U.S. federal mediators often work on the front lines of high-profile labor-management disputes, yet—aiming for neutrality and confidentiality—tend to keep a low profile themselves. We spoke to Federal Mediation and Conciliation Service (FMCS) principal deputy director Gary Hattal about how the FMCS, which was founded in 1947, strives to meet its mission of promoting effective collective-bargaining negotiations and ending work stoppages.

Negotiation Briefings: How does the FMCS help organizations with their labor-management negotiations and disputes?

Gary Hattal: Traditionally, we’ve worked on dispute resolution, specifically impasse in labor negotiations, where the parties are having difficulty working collaboratively. As a confidential, neutral organization, we are able to work with the parties in an objective way, filter out the potential for vitriol or animus, and help them reach an agreement and avoid a strike or lockout.

Both sides in a labor-management dispute need to realize that outside competitors are their real competition, not each other. Our mediators can help employees understand the financial constraints faced by their organizations. At the same time, management has to understand that if they have fair work rules from a union perspective, and good rapport and enthusiasm, then there can be a meeting of the minds.

NB: How does FMCS determine which disputes or negotiations to get involved in?

GH: Our case-tracking system keeps our mediators informed about when labor contracts are expiring, and we let the organizations know we’re available to help. In addition, parties we’ve worked with in the past often approach us for help with another situation. If we have competing requests for our time, we look at the importance of the situation and its urgency—that is, if there’s a limited period in which to help resolve a dispute. We train our mediators to determine the appropriate time to get involved. It’s rarely when the contract is wide open and more often when it has narrowed. We move our people around the country based on their past experience in particular industries.

NB: Do FMCS mediators follow a particular philosophy or approach to mediating disputes?

GH: Our particular philosophy and approach begins with neutrality, followed closely by confidentiality. We have to make sure the organization understands that we will focus on the mediation process, not on their particular proposal. During private caucuses with labor or management, we can offer new approaches for reframing issues, but that is always voluntary. If someone says, “Help me make the other side understand my priorities,” they can rest assured that we will do so confidentially.

In particular, we train our mediators to be versatile. Some organizations require a more directive approach: “These are the repercussions of impasse, so let me make a suggestion.” Some require a facilitative approach, which involves asking open-ended questions to help parties come up with their own solutions. And, in some cases, transformative mediation—where mediators need to help parties build trust and address other problems in the relationship—is required. Our mediators are trained in all three approaches. They choose which one to use based on which seems most needed and based on their past experience with the organization.

NB: Can you briefly describe the role of FMCS in resolving a labor-management conflict we may have read about in the news?

GH: Because of our need for confidentiality, I can’t get into specifics. But in the sports industry, for example, we are involved with or soon to be involved with various professional teams engaged in collective bargaining. We sit in the shadows and make ourselves available to each side. The same is true in the auto industry, the health-care industry, and others. While FMCS may not be involved in every labor- management dispute, we are ready, willing, and able to jump in when needed because we’ve monitored the situation. Our mediators often do research on the organization, its history with the union, past strikes, and even the personalities involved.

NB: You personally have experience in “preventative mediation.” Can you tell us about its purpose and what it entails?

GH: When I joined FMCS years ago, some of my mentors got involved in looking at ways to prevent disputes rather than waiting for them to blow up. We identified tools and training, such as interest-based bargaining, relationship building, and trust enhancement, that people could use so that they might never need to get to mediation. Through labor-management committees, outreach, and training, people learn how to facilitate for themselves. Progress comes not from shying away from conflict but from managing it.

U.S. federal mediators often work on the front lines of high-profile labor-management disputes, yet—aiming for neutrality and confidentiality—tend to keep a low profile themselves. We spoke to Federal Mediation and Conciliation Service (FMCS) principal deputy director Gary Hattal about how the FMCS, which was founded in 1947, strives to meet its mission of promoting effective collective-bargaining negotiations and ending work stoppages.

Negotiation Briefings: How does the FMCS help organizations with their labor-management negotiations and disputes?

Gary Hattal: Traditionally, we’ve worked on dispute resolution, specifically impasse in labor negotiations, where the parties are having difficulty working collaboratively. As a confidential, neutral organization, we are able to work with the parties in an objective way, filter out the potential for vitriol or animus, and help them reach an agreement and avoid a strike or lockout.

Both sides in a labor-management dispute need to realize that outside competitors are their real competition, not each other. Our mediators can help employees understand the financial constraints faced by their organizations. At the same time, management has to understand that if they have fair work rules from a union perspective, and good rapport and enthusiasm, then there can be a meeting of the minds.

