don’t get referral business by putting yourself first. Let’s have some balance here….who were these researchers talking with…..none of the excellent professionals I know.
So often the highest cost is NOT getting (or selling) the house and regretting it later. As a seasoned real estate professional in an area that always has more demand than supply I find that the biggest risk is fear…too much skepticism resulting in not acting decisively and missing the chance or getting so lost in the weeds over a few thousand dollars when it is nominal in the scheme of the purchase. I wholeheartedly disagree that “agent’s incentives will almost always diverge in some way from our own”. Professional agents keep their eye on the common of objective of accomplishing the objective stated by the client. Finding the right house at the right time is difficult and rare. Healthy skepticism is good but is best exercised upfront in selecting an agent with a proven track records of success in the targeted neighborhood, price point and property size. Experience and opinions of agents can be validated and supported with facts. Chose wisely then develop a trust partnership. Buying or selling is highly emotional and one needs a ballast.