Pawn Stars and Shark Tank – Proof that Americans Have Lost the Art of Negotiation.

As the dog days of summer dwindled, I stumbled upon two new TV programs that I found fascinating on several levels.  The first was Pawn Stars, a “reality” show about a family run pawn shop that mixes a little Antiques Roadshow with the dysfunctional family dynamics of American Chopper.  I admit, I enjoy watching people bring in treasures they found in the attic find out they have an authentic John Hancock of John Hancock or the gullible people learn that the 1675 flintlock pistol they got from a guy at a flea market was a Chinese reproduction.

The second show was Shark Tank, the American version of a British show called Dragon’s Den (also available on BBC America).  Shark Tank gives various Ralph Kramden-types the opportunity to pitch their business ideas to five very successful business-people who then compete for the right to buy a stake in the start-ups.   As an avowed capitalist, I enjoy seeing the ideas that these entrepreneurs cook up and then watching the multi-millionaires fight to see who gets a stake in the business.

But the disappointing, and somewhat shocking, aspect of both shows is the abject inability of most these people to negotiate.

On Pawn Stars, the people are interviewed by the producers before they enter the shop.  They describe the article they are trying to sell and are asked what they would like to get for it.  Some know roughly what the item is worth and this is invariably the exact same amount they tell Rick the pawn shop owner when he asks what they want for the item.  At this point, they’ve lost.  From there, Rick only goes down with this offer and the usually dejected seller reluctantly accepts 30-50% of what they claim they wanted.

Now, they may be savvy and really got more then they expected to get, but something tells me that people who try to sell an authentic Civil War saber worth several thousand dollars to a pawn shop and not a private collector might not be the shrewdest of the shrewd.

Likewise, on Shark Tank, the minnows either think they are setting an anchor point or have no idea how to value their business.  Most massively overvalue their business and offer a minuscule equity stake. A recent example saw a woman ask for a six figure investment in exchange for only 25% of her business.  She therefore “valued” her company at more than $400,000.  In the last two years, however, she had only $18,000 in gross sales.  By standard business models, her business might have been worth $40,000.  The only successful minnows are the ones who realize that having 49% of a successful business is better than 100% of a failing one; or are the ones that put forth a more reasonable number at the start.  The others walk away mumbling, “I’m going to show them…..”

As someone whose job it is to facilitate negotiations, I can’t say that I am surprised.  I run into both sets of bad negotiators all the time.   I guess I should be happy to a certain extent, because if people really understood how to objectively value their claims, express their needs and interests clearly and effectively and negotiate on their own, I’d be out of a job.