NB: How does FMCS determine which disputes or negotiations to get involved in?

GH: Our case-tracking system keeps our mediators informed about when labor contracts are expiring, and we let the organizations know we’re available to help. In addition, parties we’ve worked with in the past often approach us for help with another situation. If we have competing requests for our time, we look at the importance of the situation and its urgency—that is, if there’s a limited period in which to help resolve a dispute. We train our mediators to determine the appropriate time to get involved. It’s rarely when the contract is wide open and more often when it has narrowed. We move our people around the country based on their past experience in particular industries.

NB: Do FMCS mediators follow a particular philosophy or approach to mediating disputes?

GH: Our particular philosophy and approach begins with neutrality, followed closely by confidentiality. We have to make sure the organization understands that we will focus on the mediation process, not on their particular proposal. During private caucuses with labor or management, we can offer new approaches for reframing issues, but that is always voluntary. If someone says, “Help me make the other side understand my priorities,” they can rest assured that we will do so confidentially.

In particular, we train our mediators to be versatile. Some organizations require a more directive approach: “These are the repercussions of impasse, so let me make a suggestion.” Some require a facilitative approach, which involves asking open-ended questions to help parties come up with their own solutions. And, in some cases, transformative mediation—where mediators need to help parties build trust and address other problems in the relationship—is required. Our mediators are trained in all three approaches. They choose which one to use based on which seems most needed and based on their past experience with the organization.

NB: Can you briefly describe the role of FMCS in resolving a labor-management conflict we may have read about in the news?

GH: Because of our need for confidentiality, I can’t get into specifics. But in the sports industry, for example, we are involved with or soon to be involved with various professional teams engaged in collective bargaining. We sit in the shadows and make ourselves available to each side. The same is true in the auto industry, the health-care industry, and others. While FMCS may not be involved in every labor- management dispute, we are ready, willing, and able to jump in when needed because we’ve monitored the situation. Our mediators often do research on the organization, its history with the union, past strikes, and even the personalities involved.

NB: You personally have experience in “preventative mediation.” Can you tell us about its purpose and what it entails?

GH: When I joined FMCS years ago, some of my mentors got involved in looking at ways to prevent disputes rather than waiting for them to blow up. We identified tools and training, such as interest-based bargaining, relationship building, and trust enhancement, that people could use so that they might never need to get to mediation. Through labor-management committees, outreach, and training, people learn how to facilitate for themselves. Progress comes not from shying away from conflict but from managing it.

As the COVID-19 virus began to spread through the United States, Xerox CEO John Visentin announced on March 13 that the company was putting its hostile takeover of HP on hold in order to “prioritize the health and safety of its employees, customers, partners and affiliates over and above all other considerations.”

With health experts worldwide advising citizens to take social-distancing measures, such as avoiding group gatherings and staying six feet away from others, other companies chose to move face-to-face negotiations to the internet. During the virus’s initial surge, companies in China and Hong Kong started pitching IPOs to global investors online and via teleconferencing rather than flying to financial hubs such as New York City and Tokyo, according to Yahoo News.

Annual shareholder meetings are also going online. Starbucks, for example, swapped out its annual meeting in Seattle, which attracts big crowds with free coffee, for a “virtual” meeting with shareholders, Reuters reports.

Health concerns, the stock market’s plunge, and uncertainty about the virus’s ultimate toll are leaving would- be negotiators facing difficult decisions: Meet virtually, postpone talks, or avoid them altogether? Often, it is possible to forge ahead with talks, but significant foresight is required. Negotiation research and theory offer best practices for dealmaking at a distance.

Distinguishing between types of media

If you decide to negotiate at a distance, you’ll want to choose the communication media—telephone, videoconference, email, or text—best suited to your goals and needs at different points in the process.

First, the bad news: Face-to-face meetings are the superior forum for negotiation because of their “communication richness”—that is, their ample social cues. When we meet in person, we can gain understanding and build rapport through body language, eye contact, facial expressions, tone of voice, style of dress, appearance, manners, and our environment. “Negotiators leave less money on the table when they are able to pick up clear social cues,” according to INSEAD professor Roderick I. Swaab and Columbia Business School professor Adam D. Galinksy.

Health concerns, the stock market’s plunge, and uncertainty about the virus’s ultimate toll are leaving would-be negotiators facing difficult decisions: Meet virtually, postpone talks, or avoid them altogether?

