Neither mrs. reynd nor myself (especially myself), are good negotiators or bargainers. Not sure how that happened, but I have a hunch as to why that might be the case. I know this weakness very well and hence delegate almost all bargaining to my better half. She is slightly better in this aspect but not by much. We have seen this come up over and over many a times, to our detriment, but we are probably too lazy to correct ourselves. The re-discovery of our skills (or lack there of) came to light just a few days ago when we decided to get our house painted.

Before I begin with the story, it might be fun to know how bad of a negotiator I am. When I ask someone what something costs, whether it be things we buy like food, electronics, or anything tangible really or whether it be any services we request like painting work, repairs, maid etc, I always pay exactly what they ask for. I know this for a fact and I never negotiate even though I know the other person always gives a higher number than the worth of the thing I am purchasing. I can’t get myself to bargain. The reason is that I don’t know the value of an item most of the times.

Don’t get me wrong. When I offer my services, I always charge what I believe is a fair value of my time. So when I went through negotiations of salary after a job offer, or for appraisals, I would come up with my number and would tell my recruiter/manager. But here again, I would tell them what I think I am worth which could be very different from what I am worth for the company. Sounds confusing? Ok, let me explain. Suppose, I think the fair market value for a software engineer with my experience and skill would be worth Rs. 1000/hour. That is my assessment of my value to the company.

But what I might not know is that I could be a lot more or less valuable to the company than my assessment. Take for example, I am working in a project that is lot more valuable and mission critical to a company than another project. Then I should ask for higher appraisal because I am in such a critical project. The alternative could also be true. I may be working in a low impact project and hence my appraisal should be lower since I am not as valuable to the company because of the project, not because of skill or experience. I don’t have the skill to do this kind of analysis. I just judge my value on my skills and not on the value that I am providing to the company. Anyway, the point I am trying to make is that I can assess my value because I know my work and how much effort it needs etc.

However, when I am getting work done by some one else, I have no idea what the value should be. This is all the more difficult with services than items. At least for items there is an MRP which could be a guideline so you tend not to exceed that. Still, there is a lot of variance in that too. Take for example milk. If the MRP printed on it is Rs. 50, you are supposed to buy at Rs. 50 or less right? Wrong. It never once happened to me that anyone would sell me milk packets at less than MRP. In fact, most of the time they would sell it higher. They give reasons like they have to add the cost of refrigeration etc, so they cannot sell at MRP. Or may be I don’t know how to bargain?

On the other hand there is a huge margin in the MRP for something like say coffee. I recently purchased a coffee packet with an MRP of Rs. 660, which I bought on Amazon for Rs. 330. A 50% difference in MRP and what the thing is really selling for. And that too, the seller must still be making a profit selling at Rs. 330. If I went to a local shop, I would buy for MRP (which actually we do). Again, may be if we bargained with the shopkeeper, we might get it for lower. Our skills are so very lacking in this aspect. What can one do when the MRP can be so widely different for different things? How does one assess the real value of something?

Which is one of the reasons I don’t like to buy from local vendors. I know I have to bargain, but I cannot. Online, it is much simpler. They give MRP, then tell you the discount, and there is no bargaining that can be done. If you like it, you buy it. If I buy something for Rs. 100, my neighbor also buys it for the same price. On the other hand, if my neighbor is a good negotiator, they could buy it for Rs. 50 at a local vendor where I paid Rs. 100 for the same. That difference is the cost of ignorance and lack of art of negotiation. An alternate title for this post could have been that :).

My thought process is that the online prices are more inline with the price after bargaining. For example, if a phone is selling for Rs. 20K online, but selling for Rs. 15K from a local vendor after bargaining. Most good negotiators will go buy it locally. Then, as the online seller notices that they are not able to sell, will reduce the price down to Rs. 15K to compete. Of course, there are several flaws with this kind of thinking. I can think of a couple at least. One, I am assuming that there are more bargainers than non-bargainers. Otherwise there won’t be enough market forces (bargaining) to bring the MRP down. Two, online seller can make the same or better margin than local vendor after the discount (owing to bargaining).

Ok, now going back to the original story, which is that we got our house painted recently. Just the exterior walls though. We paid the contractor Rs. 2.11 lakhs. I know, I know, that is a lot of money for just exterior paining. We have a large house, but still, that is a ridiculous amount. My parents got my sister’s house (also in Bangalore) painting work done for Rs. 75K (different contractor though) around the same time! The amount of paint they needed was only half, but the workers took about the same amount of time to finish the work with similar number of workers working each day because they had more intricate metal painting work. Even if I assume my parents paid twice the amount for the paints, that should be less than Rs. 1.5L. We over paid by Rs. 60K! That tells you how much bargaining was left on the table.

