The anchor strategy in negotiations highlights the advantage of presenting the first number, as it shapes future discussions. Specific figures, like Elon Musk’s $97 billion offer for Open AI, create a psychological impact and influence investor perceptions. This proposal complicates Open AI’s fundraising efforts and positions Musk favorably with regulatory bodies. As negotiations unfold, the focus will be on the board’s response, particularly from chairman Bret Taylor, who has prior experience negotiating with Musk.
The Power of the Anchor Strategy in Negotiations
One of the most effective techniques in negotiation is the anchor strategy: the party that presents a number first often gains the advantage. This principle holds true in various situations, whether at a flea market, during salary negotiations, or in corporate acquisitions. The initial anchor price tends to dominate all future offers. As psychologist Daniel Kahneman suggests, our minds gravitate toward the number that has been introduced, much like a ship circling its anchor—subsequent discussions revolve around this figure.
Precision Matters: The Importance of Exact Figures
Research indicates that it’s more beneficial to use a specific figure rather than a round number, as this can project an image of precise expertise. For instance, presenting an offer of $97.4 billion instead of a rounded $100 billion can have a significant psychological impact. This week, Elon Musk exemplified this strategy with his recent purchase offer for Open AI, which many consider to be one of the leading AI companies globally.
Musk’s proposal introduces uncertainty for investors. From his perspective, this move appears to be a clever tactic, allowing him to influence the situation in multiple ways.
Currently, Open AI functions as a nonprofit organization with a profit-oriented division. The plan is to separate these two entities, with the nonprofit maintaining a stake in the new profit-driven organization. By offering $97 billion for the nonprofit, Musk essentially reduces the valuation of the profit-driven segment of Open AI. Given the company’s last investment round valued it at $157 billion, his offer diminishes the remaining value for investors like Microsoft and Apple, potentially inciting tensions as they all vie for the largest share.
Moreover, Musk’s offer complicates Open AI’s efforts to raise capital. CEO Sam Altman is reportedly seeking to secure $40 billion in funding, with discussions already underway with the Japanese investment group Softbank. The emergence of Musk’s proposal likely disrupted these negotiations, sending potential investors fleeing in alarm.
In addition, Musk’s strategy seems aimed not only at Open AI but also at positioning himself favorably with regulatory bodies in California and Delaware, which oversee nonprofits like Open AI. If there are concerns about the nonprofit not receiving adequate compensation during the impending restructuring, the attorneys general of these states could intervene. Reports suggest Altman might have considered compensating the nonprofit with $30 billion, a sum that pales in comparison to Musk’s anchor figure.
Furthermore, Musk’s AI venture, XAI, stands to gain from this situation. While XAI has yet to reach the upper echelons of the AI industry, should Musk’s offer be accepted, a merger with Open AI could be on the horizon. At the very least, Musk’s strategic move could impede a formidable competitor.
As the situation unfolds, all eyes will be on the Open AI board, particularly its chairman, Bret Taylor, who has previously navigated negotiations with Musk during his Twitter acquisition in 2022. The outcome of this latest maneuver remains to be seen.