While no communication medium is as rich in social cues as face-to-face meetings, some are richer than others. On the phone, we can read a lot into our counterpart’s tone of voice and how quickly they get down to business. On a videoconference, we can assess the other party’s receptiveness to a proposal from their smile or, conversely, their crossed arms and frown. Emails and texts tend to be “impoverished” forms of communication because they lack nonverbal and visual cues, though emojis can help.

Communication media also vary in their synchronicity, or the degree to which people can be engaged in the same activity at the same time. Phone calls, conference calls, and videoconferences— and, to some extent, text messages— allow us to carry on a continuous conversation. By contrast, emails (and sometimes texts) tend to extend the communication process because of delays between messages, note Swaab and Galinsky.

Communication media pros and cons

Let’s take a closer look at the three main types of electronic communication: videoconferencing, email, and texting.

Videoconferencing. Videoconferencing can easily appear to be the best substitute for in-person negotiation. It is a relatively rich communication medium, providing both visual and vocal cues, and it is also synchronous (though a poor internet connection can lead to delays and frustration). However, videoconferencing has several quirks that we need to anticipate, writes Creighton University School of Law professor Noam Ebner in a chapter in The Negotiator’s Desk Reference (DRI Press, 2017).

First, we appear as “talking heads” in videoconferences—that is, typically only our head and torso are visible. Thus, we see less of our counterpart and their environment than we would in person, and potentially miss out on important body language and other information. Grainy, choppy images can also make it difficult to read facial expressions. Ebner notes that it’s virtually impossible to make eye contact during a videoconference: Because computer cameras tend to be located at the top of the screen, we seem to be looking downward at our screens rather than into each other’s eyes.

Videoconferencing also tends to be fraught with technical glitches, which can interrupt meetings and cause frustration. Privacy and security concerns may also dissuade people from negotiating via video, especially when trust between negotiators is low.

To make the most of a videoconference, Ebner advises minimizing distractions by setting up our computer in a quiet area with a neutral background. Keep things professional while working from home by dressing for business. Give counterparts your full attention; resist the urge to look at your phone or otherwise multitask.

And if privacy is a concern, consider postponing talks.

Email. Because emails lack visual and vocal cues, we need to read between the lines to interpret our counterpart’s emotions and interest. Negotiations conducted via email tend to result in less creative, less satisfying agreements than those that take place in person, several studies have found. Emails can also lead to misunderstandings and conflict, and foster a sense of “mutual invisibility” that can lead us to be less courteous and considerate than we would be in person.

As a negotiation forum, email does have its benefits. Most obviously, it allows people in different time zones to communicate at different times of day. Because email gives us time to carefully craft our messages, it’s especially appealing if you feel nervous or shy, or if you’re negotiating in a foreign language. Email allows us to send large amounts of information as attachments. And when you are negotiating with someone of higher status (say, a CEO), email can minimize the trappings of power and put you on a more equal footing, research has found.

Texting. Like email, texting allows people negotiating at a distance to connect at any time of day. It also lacks visual and vocal cues, making it another “impoverished” communication media. If you’re a frequent texter, you’ve certainly noticed that misunderstandings and confusion are par for the course, especially when you’re typing quickly and autocorrect kicks in. Because typing on a small smartphone screen is effortful, we tend to keep our texts short and skip the formalities, which can make texts seem abrupt and impolite.

That said, texting can be an irresistibly convenient way of sharing an idea or offer on the fly. We can also adjust the pace of a negotiation by pausing before responding to a text. In addition, younger people report feeling more comfortable expressing their emotions in texts than through other media, according to research by Jennifer Crosswhite of the National Council on Family Relations and her colleagues.

Negotiating at more than arm’s length

For those accustomed to handshakes, business lunches, and late-night dealmaking sessions in crowded conference rooms, the following guidelines can help you adjust to negotiating during this time of social distancing:

