A Fair Deal

The Brooklyn crew Pistone ran with had a custom of its own. They didn’t like haggling, he writes; if a would-be buyer tried to knock the price down, they rarely met him halfway. He explains why. A high price meant a chain of middlemen, and every one of them was waiting for his cut. Dropping below cost meant leaving someone with nothing. On the other hand, their deals hardly ever fell through.

In a world like that, the price isn’t the seller’s whim. It’s a list of people who’ve been promised something. Whoever knocks it down is knocking down somebody’s cut. Remember that, and then look at how Pistone handled deals himself.

The Rig

At the very start of the operation, Pistone and the informant Marshall delivered a hijacked rig to the buyers, two armed young drug dealers. Becker, the head of the hijackers, had set the price at fifteen thousand. But the two of them announced they’d agreed ten with Becker.

Arguing with men who have a gun under their belt is dangerous. So is agreeing. Pistone was thinking about Becker. An agent who knocks off a third without a phone call looks either like a fool or like the buyers’ accomplice. And the change of price could have been a test. He started an argument. Marshall called Becker from another phone, and Becker okayed ten. Pistone agreed, but kept the last word for himself. It was a deal, he told them, but the next order would cost them fifteen.

The concession here is no gift. It was traded for a term on the next deal. And it was made only after a call to the man whose cut was shrinking.

Diamonds

Once Pistone wanted to flex his muscles in front of the crew and took ten industrial diamonds from a thief to sell. By street standards, about seventy-five thousand. He had no intention of selling them to the crew, and he set the price with care: above the street price, he writes, high enough to make the deal hard, but not sky-high, so he wouldn’t look like an amateur. A hundred thousand. And he broke the figure down: seventy-five for himself, twenty-five for his man at the airport. And then: anything they sold them for above a hundred, they could keep.

The boss’s man offered seventy-five. Pistone said no. And later he admitted that, truth be told, he couldn’t have walked away from the deal if Jilly had offered, say, 125,000.

Breaking down “who gets what” makes a price make sense, even when it’s high. And Pistone’s walk-away point was honest in both directions. He didn’t go lower. Higher, he’d have had to sell and keep his word. A man who names a threshold he isn’t ready to stick to is bluffing. You can see the bluff by the second deal.

Perfume

Pistone knew how to be a buyer, too. Vinnie the fence rolled up in a van crammed with boxes of stolen perfume. Not Donnie’s line. But, as Pistone puts it, an experienced thief doesn’t turn his nose up at goods he can make money on. He reckoned he needed to buy just enough not to offend Vinnie and not to look like a sucker. And he took one big carton for two hundred and twenty.

Refusing would have offended. Buying everything going would have marked him as a sucker. A fair deal can be a small one. Its size says as much about you as the price does. Buying exactly as much as the seller expects from you is another way of telling him who you are.

What Goes On in the Head

Scientists have tested why seller and buyer see the same thing differently. In 1990 Daniel Kahneman, Jack Knetsch and Richard Thaler handed out mugs to half a group of students. The mug owners asked more than twice what the others were willing to pay. A thing gets dearer the moment it’s yours.

It takes even less for it to feel like yours. In 2009 Joann Peck and Suzanne Shu showed that simply holding something in your hands is enough. A person starts to feel it’s a little bit his and values it more.

And in 1989 Itamar Simonson described the compromise effect. Add a third, extreme option to two others, and suddenly the middle one gets picked more often. Not because it’s better. Because it’s in the middle.

The Don’s Sheet of Paper

Once the owner of a big restaurant came to the Don for a discount on oil. A tenth off, or he’d go elsewhere. The Don took a sheet of paper and, right in front of him, wrote a column. This much to the olive mill in Sicily. This much for shipping. This much to the driver. This much to us. He pushed the sheet across: “Tell me which of them to short.”

The owner went to another supplier. The Don didn’t hold him back. To me he explained: “If I knock off a tenth after one threat, then that tenth was a lie.” Six months later the restaurant came back. The Don didn’t raise the price, and he didn’t lower it.

The Bottom Line

An honest price is one you can break down out loud. Give ground only in exchange for something, and only after talking to whoever stands behind you. Name a threshold you’ll stick to in both directions.

And when you’re the one paying, remember: a thing you’ve held already feels like yours, and so feels dearer. That’s not the seller cheating you. Everyone’s built that way. Before you pay, put the thing down on the counter and look at it once more, as if it belonged to someone else.