It is often thought that the ability to compromise is an essential trait of the successful entrepreneur. Entrepreneurs are often asked to compromise in negotiations when buying or selling, working with others, developing a product or service and countless other situations. Compromising sounds reasonable; but is it?
First, let’s be clear about the definition of compromise and why it is not the same as negotiation. Negotiation pertains to exchanging values, as in, “we negotiated a win-win deal”. Negotiation seeks agreement where both parties seek a “win-win” conclusion based on value given for value received. Compromise pertains to relinquishing values, as in “for a short term gain he compromised the company’s long term position.” Compromise comes in many forms but always results in a greater value being sacrificed for a lesser one. In this context compromise is not the same as negotiation.
One form of compromise often attempted is deception. I have heard statements along the line of “let’s put lipstick on this pig and sell it.” This is an attempt to deceive. The value that is being compromised is one’s principles of honesty and integrity (Honesty and Integrity). In negotiations honesty requires both parties being truthful with each other. Integrity demands being truthful with yourself about the value you bring to the negotiations. If discovered, deceit undermines trust, and thus undermines successful negotiations. More importantly, even if not discovered, evading the truth is an evasion of reality, which can never be achieved.
“If the ultimate virtue is reason, the ultimate vice is evasion.”
Yaron Brooks
Another form of compromise often practiced is referred to as “positional negotiating” based on the idea of opening negotiations from extreme positions with the intent of reaching a compromise. It is irrational for either party to seek more from a negotiation than they know they deserve. Many negotiations fail not because the two parties cannot come to agreement, but because they have not developed sufficient trust in each other. Most negotiations begin with a degree of mistrust between the two parties. Building trust is the first objective for achieving successful negotiations. Positional negotiating is a form of compromise that undermines that trust from the very outset. It is an attempt to gain the unearned.
“It holds that the rational interests of men do not clash—that there is no conflict of interests among men who do not desire the unearned”
Ayn Rand
But beyond these often practiced but more obvious examples of compromise, compromise in all its forms is damaging. An Objectivist entrepreneur knows that they may not win if they don’t compromise, but to some degree they will always loose if they do. And here is why.
“There are two sides to every issue: one side is right and the other is wrong, but the middle is always evil.”
Ayn Rand
Consider the following scenario. Person A holds position A. Person B holds position B. A rational analysis of compromise reveals there are only three possibilities. A is correct and B is wrong. B is correct and A is wrong. Or both A and B are wrong. Note, however, it is not possible, as many suggest, that both A and B are equally right. If they are both right then there is simply a misunderstanding of the difference between A and B, which they may not initially recognize. By not compromising and continuing discussions, A and B, if they both act rationally, will come to the understanding that they are already in agreement and no compromise is required. Their positions are in fact identical, or at least essentially so.
Let us now continue to investigate the other three possibilities and why compromising is also a losing proposition. In the first instance where A is right and B is wrong any compromise by A to B will diminish the outcome for A. After all right is right and can’t be wrong. So if A is right they should never compromise to B. If B compromises to A under this circumstance, when A is right, it is true that B’s outcome will in fact be improved. But by immediately compromising to A, first B has learned nothing about why their position is inferior. Next it is by pure luck their outcome has been improved. Compromising in hopes of a lucky outcome is clearly not a good practice. So B should never compromise until they fully understands and accepts that A is in fact right. In the second instance where B is right and A is wrong the converse is true. Any compromise by B to A will diminish the outcome for B by the same line of reasoning. And finally in the third instance where both A and B are wrong any compromise by either A or B will be equally wrong.
Now let’s consider what can happen if neither compromises. If rational discussions continue without compromise A may learn that B is right, or B may learn that A is right and an understanding of mutual benefit to both can be achieved. Even in the case where both A and B are wrong, by continuing discussions, they may both see their error and come to an entirely new conclusion they can both agree on. In all cases no compromise was required. Moreover by neither party compromising, a better outcome has occurred for all parties. The motto here is keep rational discussions going until both parties have reached an understanding and agreement that is of mutual benefit to both, if possible.
It is possible no agreement can be reached. You simply disagree for some fundamental reason that for limits of time or reasoning cannot be resolved. Or perhaps you do not hold the same value for something that the other party does and therefore do not wish to complete a transaction. Under these situations the entrepreneur may not win by refusing to compromise. But the entrepreneur will not have lost either, which one certainly will if they do compromise.
“There is no conflict of interests among men who do not desire the unearned, who do not make sacrifices nor accept them, who deal with one another as traders, giving value for value.”
Ayn Rand
An Objectivist entrepreneur recognizes to compromise implies relinquishing a value, negotiation implies trading values. An Objectivist entrepreneur only engages in rational negotiations where both parties seek a “win-win” situation with value given for value received. Negotiate, always. Compromise, never.