In A Negotiation, Funny Money Is No Laughing Matter

Negotiators need to understand exactly what funny money is
Negotiators need to understand exactly what funny money is
Image Credit:
Aart van Bezooijen

If you think about it, money is sorta a strange thing. I mean, by itself it really does not have any value – it’s just ink printed on paper, a plastic credit card, or a blank check. However, because we’ve all agreed that indeed money does have a value and that we are willing to exchange things for it, all of a sudden money becomes a lot more important. That’s why it’s strange that in a negotiation when we’re talking about real things, like cash, we do a good job. However, when the discussion switches over to funny money we see to take our eyes off of what we are doing.

The Problem With Funny Money

If we can all agree that we understand what money is, then what is this thing that I am calling “funny money”? It’s actually pretty simple: funny money shows up when we start talking about money in different forms that we may be used to. A great example of this are credit cards and checks – they are funny money because we can’t “see” the money that they represent.

One of the best examples of funny money comes when we go to gamble at a casino. The casino know that we know the true value of money and if we were sitting at a blackjack or a craps table gambling with real money we’d be hesitant to let our hard earned dollars go away – we’d be betting small. However, since the casinos take our money away from us and replace it with chips, all of sudden we don’t feel so bad when we lose. Sure, we know what a US$10, $25, and $50 chip look like, but when we lose one it’s just losing a chip – it’s not really losing $50.

Another great example of deals that are based on funny money are the ads that you see for new cars on TV. The ads are always advertising the car in terms of what your monthly installment payments would be, not the total cost of the car that you would end up paying. These sellers know that you and I will more easily consider making small monthly payments instead of committing to a much larger purchase.

How To Negotiate With Funny Money

Funny money has a habit of showing up in just about every negotiation that we are involved in no matter what negotiation styles or negotiating techniques are being used. It never looks the same, but it’s always there. One way that funny money can show up in a negotiation is in the form of an interest rate. If the other side raises the interest rate that they are going to charge you, do you realize what that is going to cost you? There are other ways that funny money can work its way into a negotiation: free training, free delivery, tax, freight charges, making payment terms longer, etc.

As negotiators it is our responsibility to keep a very careful eye on any funny money that has worked its way into our negotiation. Funny money is not just something that sits there, instead it is yet another thing that we are going to have to take the time to negotiate very carefully. The key to being able to successfully negotiate when funny money is involved is that you are going to have to take steps to determine the true value of the funny money. This means that you are going to have to translate funny money into real money or some other meaningful unit of value.

When we are negotiating and there is funny money involved, it is our responsibility to keep the real value of what is being discussed in our mind. One of the problems that we can run into with funny money in a negotiation is that if we make a funny money concession to the other side, they are not going to see very much value in it. If we agree to deliver something for no cost, stretch out some payment terms, or throw in some free training, there was never a price tag associated with these items so the other side doesn’t know how much they cost. That’s why before we make the concession we need to place a dollar value on the item so that the other side will understand the true value of the concession that we are making for them.

What All Of This Means For You

We all know what money is. We’ve seen it, we’ve touched it, and we’d all like to get more and hang on to what we already have. However, when we move on into the world of funny money things get a bit different. We need to become aware when we start to negotiate with funny money and we need to understand how to deal with it.

Funny money will show up in just about every principled negotiation. It can appear as an interest rate, free training, or longer payment terms. We need to be careful to take the time to negotiate using funny money. As negotiators it is our responsibility to assign a real value to any funny money that is in the negotiations. If we are going to make a concession that is based on funny money, then we need to first make sure that the other side understands the true value of the funny money before we make the concession.

It would be nice if in every negotiation there was a price tag associated with each item that was being discussed. However, because funny money can work its way into a negotiation, we need to keep our eyes open for it. This means that we have to be able to determine the true value of any funny money that is being negotiated. Know your values and you can use funny money to get the deal that you’ve been looking for.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: Do you think that you should use funny money to get the other side to agree to the deal that you want?

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What We’ll Be Talking About Next Time

When we are involved in a negotiation, all too often we approach it like a hunter would. We move into the territory, attempt to find a deal that will work for us, try to get it to show its head, and then we’ll shoot it when it’s in sight. Contrast this to a different approach that many international negotiators take: they approach negotiating like a farmer would. They realize that not everyone will be willing to negotiate with them and so they try to grow a long-term relationship with everyone who is willing to negotiate with them. What’s the best way for us to make sure that everyone walks away with the best deal possible?