• Set realistic ambitions. During the COVID-19 outbreak in China and Hong Kong, dealmakers put large IPOs on hold. Such deals, they recognized, would require in-person relationship building and on-site due diligence, such as document inspection, according to Yahoo News. Companies and their bankers held successful internet road shows by keeping IPOs relatively small and bringing in large anchor investors to close deals. As much as the economy needs stimulating, this might be a risky time to launch complex talks with an unfamiliar partner. If you would normally meet in person to build rapport and explore interests, consider holding off until the crisis passes.
• Toggle between media. Before you make a call, start writing an email,
  or schedule a videoconference, think about whether you’re choosing the right medium for the task at hand. In the early phases of negotiation, phone calls and videoconferencing may be helpful for building rapport. When talks get more detailed, you may want to exchange proposals and documents in emails. If you have a sudden brainstorm, send a quick text. And whenever you find yourself irritated by a confusing or curt message, pick up the phone to clear things up.
• Be patient and adaptable. To state the obvious, trying to negotiate a business deal in the midst of a global pandemic is no easy task. With life in flux and the economy in turmoil, be prepared to call off or postpone your dealmaking at a moment’s notice. Keep your alternatives to negotiating at the front of your mind so that you don’t make commitments you’ll later regret. Above all, strive to be patient and kind with counterparts, who may be dealing with more than you’re aware of away from the virtual negotiating table.
• Stay accessible. As U.S. companies have moved their annual shareholder meetings online, corporate democracy advocates have expressed fears that investors and activists will be shut out of important conversations with executives and board members— perhaps permanently. “If it is a virtual-only meeting, [boards and CEOs] can cherry-pick questions, they can avoid protests,” investor and shareholder advocate James McRitchie told Reuters. When negotiating online, ensure that all relevant parties continue to have opportunities to be heard.
• Don’t make the “new normal” permanent. When the pandemic ends, we may be tempted to stick with the convenience of distance negotiations to save time, money, and effort. There was already a trend toward virtual shareholder meetings even before COVID-19 struck, according to Reuters. But there’s no substitute for the rapport- and trust-building benefits of meeting in person, when possible. If you achieve significant cost savings from online dealmaking, at least give negotiators a chance to meet and get to know each other in person before they get down to business. Then expect that they will need to come together periodically to discuss proposals and work through differences.

As the COVID-19 virus began to spread through the United States, Xerox CEO John Visentin announced on March 13 that the company was putting its hostile takeover of HP on hold in order to “prioritize the health and safety of its employees, customers, partners and affiliates over and above all other considerations.”

With health experts worldwide advising citizens to take social-distancing measures, such as avoiding group gatherings and staying six feet away from others, other companies chose to move face-to-face negotiations to the internet. During the virus’s initial surge, companies in China and Hong Kong started pitching IPOs to global investors online and via teleconferencing rather than flying to financial hubs such as New York City and Tokyo, according to Yahoo News.

Annual shareholder meetings are also going online. Starbucks, for example, swapped out its annual meeting in Seattle, which attracts big crowds with free coffee, for a “virtual” meeting with shareholders, Reuters reports.

Health concerns, the stock market’s plunge, and uncertainty about the virus’s ultimate toll are leaving would- be negotiators facing difficult decisions: Meet virtually, postpone talks, or avoid them altogether? Often, it is possible to forge ahead with talks, but significant foresight is required. Negotiation research and theory offer best practices for dealmaking at a distance.

Distinguishing between types of media

If you decide to negotiate at a distance, you’ll want to choose the communication media—telephone, videoconference, email, or text—best suited to your goals and needs at different points in the process.

First, the bad news: Face-to-face meetings are the superior forum for negotiation because of their “communication richness”—that is, their ample social cues. When we meet in person, we can gain understanding and build rapport through body language, eye contact, facial expressions, tone of voice, style of dress, appearance, manners, and our environment. “Negotiators leave less money on the table when they are able to pick up clear social cues,” according to INSEAD professor Roderick I. Swaab and Columbia Business School professor Adam D. Galinksy.

Health concerns, the stock market’s plunge, and uncertainty about the virus’s ultimate toll are leaving would-be negotiators facing difficult decisions: Meet virtually, postpone talks, or avoid them altogether?

While no communication medium is as rich in social cues as face-to-face meetings, some are richer than others. On the phone, we can read a lot into our counterpart’s tone of voice and how quickly they get down to business. On a videoconference, we can assess the other party’s receptiveness to a proposal from their smile or, conversely, their crossed arms and frown. Emails and texts tend to be “impoverished” forms of communication because they lack nonverbal and visual cues, though emojis can help.

Communication media also vary in their synchronicity, or the degree to which people can be engaged in the same activity at the same time. Phone calls, conference calls, and videoconferences— and, to some extent, text messages— allow us to carry on a continuous conversation. By contrast, emails (and sometimes texts) tend to extend the communication process because of delays between messages, note Swaab and Galinsky.

Communication media pros and cons

Let’s take a closer look at the three main types of electronic communication: videoconferencing, email, and texting.

Videoconferencing. Videoconferencing can easily appear to be the best substitute for in-person negotiation. It is a relatively rich communication medium, providing both visual and vocal cues, and it is also synchronous (though a poor internet connection can lead to delays and frustration). However, videoconferencing has several quirks that we need to anticipate, writes Creighton University School of Law professor Noam Ebner in a chapter in The Negotiator’s Desk Reference (DRI Press, 2017).

