How Bias Effects Negotiation

Thanks for watching. My name is James Robertson with WorkSpace Real Estate, and for today, we’re going to talk about how bias affects real estate deals.

Now, the first question I want to ask is where do you get your news from? Is it from Fox News? Is it CNN? How about MSNBC? Or do you pride yourself on avoiding all of mainstream media and only looking at the most independent sources of news?

We tend to seek out information that supports our point of view while avoiding information that contradicts it. Now, I don’t even want to get started on the differences between those news sources, but I think you can understand just how strong this bias can be in each of our lives.

In commercial real estate, this bias can be just as pervasive, even more so because you are placed in an environment where there are far fewer sources of information for commercial real estate, and the people supplying that information generally have a bias as well.

While a tenant broker should share much of the same bias that you have. As a real estate manager, the listing or selling broker will share a bias for what is best for the landlord or the seller. If you doubt this, just know that in the state of Texas, by law, we’re required to have a fiduciary responsibility to work for the best interest of our client as brokers. That means that landlord brokers must look out for landlords and tenant brokers must look out for tenants.

Imagine that you were told by company leadership that you were in charge of renewing the lease or leases when they expire. Mind you, I said renew, not evaluate your options seriously. You know clearly that your company does not want to move. They don’t want to relocate. They don’t want new site acquisitions. They just want to renew their lease.

Depending on your company culture, larger institutions are much more susceptible to this confirming evidence trap, the pressure can be enormous to just comply as instructed and just focus on the renewal. Now, it’s well documented that 75% of all tenants generally renew their space and landlords are aware of that and send out proposals that are almost always more aggressive than they should be for that very reason.

So if you’re going to be a good soldier, what do you do? You just might subconsciously, even consciously, seek out information that supports the direction that you’ve been instructed to go. That usually looks something like this. You may ask for a market report to confirm that you’re not paying too much rent. You may ask for one or two different proposals from the landlord, maybe with different lease terms, maybe with a termination option or maybe with a lease purchase option.

You might ask the landlord simply to update the space via some sort of build out and consider it a win if the landlord pays for that. You might even confer with your broker, see how aggressive you can get on the renewal, but instruct your broker not to push too hard. After all, you don’t want to give the impression that you might leave. Think about all the pressure that will cause your leadership.

Now, let’s take a moment and talk about how this hurts you. Establishing your positions without sufficient data and consultation invites exposure. Company leadership may passionately want to renew their space, but they are depending on you to keep them abreast of potential problems and opportunities.

I want to use a personal example to help drive this point home. When I go to the doctor for an annual checkup, you cannot get me out of the office fast enough. All I want to hear is that, “James, your numbers are good.” Heck I’ll even take okay, and the shorter the meeting, the better. My mind is tuned to hear what I want to hear so I can go on with my day. When I die, I want it to be a total surprise. I don’t want a heads up about it.

Now, please don’t judge me. I’m just sharing with you my own bias so that you can see that we all have this issue. Now, my wife, who loves me, if she’s at the doctor with me, she will listen just a little bit more carefully. In the appointment, she will ask more questions and insist that I follow my doctor’s instructions.

Your role as a real estate manager is to help your company pump the brakes, listen to advice from professionals, use your experience, care, and concern, even love for your business to advise your company as best you can with options. Just like a doctor can not make a patient follow orders, your company may not choose to execute your plan. But just like a doctor, we have an obligation to properly consult your company.

Now confirming evidence bias not only affects where we go to collect our market data, but also how we interpret that information that we do receive. Companies that have a strong desire to expand or relocate will give more weight to data supporting new locations. Companies that want to stay will give more weight to an existing proposal, a conversation with the landlord broker or any other data that leads them to see their current option as the most attractive.

Confirming evidence of bias allows, even encourages manipulation. You can see this happen daily by just watching your favorite news source. Have you ever tried to guess where a close friend picked their news up from? I bet you can be extremely accurate in doing this. Most people will pick a source, believe much of what their preferred news source is saying while disbelieving most of the alternative news sources.

Now, I want to take a moment to show you how to address this bias. So if you’ve listened this far, hopefully, you believe that confirmation evidence bias has some merit and needs to be addressed when reviewing commercial real estate deals really in many other situations in leadership and management in business. So let’s talk about what you can do to make sure that your biases are kept in check.

First, I want you to examine your entire process to ensure that you are reviewing all possible scenarios with equal rigor. Whether you want to relocate, expand, contract or renew your leases, all of these options need to be assessed with the proper due diligence. Find a dissenting opinion. Use your broker to build an argument to counter your current position. What is the strongest to do the exact opposite of what you desire? What’s the second strongest reason to do the opposite of what you’re thinking about?

Listen or read the dissenting opinion and consider it with an open mind. Be honest with yourself about your motives. Are you making a case to make the best decision for your company or are you just looking for evidence to confirm what you think your leadership wants to do?

Here’s another one, get rid of yes men and yes women. When you control the amount of real estate that many of you guys do, brokers are very eager to please. A great salesperson should understand very clearly what you want, but should not be an echo chamber for you. You need to have a team that’s around you. That is strong enough to tell you when you’re making a mistake.

All right, so I’ve set my peace, and I have a question for you. How are you going to respond to the information that was just presented? I want to challenge you to seek out your biases when making real estate decisions and surround yourself with professionals that are willing to give you dissenting opinions, present unbiased market data, and can share experiences with you that you simply don’t have access to, to enhance your ability to do your job.

I hope this information was helpful to you. Please help us by liking, sharing, and subscribing to our YouTube channel. If you’re looking for a guy or gal that will share dissenting opinions, present unbiased market data, and share options for the next deal, we’d love to chat or break bread anytime, just reach out to us. Thank you so much for watching.