Conflict management is as old as humanity itself. From the ancient "village-gatherings" to the modern diplomatic visits, humans have always tried to find ways and means to resolve a conflict.

Although we have engaged in the process since time immemorial, for most of our history, we were just going through the motions, not really paying attention to the internal workings, or the strategy involved in these negotiations. We had no mind to think because we had no need to improve. That is, until World War II.

Post the War, with the world diplomacy in ruins, and the threat of a nuclear war ever looming on the horizon, we needed better ways to resolve our conflicts. More importantly, we needed to “parley” more peaceful times. And that’s when “negotiation” and “mediation” started being treated with a rigorous scientific outlook.

However, as with most scientific advancements, the “rational” is placed supreme, often at the cost of disregarding the natural history behind the development process of the subject. However, to truly understand how negotiation developed from a means of conflict resolution to the modern, delicate, and multifaceted art form (that it has become today) we need to study its many forms.

Negotiation can occur in one of the many forms that it has evolved into. In today’s overly legal system, “mediation” is the most commonly practiced form of negotiation. It’s when a third-party mediator, usually a law practitioner, is present to “mediate” the process between the two parties.

When it comes to business deals, this mediator involvement continues. Only this time, the mediator is usually a banking or financial institution. The buyer often approaches a lending agency to borrow the money needed to close the deal. And because the sum of money involved is pretty huge, the amount is transferred directly to the seller.

In this transaction, both parties are more or less dependent on the financial institution, without whose involvement the deal wouldn’t go through. Thus, the mediator ends up gaining an unspoken advantage in such transactions. It also gives them an upper hand which they can use to dictate the terms of the deal. And, obviously, these terms will be those that are most beneficial to them, and not necessarily to the parties involved.

That’s why the modern negotiation process through mediation, although the most common form of making deals, may not necessarily be the most efficient one.

Then why is that we continue to be involved in an sub-optimal solution? Why hasn’t the situation changed, or evolved for the better?

That’s because most people have a natural resistance or strong ambivalence to negotiation. While we find the idea of cooperation appealing, the actual practice of arriving at a compromise is particularly uncomfortable to us.

Suspicion is a deep-rooted, evolutionary, and biological aspect of our psyche, and it plays a huge role in the negotiation process. It’s not easy to overcome the feeling that someone might take advantage of us, if we let our guard down

While economists claim freely that “people are rational agents”, we know that in practice that’s far from the truth. People hardly ever behave rationally. In fact, studies in modern behavioral economics call people “predictably irrational.”

There are many theories in modern economics that are a proof of our irrationality. There is an argument, therefore, that we are not biologically hardwired to make rational choices that are best for everyone involved; instead we make selfish choices — like the banks in the modern negotiations.

How do we fix this dilemma?

Well, that’s what we are going to discuss in the second part of this article. We will talk about how modern technologies such as machine learning, artificial intelligence, and the power of big data can help us arrive at more rational, mutually beneficial compromises. So make sure you follow this space for the next installment.

About Us

Invotiate is an innovative invoice negotiation platform that redefines an invoice from a static payment agreement to an active negotiation tool. It gives you the power to offer discounts (or premiums) in return of better payment terms. And if that wasn’t enough, the software uses high-end machine learning to give you the edge while renegotiating the timelines.


Enter your email to follow this blog and receive notifications of new post by email.

Sign Up

No Credit Card required for registration.