From Voss, Chris; Raz, Tahl. Never Split the Difference: Negotiating As If Your Life Depended On It (pp. 129-130) (HarperCollins 2016):
When the famous film director Billy Wilder went to hire the famous detective novelist Raymond Chandler to write the 1944 classic Double Indemnity, Chandler was new to Hollywood. But he came ready to negotiate, and in his meeting with Wilder and the movie’s producer, Chandler made the first salary offer: he bluffly demanded $150 per week and warned Wilder that it might take him three weeks to finish the project.
Wilder and the producer could barely stop from laughing, because they had been planning to pay Chandler $750 per week and they knew that movie scripts took months to write. Lucky for Chandler, Wilder and the producer valued their relationship with Chandler more than a few hundred dollars, so they took pity on him and called an agent to represent Chandler in the negotiations.
Similarly, I had a student named Jerry who royally screwed up his salary negotiation by going first (let me say that this happened before he was my student).
In an interview at a New York financial firm, he demanded $110,000, in large part because it represented a 30 percent raise. It was only after he started that he realized that the firm had started everybody else in his program at $125,000.
That’s why I suggest you let the other side anchor monetary negotiations.
The real issue is that neither side has perfect information going to the table. This often means you don’t know enough to open with confidence. That’s especially true anytime you don’t know the market value of what you are buying or selling, like with Jerry or Chandler.
By letting them anchor you also might get lucky: I’ve experienced many negotiations when the other party’s first offer was higher than the closing figure I had in mind. If I’d gone first they would have agreed and I would have left with either the winner’s curse or buyer’s remorse, those gut-wrenching feelings that you’ve overpaid or undersold.
That said, you’ve got to be careful when you let the other guy anchor. You have to prepare yourself psychically to withstand the first offer. If the other guy’s a pro, a shark, he’s going to go for an extreme anchor in order to bend your reality. Then, when they come back with a merely absurd offer it will seem reasonable ….
The tendency to be anchored by extreme numbers is a psychological quirk known as the "anchor and adjustment" effect. Researchers have discovered that we tend to make adjustments from our first reference points. For example, most people glimpsing 8 × 7 × 6 × 5 × 4 × 3 × 2 × 1 estimate that it yields a higher result than the same string in reverse order. That’s because we focus on the first numbers and extrapolate.
That’s not to say, "Never open." Rules like that are easy to remember, but, like most simplistic approaches, they are not always good advice. If you’re dealing with a rookie counterpart, you might be tempted to be the shark and throw out an extreme anchor. Or if you really know the market and you’re dealing with an equally informed pro, you might offer a number just to make the negotiation go faster.
