The Lao Taxi Case

An American, a Dutchman and a Brit walk into an open-air third-world bus stop just before dawn. They each need transport to the town – approximately three miles away. The local minivan and tuk-tuk drivers have organized themselves into a mean little mafia, and they are gouging the international tourists as they disembark from overnight buses. All of them are weary and disoriented from long, uncomfortable journeys.

What happened next:

First the Brit tries to take control of the situation, arguing his moral position. The overnight bus was a complete rip off – he was shown photos of a modern luxury double-decker but was forced into an overcrowded, dilapidated minivan. He’s angry that the bus didn’t take him directly downtown, and is not in the mood to be ripped off again. For him this is just part of a larger issue and he wants to fight back. The British guy is right in some ways, but wrong in others. He is morally and ethically correct, but he can’t convert his anger into a negotiating goal or a set of actionable variables. He’s negotiating about emotional positions – not objective interests. The Brit doesn’t know what a ‘win’ looks like.

The Dutch guy was a compromiser. He aggregated a bunch of folks together and beats down the driver from extortion to mere larceny, but at least he transacts. This seems like a pragmatic position that is well suited to the situation. He knows that they will all get cheated on the price, but it is a one-off deal and he acknowledges the relative weakness of his position. Part of his problem was that the other side knows this tactic, and sets his opening price so high that even a 25% drop is still dear. But that’s not the extent of the Dutch negotiators’ trouble. He didn’t include two key variables – time and exclusivity. As soon as the group has loaded their luggage on the roof and taken their seats, the driver continued trying to lure in new passengers. The group has no choice but to sit and wait.

The young American was coming from Shanghai and using all the wrong benchmarks. He undermined his co-negotiators by repeatedly saying it is cheaper than Shanghai. He’ll always give more and get less. Not only is the American paying more now, but is institutionalizing higher price levels for all foreigners in the future. The longer this type of negotiator works with the same counterparty, the worse his outcome.

What could they have done different?

The first negotiation they should have conducted was internal. Instead of just “taking a shot” at a single driver one after the other, they should have discussed roles, strategy, tactics and limits among themselves first. The Brit would have made a great “bad cop”, while the American could have acted as “good cop” with the Dutchie acting as the “fair judge”.

They might have tried to play one driver off against another and undermined the first drivers de-facto monopoly.

They could have changed venue by walking away. By simply walking to the side of the road and trying to hail a passing cab they could have improved the balance of power. Nothing works better in a tough negotiation than walking away.

Me? No- I wasn’t the relatively rich guy from Shanghai.

I kept my bag on my lap and didn’t pay till we got to our destination. I jumped out of the car immediately, and then offered the driver a choice of currencies – both at a twenty percent discount to the Dutch price. He looked at my US dollars in horror, and quickly took the Thai baht without a complaint.

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