16 Feb 2011Working Paper Summaries

Naivete and Cynicism in Negotiations and Other Competitive Contexts

by Chia-Jung Tsay, Lisa L. Shu and Max H. Bazerman

In business and in life, it's important to strike a smart balance between naïveté and cynicism. Act too naïvely, and someone is bound to take advantage of you. Skew cynical, and you may miss out on new opportunities with good people. This paper discusses the decision errors inherent in leaning too far in either direction. Research was conducted by Chia-Jung Tsay, Lisa. L. Shu, and Max H. Bazerman of Harvard Business School. Key concepts include:

Naïveté is more than a glut of trust. More broadly, naïve behavior refers to a failure to make the best decision, due to a lack of consideration of other people's strategic and behavioral perspectives. We are likely to make naïve decisions when we don't think through the likely future decisions of other parties. A cynic, on the other hand, may avoid a business transaction due to an assumption that the seller's self-interested motives will be harmful to him or her-even if logic shows that the deal would likely benefit both parties. When people withhold from trusting others, they usually lack opportunities to learn whether their trust would have reaped rewards. But when they offer their trust and are subsequently burned, they learn hard lessons about trust. This unbalanced feedback breeds cynicism.
In laboratory studies, the best negotiators were those who had a tendency to think about the perspectives of others. However, most people lack sufficient perspective-taking ability. The researchers suggest that training mechanisms should be developed to increase that ability.

Author Abstract

A wealth of literature documents how the common failure to think about the decisions of others contributes to suboptimal outcomes. Yet sometimes, an excess of cynicism appears to lead us to over-think the actions of others and make negative attributions about their motivations without sufficient cause. In the process, we may miss opportunities that greater trust might capture. We review the research about when people think too little and when they think too much about the decisions of others, as contrasted with rational behavior. We also discuss the antecedents and consequences of these naïve and cynical errors, as well as some potential strategies to buffer against their effects and achieve better outcomes in competitive contexts.