First, we appear as “talking heads” in videoconferences—that is, typically only our head and torso are visible. Thus, we see less of our counterpart and their environment than we would in person, and potentially miss out on important body language and other information. Grainy, choppy images can also make it difficult to read facial expressions. Ebner notes that it’s virtually impossible to make eye contact during a videoconference: Because computer cameras tend to be located at the top of the screen, we seem to be looking downward at our screens rather than into each other’s eyes.

Videoconferencing also tends to be fraught with technical glitches, which can interrupt meetings and cause frustration. Privacy and security concerns may also dissuade people from negotiating via video, especially when trust between negotiators is low.

To make the most of a videoconference, Ebner advises minimizing distractions by setting up our computer in a quiet area with a neutral background. Keep things professional while working from home by dressing for business. Give counterparts your full attention; resist the urge to look at your phone or otherwise multitask.

And if privacy is a concern, consider postponing talks.

Email. Because emails lack visual and vocal cues, we need to read between the lines to interpret our counterpart’s emotions and interest. Negotiations conducted via email tend to result in less creative, less satisfying agreements than those that take place in person, several studies have found. Emails can also lead to misunderstandings and conflict, and foster a sense of “mutual invisibility” that can lead us to be less courteous and considerate than we would be in person.

As a negotiation forum, email does have its benefits. Most obviously, it allows people in different time zones to communicate at different times of day. Because email gives us time to carefully craft our messages, it’s especially appealing if you feel nervous or shy, or if you’re negotiating in a foreign language. Email allows us to send large amounts of information as attachments. And when you are negotiating with someone of higher status (say, a CEO), email can minimize the trappings of power and put you on a more equal footing, research has found.

Texting. Like email, texting allows people negotiating at a distance to connect at any time of day. It also lacks visual and vocal cues, making it another “impoverished” communication media. If you’re a frequent texter, you’ve certainly noticed that misunderstandings and confusion are par for the course, especially when you’re typing quickly and autocorrect kicks in. Because typing on a small smartphone screen is effortful, we tend to keep our texts short and skip the formalities, which can make texts seem abrupt and impolite.

That said, texting can be an irresistibly convenient way of sharing an idea or offer on the fly. We can also adjust the pace of a negotiation by pausing before responding to a text. In addition, younger people report feeling more comfortable expressing their emotions in texts than through other media, according to research by Jennifer Crosswhite of the National Council on Family Relations and her colleagues.

Negotiating at more than arm’s length

For those accustomed to handshakes, business lunches, and late-night dealmaking sessions in crowded conference rooms, the following guidelines can help you adjust to negotiating during this time of social distancing:

• Set realistic ambitions. During the COVID-19 outbreak in China and Hong Kong, dealmakers put large IPOs on hold. Such deals, they recognized, would require in-person relationship building and on-site due diligence, such as document inspection, according to Yahoo News. Companies and their bankers held successful internet road shows by keeping IPOs relatively small and bringing in large anchor investors to close deals. As much as the economy needs stimulating, this might be a risky time to launch complex talks with an unfamiliar partner. If you would normally meet in person to build rapport and explore interests, consider holding off until the crisis passes.
• Toggle between media. Before you make a call, start writing an email,
  or schedule a videoconference, think about whether you’re choosing the right medium for the task at hand. In the early phases of negotiation, phone calls and videoconferencing may be helpful for building rapport. When talks get more detailed, you may want to exchange proposals and documents in emails. If you have a sudden brainstorm, send a quick text. And whenever you find yourself irritated by a confusing or curt message, pick up the phone to clear things up.
• Be patient and adaptable. To state the obvious, trying to negotiate a business deal in the midst of a global pandemic is no easy task. With life in flux and the economy in turmoil, be prepared to call off or postpone your dealmaking at a moment’s notice. Keep your alternatives to negotiating at the front of your mind so that you don’t make commitments you’ll later regret. Above all, strive to be patient and kind with counterparts, who may be dealing with more than you’re aware of away from the virtual negotiating table.
• Stay accessible. As U.S. companies have moved their annual shareholder meetings online, corporate democracy advocates have expressed fears that investors and activists will be shut out of important conversations with executives and board members— perhaps permanently. “If it is a virtual-only meeting, [boards and CEOs] can cherry-pick questions, they can avoid protests,” investor and shareholder advocate James McRitchie told Reuters. When negotiating online, ensure that all relevant parties continue to have opportunities to be heard.
• Don’t make the “new normal” permanent. When the pandemic ends, we may be tempted to stick with the convenience of distance negotiations to save time, money, and effort. There was already a trend toward virtual shareholder meetings even before COVID-19 struck, according to Reuters. But there’s no substitute for the rapport- and trust-building benefits of meeting in person, when possible. If you achieve significant cost savings from online dealmaking, at least give negotiators a chance to meet and get to know each other in person before they get down to business. Then expect that they will need to come together periodically to discuss proposals and work through differences.

