Artificial intelligence versus the Art of the Deal

I’ve been thinking a lot about whether artificial intelligence (AI) could have a role in helping us do better deals more efficiently, without all that negotiation rigmarole that we’re so used to.  

With the UK and the EU embroiled in possibly the biggest politico-economic deal of our lifetime, and the leader of the free world living and breathing ‘the deal’ from the Oval Office, perhaps it’s not surprising that my thoughts have drifted to whether a bunch of algorithms and a bit of big data could help us out.

In fact, nailing my colours to the mast, I dream of a world where AI does all the deal making without any of the nonsense and waste, a world where the ‘Art of the Deal’ has as much relevance to mainstream business as the art of making bricks out of cow dung has to modern house-building.

Before all the wheeler-dealers start having heart attacks, I know it’s just a dream, and I’m guessing it’ll stay that way.

I don’t believe that’s because of any technological limitations, it’s just that deal-making is one of those human activities we’re so fond of that we will use almost any excuse to stop machines from taking it over.

That’s because there are two kinds of deal; the rational, evidence-based kind AI could handle brilliantly, and the kind we love to do ourselves.    

Back when IT outsourcing had just started to be a thing, I was handed the job of teaching Procurement 101 to a bunch of techies, preparing them for this brave new world of contracts and external resourcing.

To this day, I don’t know how I got the gig; perhaps I’d done something really bad in a previous life.

To lighten the mood, I found a quote claiming that the idea of ‘win-win’ in commercial negotiation is basically horse feathers.

Making a deal should be about grinding the other guy into the ground, nailing them to the tightest deal that’ll keep them just the right side of Chapter 11.  I could practically see the dripping fangs as I read the quote. 

The punchline was that the quote came from a senior member of the Librarians’ Guild.

The gag didn’t get much of a laugh, but a bit of nifty post-rationalisation managed to turn it into a serious learning point.  

Matching it with a quote from the other perspective, talking about the best deals being built on mutual benefit and shared risk, illustrated the tension between the different ways of thinking about negotiation; the analytical, AI friendly method of examining requirements, finding common ground to deliver maximum mutual benefit, versus the ‘look ‘em in the eyes and make sure they blink first’ approach. 

The first approach is claimed to deliver the greatest aggregate sustainable value across all stakeholders. It’s also pretty boring.

The second approach encourages a competitive mindset in making deals and is much more fun, particularly when there’s a bit of testosterone about. I don’t believe it’s any coincidence that the stereotypical natural home for this kind of dealing has been the (long-extinct) smoke-filled room, the late-night whisky drinking session, the squash court and the 14th green.

When it comes to AI in procurement, we must be pretty close to having the capability to be able to optimise any deal for all stakeholders.

Plug in all the information available on all the parties involved – cost and profit projections, risks, the macroeconomic situation, success or otherwise of similar past deals – turn the handle, and out pops the optimum deal for everyone.  

It’s an approach which creates the greatest aggregate value, but it won’t do much for your golf handicap.

There is plenty of stuff out there on applying AI to the procurement process, but everything I’ve seen still appears to be targeted at the side with the AI winning the best deals, rather than getting the optimum outcome for everyone, which isn’t necessarily the same thing.  

There’s an understandable reluctance to let AI take the lead in functions where we place a high value on human skills.

We’re already seeing some tension around this in medical diagnostics, and I see the field of law potentially following suit.  AI can analyse and assimilate data from millions of medical case histories, comprehensively and without error, to determine the best treatment for the patient in front of you right now. Yet, if you’re like me, it’s uncomfortable to think of this process being taken away from a human doctor.     

A purchasing executive is perhaps not valued in quite the same way as a doctor or even a lawyer, but I can still understand people feeling uneasy about striking a multi-million deal based on “the computer says ‘yes’”.  

I believe our ingrained love of the traditional, competitive deal-making approach is a greater barrier. We won’t give it up easily, even if the prize is a vastly more efficient procurement process and better outcomes for all.

In the mid-1990’s, car manufacturer Daewoo made a short-lived attempt to replace the merry dance of doing a deal on a new car by taking its salespeople off commission and replacing it with a ‘this is the price, take it or leave it’ model.

Daewoo’s failure may have had more to do with the quality of their product at that time, but equally no-one jumped on that particular marketing bandwagon, and ‘I paid list price for it’ is still something you’re as likely to hear as ‘actually, I’m a pretty indifferent lover.’

Our love of the ‘Art of the Deal’ goes much wider and deeper than the car showroom. Throughout history, national economic power has been built and sustained through doing advantageous deals from a position of strength; from trading beads for gold, to sourcing high-end training shoes from third-world sweatshops.

Trends like globalisation and digital transformation started to threaten this status quo, fuelling a backlash which has arguably contributed to the recent rise of nationalism and tribalism.

These forces have helped put the world’s self-proclaimed master of the deal into the White House, and seen the UK row back from the greatest multi-country collaborative deal since the end of World War Two, when Europe learned once again how a fixation on winning for your country often doesn’t end well.

If putting artificial intelligence in charge of commercial deals is a dream, getting it to sort that lot out is pure fantasy.  

At a time when we most need impartial, super-knowledgeable capability to drive the decisions which shape our future, we seem to be in danger of reverting to those decisions being driven by a mindset that sees ‘sell me this pen’ as an important life-lesson.  

So, I guess the art of the deal will continue to dominate our world and the march of the machines will just need to go around it.  

If you happen to be uncomfortable with that thought, and if you also happen to have a degree in artificial intelligence, you might want to remind yourself how the journey of a thousand miles starts with a single step.

A good first step might be an AI online shopping app which only recommends stuff I actually need and doesn’t rip anyone off when I buy it. I’d pay good money for that – I’d even promise not to haggle.

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