Ultimatums

When someone issues an ultimatum, they create a situation where there are only two options, and force the other side to choose. If an ultimatum is issued, it is usually best to de-escalate the negotiation and employ bargaining and compromise in an attempt to achieve a mutually beneficial outcome.

Effectively, an ultimatum is a threat to do something unless the other party does what you want. For example, someone would be issuing an ultimatum if they said, "Take 10% off the sticker price or I'll go to another dealership," or, "Pay to have the plumbing issues fixed or I'll go buy another house," or, "Give me a better rate on my insurance or I'll switch to another provider."

If giving an ultimatum in a negotiation never worked, then no one would ever employ this tactic. However, ultimatums do sometimes result in you getting what you want, and if you don't mind the relationship wreckage left in the wake of an ultimatum - either because you'll never see these people again or you simply don't care about preserving the relationship - then if issuing an ultimatum is the only way to get what you want, then in theory there's no harm in trying. However, ultimatums ultimately rely on the faulty premise of a false dichotomy, as in a negotiation, there are never only two options.

Negotiations are not black and white, right or wrong, you or me, either-or, zero-sum games, and do not require all-in bets where someone either has to fold or call someone's bluff. They are instead a discussion to find out how everyone can get what they want, and if they can't, what compromises might be made so that everyone can walk away from the deal happy.

When someone issues an ultimatum, they are playing a game, and this game has a name: brinkmanship. Brinkmanship refers to the strategy of being willing to take a situation right to the brink of catastrophe, in the hope that the threat of catastrophe will compel the other side to do what you want.

It could be argued that the policy of mutually assured destruction during the Cold War was a decades-long game of brinkmanship between the United States and the Soviet Union, with both sides threatening nuclear annihilation to force the other side to capitulate to whatever they wanted. This game reached its most dangerous point during the Cuban Missile Crisis, but fortunately both sides were able to find a way to de-escalate the crisis back to a negotiation, where both sides were able to find a way to bring the crisis to an end.

Thinking of ultimatums as a crisis is useful, as it implies the correct response is de-escalation, as clearly something has escalated to the point where someone is willing to say, "Do what I want or else there will be consequences."

One of the approaches to de-escalate a negotiation after an ultimatum has been issued is to address the notion of there being only two options, such that it's not a question of either-or, but instead, a question of which is the best choice out of all of the available options.

One framework that helps illustrate the power of having many options is the OODA loop, which stands for Observe, Orient, Decide, and Act. While this model was developed originally for fighter pilots as a model for decision-making during a dogfight, it has been widely adopted as a structured process for making decisions.

In the first stage of Observation, the goal is to gather information about the current situation, which might also be called situational awareness. In the second stage of Orientation, the goal is to develop a comprehensive list of options, with the first option always being to do nothing. The subsequent stages are to Decide on which option to choose, and then Act on that decision, which then creates a loop back to Observation, where the process repeats.

When you find yourself in a negotiation where someone has issued an ultimatum, you should first try to observe the situation objectively to understand exactly what's going on, which should include figuring out why someone felt it was necessary to issue an ultimatum in the first place.

For example, if someone said, "Take 10% off the sticker price or I'll go to another dealership," try to develop an understanding of why they are taking this approach. Are they broke and in desperate need of a car? Do they have enough money to pay full price but like getting good deals? Is their spouse waiting in their car, looking on disapprovingly, as if anything but buying the car at a discount would be unacceptable? Do they seem frustrated and flustered, or calm and collected?

Once you have made your observations, you might conclude that they have the money to afford the sticker price, but as they and their spouse seem very frustrated, you might say, "I think we can find a way to come down on the sticker price. If you are able to pay in cash, we can definitely come down on the price, or we can find you another car that's got everything you want but is more affordable, or we can take your current car as a trade-in, and deduct the trade-in value from the price. We might also be able to get you into a higher trim level at the original price, but the choice is yours. What would you like to do?"

If the person seems to relax, and starts to discuss the pros and cons of the various options, then you have successfully de-escalated the ultimatum back to a reasonable negotiation, the result of which would be a decision of which option they liked the best, and taking the action of completing the purchase, thus closing the OODA loop.

Whatever technique you choose to de-escalate an ultimatum, be sure to never get upset, so that you are always trying to understand the situation, and think of acceptable alternatives to simply acquiescing to their demands. While it can be tempting to fold and give them what they want, or to call their bluff to see if they will follow through with their threat, often a far better deal can be reached with a bit of patience, creative thinking, and by remaining open-minded about how to create a win-win situation, even if someone is trying to frame a negotiation as winner-take-all.