Most of us believe we’re savvy enough to keep from being scammed by con artists in a sales negotiation. But, as the Bernard Madoff scandal showed, even the rich and seemingly business savvy get taken for a ride sometimes. The latest high-profile swindle to hit the news, this one in France, reminds us of the need to stay vigilant.

An industry interloper appears

In 2002, a shadowy figure named Gérard Lhéritier burst onto the genteel European and American market for rare manuscripts and books, reports David Segal in the New York Times. In auctions and private negotiations, Lhéritier and representatives of his company, Aristophil, paid inflated prices for letters from Fidel Castro, Abraham Lincoln, and Charles Dickens; first editions by Jack Kerouac and Balzac; sketches by Salvador Dalí and Andy Warhol; and numerous other treasures.

Within years, Aristophil owned an estimated 5% of the global market for rare books and manuscripts, leaving many dealers shut out of the market.

In addition to offering sellers many times the going rate for their manuscripts, Lhéritier reportedly paid some dealers monthly retainers of 10,000 euros (approximately $10,800 today) for leads. Other dealers, for a fee, signed off on generous appraisals of Lhéritier’s documents, which he used to lure investors.

Buying legitimacy

As he amassed an impressive collection of artifacts, Lhéritier divided their appraised value into shares and began selling the shares like stock in a corporation, according to the Times.

Lhéritier spent lavishly to build a reputation as a respected manuscript dealer out of nothing. He opened the Museum of Letters and Manuscripts in a tony neighborhood in Paris, bought a $40 million mansion to house Aristophil, and gave out awards and donations. His high profile and largesse led Europeans to “rummage through their libraries and sell off their treasures,” according to Segal.

Aristophil’s collection ballooned to 136,000 works. Ultimately, about 18,000 people, many of them elderly and of modest means, invested approximately $1 billion total in the documents. The investors later claimed that Aristophil falsely promised to buy back their shares for at least 40% above their original price after five years.

The crash and the aftermath

As time passed, more and more of Aristophil’s aging investors tried to cash out their shares. Aristophil stalled for time. In an odd twist of fate, Lhéritier won the equivalent of $215 million in a European lottery in 2012 and poured about $40 million into Aristophil, but it was just a temporary reprieve.

Investors’ complaints led to media coverage and a police raid in 2014. Lhéritier, then in his late 60s, was arrested and charged with fraud. He stood accused of running a classic Ponzi scheme that depended on a continual influx of new investors to stay afloat. It came out that Lhéritier had been involved in a similar scheme involving commemorative stamps in the 1990s.

French authorities seized Lhéritier’s collection and hired a company to auction it off to help repay investors, a process that will take years. Because he so grossly inflated the value of the manuscripts, they are fetching only about one-tenth of what investors paid for them. Some investors have been forced to sell their homes or cash out their retirement savings. One committed suicide.

While the criminal case against him is adjudicated, Lhéritier continues to live in a $6 million villa in France. In an interview with Segal, Lhéritier denied he had done anything wrong and insisted he was unfairly targeted by regulators and investors for being an industry “disruptor.”

Eight more auctions of Aristophil’s former holdings are planned for this year. One of the main buyers in these fire sales is Jean-Claude Vrain, a dealer who was indicted for “gang fraud” for selling documents to Lhéritier and then appraising them at exorbitant rates.

Being a better noticer

The sordid story of Lhéritier’s alleged fraud highlights just how willing we are to suspend disbelief when confronted with opportunities to win big. In the Madoff scandal, it should have been obvious to experienced investors that his steady returns on investment, seemingly immune to stock-market volatility, were too good to be true. Similarly, Lhéritier’s lack of reputation and his unorthodox approach in the rare-manuscripts market should have raised red flags much sooner for experts, investors, and authorities alike.

In his book The Power of Noticing: What the Best Leaders See (Simon & Schuster, 2014), Harvard Business School professor Max H. Bazerman notes that all of us are susceptible to positive illusions—that is, seeing the world as we want it to be. To reach more rational judgments, we need to test the “reality” we think we see by asking lots of questions, verifying claims independently, and otherwise examining whether our counterpart’s sales pitch makes sense in the real world.

