Brexit is turning out to be a tragic example of bad negotiation. Good negotiators follow a basic set of rules that Brexit has seemingly failed to manage. Negotiations of such complexity are fabulously complicated and we must give those attempting to create value credit where it is due. But in the case of Brexit, perhaps the best value comes in learning how not to negotiate.
1. Brexit negotiators have no idea what lies in store for Britain if there is no deal. One of the first things that hopeful negotiators learn in a negotiation course is that to be effective you have to know what your best alternative to a negotiated agreement is. This is called your BATNA.
Without a BATNA you have no idea if the deal you are currently being offered is better or worse than what you might get otherwise. If you don’t know what will happen if you don’t make a deal, then the deal you are offered could be great, or it could be rubbish. You can’t tell.
People have not known this ‘unknown’ from the outset. Many, many economists predicted that Brexit would be bad for the economy in the short run. That has certainly turned out to be true. But in the long run, who knows? Will the UK have a sufficient workforce in the National Health Service? Will Northern Ireland stumble back into instability? Will the UK’s economy blossom once it is unshackled from the constraining forces of Brussels? It is impossible to say.
Some are convinced no deal is better than a bad deal. But how bad is a bad deal? How bad is no deal? There is no consensus. There are many pundits who make bold and often substantiated claims with carefully chosen anecdotes. But the pundits’ claims often contradict one another. It is impossible to tell what one learns from them except who your preferred pundits are.
Nearly everyone has an opinion on Brexit. But no one can tell the future. In 20 years, it is impossible to predict what the world will look like. Twenty years ago the internet was a hobby. How Brexit matters to you will depend a lot on what you think in the future when you’re actually experiencing whatever Brexit becomes.
People are notoriously bad at predicting how they will feel, which is what psychologists call a failure of affective forecasting. The evidence suggests that most of us don’t know how we’ll feel about many important things. Brexit, being a complicated endeavor, is almost assuredly among them.
Note: Some claim that Leavers know what there BATNA is: it means staying in the EU, which is not good. But this isn’t really a BATNA, it’s an ideological position. If you negotiate from an ideological position, then you are more willing to pay any price to get what you want. That is a very bad position from which to enter a negotiation.
2. Brexit is a multiparty negotiation in the worst possible way. It may seem there is just Britain and the EU. But Britain, especially, is far from a single-minded party, and many within Britain strongly disagree about what a good deal is. Even among those who voted for Brexit, views differ strongly about what the deal should be.
The EU is of course equally diverse and because of that it is a tough negotiating party. Multiple parties need to be satisfied even within the EU.
Multiparty negotiations are generally extremely difficult because they require agreement among more than just two parties. But Brexit is in a class all its own. Imagine buying a car and giving all your friends and relatives the right to veto your choice. Now imagine that you also give the same power to all the car dealerships you visit. That’s Brexit.
3. The Brexit negotiation is poisoned because it suffers from a toxic third party. A third party can prevent reasonable outcomes by forcing negotiators into untenable positions.
The toxic third party for British negotiators are the British people. Because the British are divided about what Brexit should be (and whether it should be), those who are doing the negotiating can only guess at what the British people and their representatives in Parliament will agree to. So far they have guessed wrong. Because the British people have been told numerous stories about what Brexit really means, they are willing to hold out for “miracle” deals to which the EU will never agree.
In 2015 Greece had a similar problem in negotiations with the EU. The Greek prime minister, Alexis Tsipris, in an effort to reveal his country’s resolve in the EU negotiations, called for a referendum on austerity. Alongside Tsipris, 61% voted “oxi” (‘No’) to austerity. This was a historic vote at the time. But in the end Tsipris was forced to go along with an offer from the EU that was even harsher than austerity conditions his country voted against in the referendum. The third party in Greece effectively lobotomized Tsipris because it told the EU that his fallback position was untenable. He had nothing left to lose, and he resigned several months after the referendum.
4. The Brexit negotiation has no basis for trust. The best negotiations rely on the parties involved trusting one another. Britain was off to a bad start from the beginning, because it put people in charge of the negotiation who were not looked favorably upon by the EU. Nigel Farage and Boris Johnson were particularly bad choices. The belief was that they would be tough and represent the seriousness of the leave position. But you can be tough and trusted, and they lacked the latter.
Everyone in the business of negotiation knows that if you want to make a good deal, you have to trust the other side to actually do and mean what they say. No one would buy a car from a man singled out as an international liar. But people like Nigel Farage and Boris Johnson, who represented the UK for some parts of the negotiation, have said many memorable things that turned out to be false, or extremely difficult to verify, or simply genuinely unhelpful. While this may have made some people in Britain’s toxic third party chuckle, it is expensive humor.
Britain has also put forward a revolving door of lead negotiators, further undermining trust or even familiarity. Even if the EU had warmed up to Nigel’s sense of humor, he was gone before his charm could take hold.
5. Britain forced itself to negotiate under time pressure. Teresa May unfortunately did not have a clear plan when she initiated Article 50. This gave Britain only two years to negotiate a deal with no historical precedent that would influence the lives of hundreds of millions of people.
Negotiating under a deadline is a recipe for bad decision making. If you don’t give yourself time to make a good deal, to consider your options, to develop trust, to understand the costs of no deal, then expect your deal to either be lucky or bad.
6. Both sides are overconfident. Overconfidence routinely kills good negotiators. It killed Netscape in the browser wars. It did away with Robert Campeau, billionaire retailer, and contributed to a financial crisis that shook the world.
Overconfidence makes negotiators inflexible because they believe they already know it all. This leaves them unwilling to find integrative deals that create value. It leads them to walk out of rooms with heady visions of the eventual downfall of their so-called adversaries. It prevents them from looking for common ground that can be leveraged into long and healthy relationships.
All the nations negotiating Brexit will continue to have a relationship long after the outcome of the present negotiation. And that will influence their future negotiations. The downfall of the EU is the downfall of Britain, and the downfall of Britain is the downfall of the EU. Financial markets no longer exist in isolation and Britain and the EU’s fate are tied together like two dogs on one leash.
There is no precedent for Brexit. But the general rules of good negotiations are not up for grabs. Going into a difficult negotiation, one must be aware of the likely pitfalls and complications, the necessity for understanding one’s BATNA, the need for serious planning, the importance of well-defined values, the key role of stable negotiating parties, and the vital ingredient of time to make a good deal and the humility to work it out.
If you’re feeling nostalgic, here’s an article I wrote about the psychology of Brexit just after the referendum. The reasons for Brexit, I believe, are still largely true and will be unchanged by Brexit.