How to turn $20 into $15 000

In this article I want to look at why we find it so hard to give something up and/or back down. Most of the fights I’ve seen in my time working door/bar security were escalations of petty disputes, that could have easily been resolved in the early stages of the argument or misunderstanding. However, at some point both parties reached a point where they had bought into the conflict and couldn’t let it go. At that point it was usually inevitable that things would turn physical. What was interesting about this, is that neither party recognized this point, and would usually keep arguing, talking and shouting etc. beyond it, when really somebody should have taken the initiative and acted preemptively to end the physical conflict before it began; at this point the legal conditions for assault, and sometimes battery (unwanted touching) had been met. The purpose of this article is to help us understand the extraordinary lengths we’ll go to when we commit to something – so we can avoid going down this route – and help us to recognize when somebody else is so committed to the “conflict” that they will never back down.

People will often put goods up for auction, rather than sell them at a fixed price, because they believe that people will get caught up in the bidding process, and pay more for a product than they might normally – especially if they can up their bid in small increments, such as a dollar, or even fifty cents. Auction/bidding sites like Ebay, rely on this process to increase their revenues (these sites have also made it extremely easy for criminals to dispose of stolen goods quickly, and with little traceability, so if there’s a highly valued product at a ridiculously low price, it’s worth questioning why the seller needs it off their hands so quickly). One experiment designed to illustrate this, and how people can buy into something, and find that they are quickly out of their depth, involves bidding on a twenty dollar note. The rules of the auction are pretty simple: the highest bidder gets the twenty-dollar note, however the next nearest bidder has to pay the seller of the bill, whatever their bid was e.g. somebody might bid $18, which is the winning bid and so they get the twenty dollars, whilst the next highest bid of $17 sees that bidder hand over seventeen dollars to the owner of the twenty dollar bill. Two types of behavior tend to be noted here. Firstly, the risk-averse in the experiment quickly see how they could lose money as they continue to bid higher amounts and so bail out pretty early, however there are normally two or three people in a group who get caught up in the process. What usually happens next is a realization, that in order not to lose nineteen dollars, to a twenty dollar bid, it is necessary to make a bid of twenty one dollars, for the twenty dollar note, which is normally met with a counter bid of twenty two dollars, etc. It’s no longer about winning the twenty dollars, it’s about not coming second place, so that you don’t have to hand over any money – it’s all about not losing. The experiment has seen people bid each other up into the tens of thousands; the more you have to lose, the more you keep bidding.

This process demonstrates how small and petty disputes can escalate to the point where deadly force is used, especially when the commodity being bid on is undefinable and unquantifiable, like “respect”. In any dispute, you have to decide what you are prepared to lose, and when that is. The safest course of action is to bail out of the process early, before you have the realization that you may be paying $21 or more for something that is only worth twenty dollars etc. At that point there is no winning, it is simply your ego running the show for you, and that means the situation can go anywhere. We should also recognize that we have certain biases that may prevent us from recognizing when somebody is trying to resolve or get out a dispute i.e. they want to stop “bidding”, whilst we’re so caught up in the process we don’t recognize this. One of the biases that often prevents us from seeing the value of a solution that somebody puts forward is something called “Reactive Devaluation”. This is when you automatically/emotionally refuse somebody else’s resolution to a dispute/conflict because it came from the other party i.e. if you had come up with it yourself you would have deemed it fair, equitable and suitable however you devalue it as a reaction to it coming from the other person. In a heated dispute, rational resolutions can be passed over because we are so caught up in the competition of posturing to exert dominance over the other person. If we fail to recognize a solution that meets some – maybe not all – of our grievances, it is unlikely that we will be presented with a better offer, as a refusal will harden the other person’s opinion of us as being unreasonable, and anything we put forward is likely to be subject to the other party’s reactive devaluation.

Understanding how we naturally respond and behave in conflict situations, means we can be aware of the traps that we might unwittingly fall into, and recognize when we are heading for those points when we will discover that we’ve invested too much, and will not be able to extricate ourselves from the dispute. At the same time we should quickly recognize when we are dealing with somebody who is so caught up in the process of conflict, that they quickly reject a resolution presented to them, because they have already passed the twenty dollar bill mark, and are prepared to go on regardless of the personal costs to themselves, which could be significant e.g. risk of injury, legal costs, criminal charges, etc.