Most of us believe we’re savvy enough to keep from being scammed by con artists in a sales negotiation. But, as the Bernard Madoff scandal showed, even the rich and seemingly business savvy get taken for a ride sometimes. The latest high-profile swindle to hit the news, this one in France, reminds us of the need to stay vigilant.

An industry interloper appears

In 2002, a shadowy figure named Gérard Lhéritier burst onto the genteel European and American market for rare manuscripts and books, reports David Segal in the New York Times. In auctions and private negotiations, Lhéritier and representatives of his company, Aristophil, paid inflated prices for letters from Fidel Castro, Abraham Lincoln, and Charles Dickens; first editions by Jack Kerouac and Balzac; sketches by Salvador Dalí and Andy Warhol; and numerous other treasures.

Within years, Aristophil owned an estimated 5% of the global market for rare books and manuscripts, leaving many dealers shut out of the market.

In addition to offering sellers many times the going rate for their manuscripts, Lhéritier reportedly paid some dealers monthly retainers of 10,000 euros (approximately $10,800 today) for leads. Other dealers, for a fee, signed off on generous appraisals of Lhéritier’s documents, which he used to lure investors.

Buying legitimacy

As he amassed an impressive collection of artifacts, Lhéritier divided their appraised value into shares and began selling the shares like stock in a corporation, according to the Times.

Lhéritier spent lavishly to build a reputation as a respected manuscript dealer out of nothing. He opened the Museum of Letters and Manuscripts in a tony neighborhood in Paris, bought a $40 million mansion to house Aristophil, and gave out awards and donations. His high profile and largesse led Europeans to “rummage through their libraries and sell off their treasures,” according to Segal.

Aristophil’s collection ballooned to 136,000 works. Ultimately, about 18,000 people, many of them elderly and of modest means, invested approximately $1 billion total in the documents. The investors later claimed that Aristophil falsely promised to buy back their shares for at least 40% above their original price after five years.

The crash and the aftermath

As time passed, more and more of Aristophil’s aging investors tried to cash out their shares. Aristophil stalled for time. In an odd twist of fate, Lhéritier won the equivalent of $215 million in a European lottery in 2012 and poured about $40 million into Aristophil, but it was just a temporary reprieve.

Investors’ complaints led to media coverage and a police raid in 2014. Lhéritier, then in his late 60s, was arrested and charged with fraud. He stood accused of running a classic Ponzi scheme that depended on a continual influx of new investors to stay afloat. It came out that Lhéritier had been involved in a similar scheme involving commemorative stamps in the 1990s.

French authorities seized Lhéritier’s collection and hired a company to auction it off to help repay investors, a process that will take years. Because he so grossly inflated the value of the manuscripts, they are fetching only about one-tenth of what investors paid for them. Some investors have been forced to sell their homes or cash out their retirement savings. One committed suicide.

While the criminal case against him is adjudicated, Lhéritier continues to live in a $6 million villa in France. In an interview with Segal, Lhéritier denied he had done anything wrong and insisted he was unfairly targeted by regulators and investors for being an industry “disruptor.”

Eight more auctions of Aristophil’s former holdings are planned for this year. One of the main buyers in these fire sales is Jean-Claude Vrain, a dealer who was indicted for “gang fraud” for selling documents to Lhéritier and then appraising them at exorbitant rates.

Being a better noticer

The sordid story of Lhéritier’s alleged fraud highlights just how willing we are to suspend disbelief when confronted with opportunities to win big. In the Madoff scandal, it should have been obvious to experienced investors that his steady returns on investment, seemingly immune to stock-market volatility, were too good to be true. Similarly, Lhéritier’s lack of reputation and his unorthodox approach in the rare-manuscripts market should have raised red flags much sooner for experts, investors, and authorities alike.

In his book The Power of Noticing: What the Best Leaders See (Simon & Schuster, 2014), Harvard Business School professor Max H. Bazerman notes that all of us are susceptible to positive illusions—that is, seeing the world as we want it to be. To reach more rational judgments, we need to test the “reality” we think we see by asking lots of questions, verifying claims independently, and otherwise examining whether our counterpart’s sales pitch makes sense in the real world.

No matter how strong their credentials or negotiating skills, women are less likely than men
to be chosen for jobs historically held by men, such as positions in leadership, science, and engineering, past research shows. In a new study, University of Vienna assistant professor Steffen Keck and National University of Singapore visiting assistant professor Wenjie Tang found the comparisons that hiring personnel make among final candidates for a position may play a role in such discrimination.

