Pot of Gold

Description.   Optimistic math based on questionable assumptions.

It’s always easier to reach a deal when there’s lots of upside potential and healthy cash-flows.  Some negotiators like to engage a counterparty with dazzling projections and sure-fire plans.  Think about all the multinationals who invested heavily in China and other emerging markets because the top-down figures sounded too good to be true.  “There are 1.3 billion consumers waiting for your product.   If we can convince just 3% of them to sign up with your firm, it will double your global sales!”   The same technique works as a relationship builder — focusing on each side’s strengths, and ignoring the challenges and potential friction points.  Usually deployed early in the relationship or when an impasse has been reached.

Be wary of timing differences.  If you have to put up real assets now in exchange for optimistic promises of payoffs in the future, you are in a risky situation.

Intent:  Used to smooth over disputes, delays, and mistakes.

Style:  Seems collaborative, but can actually be quite competitive.

Counter:  Establish benchmarks and find ways to match both parties investment and payout.  Find ways to get guarantees or minimum payouts from optimistic counterparties.

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