IVAN HOFFMAN, B.A., J.D.
In any arms-length business transaction, everyone acts only out of their own self-interest. All parties to such a transaction should make that assumption and act in their own best interests based on that assumption.
And that is a very positive idea, although some ethics might have us believe otherwise.
Self-interest simply means doing what is in the best interests of one’s self. As such, such behavior is instinctive and inherent in the universe, both as to humans and other life forms.
From a business and economic standpoint, it is only when each of us acts in our own self-interests that the collective “society” can elevate. Paternalism in business is of little or no value in achieving that goal and does not help the party being patronized. (Read “Capitalism”). It’s the old “give a man a fish and he eats for one day but teach a man to fish and he eats forever” story. By acting in one’s self-interest and thus teaching the other party in a transaction to do so as well, the actor is helping that other party achieve independence from dependence. To cater to the other party’s dependence on that paternalism only makes you co-dependent. That neither helps you nor the other party.
I realize that many believe that “giving rights away” is somehow “fair” but that has never been my understanding or experience and I’ve been making deals for over 30 years. Giving rights away is just...giving rights away. If you do not respect yourself in a transaction enough to seek all that you can, how can you possibly expect anyone else to respect you? Just how “fair” is the transaction going to seem to you when the other party ends up with all the money from the rights you gave away to be “fair” and you end up with all the regret? Applying the statements in the prior paragraph to the world of business, if you give away rights to help the other party without requiring the other party to negotiate for those rights, you end up doing nothing but giving away rights and then you become resentful and you have not taught the other party anything about their own need for taking care of their own self-interest.
There is absolutely nothing wrong and there is absolutely everything right in advancing one’s self-interest. It is a sign of self-respect. Starting out with the “own everything” mantra is a mindset that then enables you to negotiate from that standpoint. (Read “Private Laws”) Clearly since rights are often a zero sum game, by seeking to own everything, you then are in a position to negotiate for participation in everything even if the other party actually owns it. But if you start out being willing to not own everything, to give it away in the name of “fair” or otherwise, you are already starting out below ground level.
Adam Smith, the English economist and philosopher, wrote in “An Inquiry into the Nature and Causes of the Wealth of Nations” in 1776 [Book 1 Chapter 2]:
As indicated, some ethics would have us believe, and many generations have been conditioned to believe, that acting out of self-interest is somehow “bad.” It seems to offend some of the teachings we were taught as children that it is better to be self-effacing and not to advance our goals. That is where the resistance to what is otherwise a self-evident idea stems from. It is within our innate instincts to take care of our selves. To act in denial of these elemental qualities of human nature often breeds resentment, regret and unhappiness, even if we are not even aware that such feelings stem from denying this instinct.But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens. [emphasis added]
Acknowledging one’s self-interest and negotiating with that in mind would lead to seeking the most you can achieve in a given transaction. But often what happens is that parties fail or outright refuse to negotiate with this self-interest in mind and relinquish such rights or such participation. This may arise because they have been “taught” by the above-named ethic that maximizing value is a “bad” thing. If a party believes they have been taken advantage of it simply means that they did not take care of themselves in the negotiation, either by knowing what they needed to know or being represented by someone who did, and the very essence of the concept of being taken advantage of means that they expected the other party to look out for them and the other party did not. Thus the failure of the paternalistic approach.
How Does This Self-Interest Appear?
As I stated above, this article presumes an arms-length transaction and thus not one in which one party is charged with the responsibility of protecting the interests of another party, such as in a fiduciary relationship. And within the arms-length relationship thus created by each side “pulling” on the rope of its own self-interest as it were, the deal is struck.
Such is the fundamental principle of free market capitalism.
Such is the fundamental principle of personal responsibility.
Such is the fundamental law of nature.
Initially of course, each side must recognize their inherent value to the deal (real or perceived) and then in turn be willing to advance that value within the context of the negotiation. That requires a belief in oneself. If you enter into a transaction without knowing that value and being willing to advance that value, if you somehow believe that the other party has some obligation to look out for your rights, royalties, etc., in other words to be “fair” or otherwise to act in a manner that is contrary to what appears to be human nature or the mandates of capitalism, you will likely fail to take care of your own self-interest. Read “The Fear Of Winning,” “Dignity in the Deal,”“Dignity for Designers” and “Set To Fail.”
Ralph Waldo Emerson, writing in “Self-Reliance” in 1841, said:
And if you fail to take care of your self-interest, you may likely perceive the other party to be “unfair” or to be to “blame” for your failures. Failing to recognize the other’s said motivations to take care of their own self-interest is an abdication of personal responsibility that ultimately leads to frustration, blame and regret.Let a man then know his worth, and keep things under his feet. Let him not peep or steal, or skulk up and down with the air of a charity-boy, a bastard, or an interloper, in the world which exists for him. But the man in the street, finding no worth in himself which corresponds to the force which built a tower or sculptured a marble god, feels poor when he looks on these. To him a palace, a statue, or a costly book have an alien and forbidding air, much like a gay equipage, and seem to say like that, 'Who are you, Sir?'
And a failure to grow and learn.
In such instances, the result is that you will need, each day, to find someone else to give you a fish.
Contract provisions are there, in the open, for all parties to read. If a party does not know what the provisions mean or their full potential implication, they should seek the advice of someone who does. If you sign an agreement without knowing what you need to know, you have only yourself to blame.
There is no room for blame of the other party in my version of negotiations. If you are up against a party with better resources than you, then either get yourself equal resources, find another line of work or accept your own responsibility for the outcome. Stop blaming others by personalizing an otherwise objective process of deal making.
Accepting personal responsibility for anything is often a difficult concept to accept.
Copyright © 2004 Ivan Hoffman. All Rights Reserved.