In one experiment, the researchers gave 218 online participants (125 female, 93 male) profiles of two or three applicants for a position as a client support engineer in the aerospace industry, a job that they were told would require technical competence and customer-support experience. Applicants’ profiles included their names, work experience, and technical competence, as reflected in their level of education.

When participants compared a male applicant—“Kevin Davis”— and a female applicant—“Sarah Thompson”—who had similar qualifications (with one having more work experience and the other having attained a higher education level), they were not biased against the female candidate; they chose her about as often as the male candidate.

That changed when a third, male candidate, “William Anderson,” was added to the choice set. When William was less qualified than Kevin on both dimensions (work experience and education) and more comparable to Sarah, participants were much more likely to choose Kevin. And when William was lessqualified than Sarah and more comparable to Kevin, participants were still more likely to choose Kevin.

The results of this and other experiments by Keck and Tang suggest that when people (men and women) are hiring someone for a male-stereotyped position, they will strive to be objective and fair. Yet, due to the powerful influence of gender biases, most people will find male candidates to be more congruent with such roles. As a result, they will unconsciously look for other reasons to justify choosing the male candidate instead of the female candidate. In this study, the presence of a less-qualified male candidate was sufficient to make a male candidate seem like a better choice than a similarly qualified female candidate.

The findings should encourage hiring managers to think carefully about the set of final applicants being considered for a given position—not just their qualifications, but their number. Research by Iris Bohnet (Harvard Kennedy School), Alexandra van Geen (Erasmus University, Netherlands), and Max H. Bazerman (Harvard Business School) found that decision makers who evaluate two applicants at the same time, rather than separately, make more rational judgments and are less likely to fall back on gender stereotypes. Keck and Tang’s research suggests that adding a third candidate to the mix could introduce more biased thinking. Thus, when it comes to narrowing the field of candidates for an open position, two may be the magic number.

Resource: “When ‘Decoy Effect’ Meets Gender Bias: The Role of Choice Set Composition in Hiring Decisions,” by Steffen Keck and Wenjie Tang. Journal of Behavioral Decision Making, 2020.

No matter how strong their credentials or negotiating skills, women are less likely than men
to be chosen for jobs historically held by men, such as positions in leadership, science, and engineering, past research shows. In a new study, University of Vienna assistant professor Steffen Keck and National University of Singapore visiting assistant professor Wenjie Tang found the comparisons that hiring personnel make among final candidates for a position may play a role in such discrimination.

In one experiment, the researchers gave 218 online participants (125 female, 93 male) profiles of two or three applicants for a position as a client support engineer in the aerospace industry, a job that they were told would require technical competence and customer-support experience. Applicants’ profiles included their names, work experience, and technical competence, as reflected in their level of education.

When participants compared a male applicant—“Kevin Davis”— and a female applicant—“Sarah Thompson”—who had similar qualifications (with one having more work experience and the other having attained a higher education level), they were not biased against the female candidate; they chose her about as often as the male candidate.

That changed when a third, male candidate, “William Anderson,” was added to the choice set. When William was less qualified than Kevin on both dimensions (work experience and education) and more comparable to Sarah, participants were much more likely to choose Kevin. And when William was lessqualified than Sarah and more comparable to Kevin, participants were still more likely to choose Kevin.

The results of this and other experiments by Keck and Tang suggest that when people (men and women) are hiring someone for a male-stereotyped position, they will strive to be objective and fair. Yet, due to the powerful influence of gender biases, most people will find male candidates to be more congruent with such roles. As a result, they will unconsciously look for other reasons to justify choosing the male candidate instead of the female candidate. In this study, the presence of a less-qualified male candidate was sufficient to make a male candidate seem like a better choice than a similarly qualified female candidate.

The findings should encourage hiring managers to think carefully about the set of final applicants being considered for a given position—not just their qualifications, but their number. Research by Iris Bohnet (Harvard Kennedy School), Alexandra van Geen (Erasmus University, Netherlands), and Max H. Bazerman (Harvard Business School) found that decision makers who evaluate two applicants at the same time, rather than separately, make more rational judgments and are less likely to fall back on gender stereotypes. Keck and Tang’s research suggests that adding a third candidate to the mix could introduce more biased thinking. Thus, when it comes to narrowing the field of candidates for an open position, two may be the magic number.

Resource: “When ‘Decoy Effect’ Meets Gender Bias: The Role of Choice Set Composition in Hiring Decisions,” by Steffen Keck and Wenjie Tang. Journal of Behavioral Decision Making, 2020.