The way my parents handled the situation is very different from us. My dad went to a local asian paints shop and found out the price of the damp-proof paint that he is willing to sell it for. On a 20L bucket, the MRP was nearly Rs. 8000. But the shop keeper was willing to sell for Rs. 5000 after bargaining. So my dad knows the “real” cost of paint and how many litres is needed (as per the contractor). My dad was saying that the painter will get it for even less since the shop keeper and the contractor will have their own set of deals. The real price could be 50% of MRP!

We, on the other hand never visited any shop and naively assumed that the painter would have gotten the paint for Rs. 7000 after looking at the MRP of Rs. 8000 printed on the buckets he got for us. That, my friend, is the cost of ignorance or perhaps the cost of being lazy and not doing the leg work to find the real price of things. Oh! That could have been another alternate title for this post. Even if we did not want to go to local shop to check the price, we should at least check the price online which was around Rs. 5900. Of course beyond this there are lots of ways middle men like to cheat like diluting the paint more than required, bringing duplicate paint in an original branded buckets etc. So unless you go to the factory and buy a sealed bucket or know someone you can really trust, you will eventually get cheated no matter what.

The point I am trying to make (if there is one), is that I don’t like depending on other people who I don’t know to be moral or reliable. But in life, almost everything has to be done by some one else. If I want to construct a house I need a bunch of people, most of whom like to take advantage to make a good profit. There is nothing wrong in it. They are just cashing in on your ignorance. Unfortunately, you cannot learn all the skills you even need for everything in your life :).

While we came from middle class families who are known to bargain like crazy, we were unable to pick up the skill to the same level (or any level for that matter) as our parents. I am not really sure why, but I have a feeling that since we moved from middle class to upper middle class, may be we were not as careful with money? A middle class person knows the value of every rupee they have earned and try to bargain as best as possible or at least puts effort into knowing the real cost of goods. We folk with much higher salaries did not think as much perhaps. Of course I know some people who are earning a great deal, yet they are ridiculous bargainers. So I am not sure I have the right answer really.

Whatever the case may be, there is still more to learn. Don’t get me wrong. I am not upset that I spent more than is required. But I wish the money was equally distributed. The middle man (contractor) makes the most money, while the daily labour who actually do all the hard work still get paid their minimum wages. If I paid 50% extra and the workers got 50% more than their usual income and the contractor gets 50% more than their usual value, I would still be happy. Unfortunately, the ignorance of the daily workers and the ignorance of the lazy people who are getting the work done are both duped to make the middle man rich. Not just in painting, but in all other aspects, like real estate, plumbers, technicians, lawyers, engineers, doctors you name it.

I can’t recount the number of times we have gotten this wrong. This happens on big ticket items like buying a land or even small ticket items like buying a second hand book. Need to learn to not be lazy and do the required leg work. But also not be so naive in assuming people will do the right thing and be truthful. You know the part about how we spent 2.5 times more than the going price of land when we purchased our farm?

The most recent one while being a small amount was when we purchase some used lego blocks. The person selling the blocks told us it was Lego. We did not even think of verifying whether the person was telling the truth. Paid the full amount via google pay and asked them to reserve it for us. Later we picked it up and did not even for once think to check properly. Only after coming home and handing it over to our daughter did we realize that they were fake ones :). Our daughter pointed out the fact. By the way, she very particular about lego blocks. Again, that is the cost of ignorance.

Earlier, I only used to buy reputable brand name stuff whether clothes or electronics or what have you. But now with so many counterfeits it is hard to tell them apart. When I try to buy a Nike shoe on Amazon, I am not really sure if it is the real thing. You can read in the comments that some say the shoes is fake, so that deters me. The only way is to buy it directly from the Nike store itself, but then the return policy and other things that I love about Amazon are not available there. That is the conundrum.

Anyway, we have to some how come out of this and stop wasting money unnecessarily. Every failure is an opportunity for learning, but we are failing in more and more interesting ways and not really sure when we would get it right at least once :). Hope our ignorance, stupidity and laziness will one day be gone. At least in my case I know for a fact I am not good at these things and accepted it. Unfortunately while mrs. reynd is slightly better than me in bargaining, is still in a delusion that she can read people. I can tell you that neither of us are good at this game. We just have to live in a world with lot of uncertainty. Of course I don’t want to be penny wise pound foolish either. So there is that :).