The Wolf of Wall Street: arguably one of the best films of the decade AND Leo is in nearly every scene. The only thing better than that is the smooth way in which Stratton Oakmont make money, and how do they do this? Negotiation.
For those of you who haven’t seen the film, it follows newly qualified stock broker Jordan Belfort as he learns about the trade and goes on to build a multi-million dollar empire. The problem is that Stratton Oakmont is built on deceit and defrauding investors.
But how do you make millions via a phone call with someone you’ve never met? This scene from the film is a perfect example of how negotiation can work, and how a certain factors can ensure you come out on top.
**NOTE: video contains strong language***
First, get your foot in the door
Jordan begins by selling the client “blue chip stocks” or to the common man, shares in global businesses. The client knows the company and its reputation and so doesn’t feel like buying shares would be a risk. Jordan then moves on to the “pink sheets and penny stocks”, or cheap shares in companies that no one knows and are vulnerable, but that make them lots of money. The idea is that once the client has made an initial, safe commitment, they are more likely to commit to a second request later on, (e.g. Freedman & Fraser, 1966; Taylor & Booth-Butterfield, 1993).
Second, have a word with your wife...
The client breaks the silence and says he needs to speak to his wife. Now in most situations, telling the seller that you need to speak to someone of higher or equal authority provides the buyer with two things: time to think about the offer, and an opportunity to go back to the seller and say “my wife thinks it’s too high”. A study by Stuhlmacher & Champagne (2000) looked at the effect of time pressures on the outcome of negotiations. They found that in high time pressured situations – when there is less time to make a decision – there was less exploration of alternatives occurred and the buyer gave more concessions. Maybe this is what the client is trying to achieve in this scene, unfortunately for him, Jordan knows all the tricks and so it doesn’t work in his favour.
Lastly, scarcity: “By the time you read about it in the Wall Street Journal, it’s already too late.”
When something is difficult to get hold of, we generally perceive them to be better than those things that are easy to get, (Lynn, 1989). Thus, when we can’t have something, we want it more! Jordan plays this game with the client by saying that this opportunity will not be around for long. Driscoll, Davis & Lipetz (1972) found this effect in teenagers and their romantic partners. Participants reported that the more their parents restricted them seeing ‘said person’, the more they valued the partnership and wanted it.
I could go on; the fact of the matter is, Jordan Belfort knew how to sell and he knew how to make every deal look like the best offer via a mix of fine negotiation techniques!
Now it is my turn...how do I make marrying me look like a better option than all other possible alternatives?
Katherine Baylis – Blog 5
Driscoll, R., Davis, K. E., & Lipetz, M. E. (1972). Parental interference and romantic love: The Romeo and Juliet effect. Journal of Personality and Social Psychology, 24, 1, 1-10.
Freedman, J. I., & Fraser, S. C. (1966). Compliance without pressure: The foot-in-the-door technique. Journal of Personality and Social Psychology, 4, 2, 195-202.
Lynn, M. (1989). Scarcity effects on desirability: Mediated by assumed expensiveness? Journal od Economic Psychology, 10, 2, 257-274.
Stuhlmacher, A. F., & Champagne, M. V. (2000). The impact of time pressure and information on process and decisions. Group Decision and Negotiation, 9, 471-491.
Taylor, R., & Booth-Butterfield, S. (1993). Getting a foot in the door with drinking and driving: A field study of healthy influence. Communication Research Reports, 10, 1, 950-101.