Complexity-Theory-And-Negotiation-(Harvard-Busines

DoNotCopy9-902-230JUNE18,2002________________________________________________________________________________________________________________ProfessorMichaelWheelerandResearchAssociateGillianMorrispreparedthisnoteasthebasisforclassdiscussion.Copyright©2002PresidentandFellowsofHarvardCollege.Toordercopiesorrequestpermissiontoreproducematerials,call1-800-545-7685,writeHarvardBusinessSchoolPublishing,Boston,MA02163,orgoto—electronic,mechanical,photocopying,recording,orotherwise—withoutthepermissionofHarvardBusinessSchool.MICHAELWHEELERGILLIANMORRISComplexityTheoryandNegotiationQuestionOne:Rachelwenttoanautodealershipplanningtobuyalatemodelsedanbutlefthavingleasedabrand-newsportscar.Howdowejudgehernegotiationsuccesswhensheendedupwithsomethingshehadn’tbeenlookingfor?QuestionTwo:AfterhearinganultimatumfromaChinesetradeofficial,U.S.negotiatorCharleneBarshefsky,responded,“Ifthechoiceistakeitorleaveit,ofcourseI’llleaveit.ButIcan’timaginethat’swhatyoumeant.Ithinkwhatyoumeantisthatyou’dlikemetothinkoveryourlastofferandthatwecancontinuetomorrow.”1HowdidBarshefsky’simprovisedresponsechangethecourseofthatnegotiation?QuestionThree:MississippiAttorneyGeneralMichaelMooreusedanovellegaltheorytobuildaforty-statecoalitionandtocompelthemajortobaccocompaniestothebargainingtableforthefirsttimeever.Washeabrilliantstrategistorjustlucky?Conventionalnegotiationtheorytendsnottoaddresssuchquestions,focusinginsteadonthebookendsofnegotiation–rigorousidentificationofinterestsandBATNAsessentialtogoodpreparationand,atagreement,assessmentofvaluecreationanddistribution.Muchcanchangebetweenopeningandclosing,however,whetherintherarifiedairofinternationaltradenegotiationsorinprosaictransactionslikebuyingacar.Somesurprisesmaybepleasantorpainful,buteitherwaytheycanrequireasignificantrevisionofstrategyandtactics.Drawingdecisiontreesandmappingbackwardssharpensourthinking,butthedynamicnatureofnegotiationmeansthatwecannotplotallthepossibletwistsandturnsofnegotiation.Weneednewmodelsandmetaphorsthattakeasastartingpointthecomplexinteractivityoftheprocess,ratherthanassumeitaway.Suchmodelscouldbeapotentialsourceofpracticalinsightforhowtosurvive,eventhriveinfundamentallyunpredictableenvironments.TheScienceofComplexityComplexityisahottopic.Scientistshavestudieditinavarietyoffields,andnowothertheoristsandpractitionersareapplyingitsconceptsandprinciplestoanevenbroaderrangeofapplications,1From“CharleneBarshefsky(A),”HBSNo.801-421.DoNotCopy902-230ComplexityTheoryandNegotiation2includingbusinessstrategyandorganizationalbehavior.2Complexitytheorymayofferanewandpowerfulwayofunderstandingnegotiation,aswell.Thetheoryhasitsrootsinvarioussciences,amongthemparticlephysics,microbiology,ecology,meteorology,andevolutionarybiology.Forexample,sincethe1960s,environmentalscientistsandpolicymakershavestudiedthecomplexityofhabitatsandecosystems,tryingtounderstandthedynamicprocessesinwhichthedestructionofonespeciescancauseacascadeofunexpectedconsequencesforotherplantsandanimals.Meteorologistshavelikewiseexploredhowseeminglysmallchangesinatmosphericconditionscanspellthedifferencebetweenfairweatherandviolentstorms.Untiltheadventofmoderncomputers,scientiststypicallyhadtorelyontraditionalNewtonianphysicsandmathematicstoexplainmarketdynamicsandfluidweatherpatterns.Newton’ssystemassumesalogicalordertotheworld,representedbylinearequationsandmodelsinwhichpreciseoutputsareexpectedfromthesameinputs.Alinearsystemislikeamachine.Eachpartisacoginthelargerwhole,andanadjustmentinthesystemproducesthesameoutcome,everytime.Realworldresultsoftendidnotfitthisneatpattern,however.Theseseeminganomaliescouldnotalwaysbedismissedasmere‘noise’inthesystem,theresultofhumanerrororimprecisecalculations.“TotalpredictabilitywasthefoundingmythofNewtonianscience,”asonemodernscientistputit.3Scientificadvancesinthefieldsofrelativityandquantumphysicscalledthisdeterminismintoquestion.Thestagewassetfortheemergenceofcomplexitytheoryasmanifestedbyphenomenaasdiverseasmarkettrends,trafficflow,andemigrationpatterns.Socialscientistsbecameinterestedindynamic,unstableprocessesaswell.BenoitMandelbrot,anIBMmathematician,discoveredpatternsinthepriceofcottonthatwereneitherregularnorrandom.DecisionanalystslikeThomasSchellinglookedat“tippingpoints”ineverythingfromtheracialcompositionofneighborhoodstothepercentageoficehockeyplayerswillingtowearhelmets.4Inrecentyears,othershavewoventhesedisparatethreadsintoabroadertheoryofcomplexity,findingapplicationsinmanydomains,includingorganizationalbehaviorandbusinessstrategyThereappeartobeclearconnectionstonegotiations,aswell.TheConceptualBuildingBlocksofComplexityTheoryLinearityvs.Non-linearityInthe1960s,morepowerfulcomputersallowedresearcherstoexploredynamicmodelsbyrunningsimplenonlinearequationsthroughtheircomputersagainandagain.Theydiscoveredthattheworldofnonlinearityisnotaworldwithoutlogicorpattern.Itissimplyfarmoreintricatethan2Forexamplesofthisli