Obama's Rookie Mistake - Negotiating Against Himself

The stakes for Obama's speech on health care reform could not be higher. It will determine if his promise of real change will actually happen, or if reform will be watered down to appease a population of people with an extraordinary inability to decipher misinformation from fact.
Obama, who came in with a mandate for change, now faces an unapproachable right, an insecure center, and an inconsolable left when it comes to the subject of health care. The reason? He made an easy rookie mistake - he negotiated against himself ahead of the deal.

I work in sales for a start up company. My clients are usually financial institutions, who use my company's research engine to find information from the web that enhances their qualitative research. Before that I worked for mid-market institutional sales for a major brokerage firm (or rather, formerly major...)

I've done a fair share of negotiations during my few years in the workforce, and one of the things you learn with negotiating trades or contracts is to not negotiate yourself into a hole. If you know you will have to negotiate, give yourself room for a counter offer. If you don't allow for that, your counterpart will force you to give up something anyway because that's his job, and you will end up loosing money on the deal, or loosing the deal completely.

Obama , like many sales rookies, began to negotiate before he even came to the table. Before the bill was in the various congressional chambers, his team was meeting with the key players; Republicans, drug companies, insurance companies, etc, with the assumption that if they showed them a plan that was fair from the start, they could be trusted to get this done quickly and without much opposition. They volunteered to give up the most liberal components of reform like single payer because they thought the good faith gesture would be rewarded. Sure, details would need to be worked out, but the principles were all there and all the players seemed reasonable enough.

This assumption that the smiling faces looking back from across the table would actually play ball can only be described as a major slap-yourself-on-the-forehead moment. The insurance companies played both sides, the Republicans played to their town hall crazies, and the lobbyists went out in force with a misinformation campaign so intense and brutal, people actually believe Obama is trying to kill their grandparents.

In sales, negotiations can be complicated, but are often very simple - once you get a client to agree to buy, you then have to negotiate price. Now, my clients are usually people who value things for a living, so negotiations happen often. I know of two approaches - One is to simply start with a high number, knowing it's ridiculous, and hope the client is not offended and comes back with a number close enough to your end target.

The other, which is what I usually subscribe to, is to come up with a highly defensible number, that considers cost, margin, service levels, usage, etc, and that also gives you some room to negotiate - for example a cheaper per user price for a higher number of users. If you go that route, you have to be ready to fight for that price tooth and nail, and you have to be willing to walk away.

Obama could have done either. He could have started out all the way on the left -universal health care for all, or a some type of single payer option. This would have of course angered the conservatives but it would have had lead to a more centrist final version. Alternatively, they could have come up with a concrete campaign to defend the prenegotiated plan by using the machine that got him elected to garner support for the measure.
His team did neither until way after it became evident the conversation was getting away from them, and the cable news networks were filled with death-panel and government take-over crazies and their congressional enablers.

To give another analogy, Obama "opened his Kimono" too early to show he had nothing to hide, thinking they'd open up too, and instead, the Right took that opportunity to kick him right up the middle.

The Republicans have a better idea of the game they are playing. They know they don't need to come up with a plan, just attack the one on the table. They aren't thinking of the merits of reform, but how much they can represent themselves as the anti-Obama in the hopes of votes in 2010 or 2012. Their motivations do not match the President's in the slightest.
This mismatch allows them to start negotiations from an extreme position, so that Obama and the Democrats would welcome a center/right compromise and think they got something done. Those town halls crazies weren't organized to shut the bill down, it was to push the conversation so far to the right that the left would feel they were negotiating from a position of weakness. Because of this, we may lose the centerpiece of reform, the "public option." Most analysis seem to indicate that a public option will never make it to the final bill.

Obama must now rely on his oratory skills to get him out of this hole. Even if he does so, there are still quite a few levels of negotiations left, and the right is expecting Obama and the Democrats to give up something at each turn in exchange for support. What's even more amazing is that after these negotiations, the majority of Republicans may vote against the bill anyway.

How do you get a deal done when the person who pretends to be negotiating continues to low ball their counteroffer or doesn't present one, who either doesn't understand or pretends to not understand your product, and who is trying to block your way towards close? You stop negotiating with them and get to a different decision maker and sell around them. Obama can do this by strengthening the Dems and getting this passed, even without Republican votes. His efforts are probably best used in getting the Dems what they want, than continueing to believe the Republicans are going to give anything up.

So Obama, rookie mistake learned. You tried to play nice, but you need to stop negotiating with those who are doing so in bad faith. Keep that kimono closed, with a protective cup underneath. It is time to show some teeth, and save this deal. Too many people's lives are in the balance.