On Sunday night (August 23, 2009), ABC TV aired the last prime time episode of “Who Wants To Be A Millionaire.” One of the contestants learned (and taught the rest of us) a valuable lesson in risk taking vs. risk aversion.
Ken Basin, a 24 year old Harvard (magna cum laude) law school graduate and a recently admitted (December 2008) California entertainment lawyer answered correctly all of the questions leading up to the final question worth $1 million dollars. As of that moment, he had won $500,000. If he walked away, he would take that sum with him. If he answered the next question correctly, he would win a million dollars. But, if he answered that next question incorrectly, he would walk away with $25,000, losing $475,000.
The question he faced:
“For ordering his favorite beverages on demand, LBJ had four buttons installed in the oval office labeled “coffee,” “tea,” “coke” and what?
In debating what to do, Mr. Basin admitted to Regis Philbin, the show’s host, and thus to everyone viewing, that he did not have a clue: It would be a pure guess on his part to answer the question. So, he used his last “lifeline” by asking the audience for its opinion as to the correct answer. The audience voted 40% for Yoo-Hoo, and split the remaining 60% over the other three possible answers. Not a strong response.
In deciding what to do – whether to walk away or take a risk, Mr. Basin made an interesting observation. He noted that lawyers are, by nature, risk avoiders while business people or those who graduated with degrees in business administration (i.e., MBA degrees) are risk takers. Mr. Basin then commented that he should have gone to business school as he is a risk taker.
His nature, rather than his law school training and judgment, prompted him to take the risk. He guessed “Yoo-Hoo”. . . and lost $475,000. The correct answer was “Fresca.”
Are you a “risk-taker” or a “risk-avoider”? While, superficially, this may sound like a silly question, in truth, it is actually quite an important one. The answer, to a large degree, explains how you approach negotiations. I do not mean just “serious” or work related negotiations but, any and every type of mundane negotiations; the kind that we engage in every day of our lives (e.g. who drives? Who cooks? Who picks up the kids? Where to go for dinner or vacation?) It is an important trait that we should know about ourselves. In negotiating with others, are you willing to risk a lot purely on a guess like Mr. Basin, or do you feel more comfortable making a decision based on information which lowers your probabilities of making the “wrong” decision?
As importantly, is the other party to your negotiations a “risk-taker” or a “risk-avoider”? Obviously, the other party’s propensity (or strong lack thereof) for “adrenalin rushes” plays a role in your own negotiation strategy. Her approach to “seeking thrills” must be weighed against your own approach. By doing so, you might just be able to come up with a strategy in which you do not lose $475,000 or anything else because the “thrill” of the guess overtook your rationality, judgment if not common sense.
. . . Just something to think about.
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