As robotics and AI become increasingly sophisticated, John Clements asks whether negotiating with a machine will become more common than negotiating with a human being.
Last month, a client asked for help leading a negotiation on their behalf. This in itself is not unusual; consulting work often involves negotiation by proxy. The task was to negotiate the commercial aspects of a contract at the office of the client’s counterparty. Upon arrival, the client’s representative escorted me to a meeting room, invited me to sit at a computer, and asked me to follow the instructions on the screen. It soon transpired that the negotiation would be against a computer. Familiar with last-minute changes in negotiations—a common tactic—this was something completely new. After being left alone in the room, the computer presented a proposal and asked for a response. With an image of HAL from 2001: A Space Odyssey in mind, the heart started to race. Now it was one person against a computer.
Automated Negotiation in Practice
In 2017, Wired magazine reported that the Facebook Artificial Intelligence Research (FAIR) group, in collaboration with the Georgia Institute of Technology, conducted an experiment forcing two bots to learn how to negotiate with each other by presenting a bargaining task. They were shown the same number of objects but were programmed to want different things. A paper published by FAIR revealed that the negotiating bots learned to lie. They found a strategy that worked by feigning interest in a valueless issue, so they could later “compromise” by conceding it. FAIR is currently exploring whether this experiment can be extended into other situations.
Amazon
According to Bloomberg, several six-figure earning Amazon executives were reassigned or left their jobs in April 2018 because the company had chosen to replace them with artificial intelligence where it made sense. This process started a few years back under the “hands off the wheel” initiative. Algorithms took over tedious tasks like forecasting demand, ordering inventory, and negotiating prices. The machines (via the algorithms) learned patterns and became increasingly accurate. Eventually, humans had to justify any system override, and finally, they became redundant. Amazon has since devised a new way of doing business that removed “middlemen” and reduced the risk of buying inventory. People were no longer needed to negotiate for businesses to come on board Amazon, as most major brands wanted to be featured where most shoppers were.
Uber
An article by Procurious, an online business network for procurement and supply chain professionals, pointed out that Uber’s surge pricing algorithm is a particularly effective automated negotiator. The algorithm understands the counterparty and their motivations, such as passengers being more likely to book when their smartphone battery is low. It is unemotional and does the job intrinsic to all negotiators—it gets more for its stakeholders. Procurious believes that automation will become a bigger part of negotiation, with negotiators finding innovative applications for data science to equip them with information leading to better outcomes. So, if Uber accesses the battery meter on a smartphone today, tomorrow’s risks could be significantly more far-reaching.
The scenario described was entirely fabricated. But could this situation be the future of negotiations, or is it just science fiction? Remembering how Star Trek once made remote communication via handheld devices seem like fantasy, today we have mobile phones, FaceTime, and Alexa. Therefore, shouldn’t those involved in negotiations consider whether all negotiations might someday be undertaken by computers? If negotiation is like chess, requiring multiple moves ahead, why couldn’t computers carry out negotiations? After all, IBM invented a computer (Deep Blue) that defeated some of the best chess players in the world.
The Business Perspective
The Gap Partnership runs negotiation courses for some of the biggest multinational corporations in the world, as well as many small to midsize organisations. These courses focus on the behavioural element of negotiations, which is currently only attributable to humans. This suggests that human negotiations are not ending soon. However, major organisations are looking into and have, to some extent, implemented automated negotiation.
Some major organisations have taken the concept of negotiation being automated seriously and have implemented it to great success in some cases. Thousands of other organisations are likely conducting similar investigations. However, at this stage, success appears confined to relatively non-complex negotiations with few variables, such as price, in a business-to-consumer (B2C) context, where one party needs to make concessions.
The Academic Perspective
In a paper presented at the Fifth International Biennial on Negotiation, Shaw, Noël, and Spicer (2014) concluded that despite automated negotiation technology being available for the last fifteen years, it was difficult to find information on household name companies employing them successfully. This may still be the case in 2019. Moreover, the impact of automated negotiation on real-world business processes has remained largely unfulfilled in a business-to-business (B2B) context.
Numerous academic studies compare human negotiators with automated negotiation agents. The outcomes of these studies have been inconclusive. Researchers compared human and automated B2B negotiations, with the main differences being that humans use natural language and include ambiguous or irrelevant messages, while automated agents use machine language and focus exclusively on the variables at hand. Most B2B negotiations include multiple variables and require both sides to make considered concessions. Given this, it is unsurprising that automated negotiation has not been more widely adopted in corporations.
The End of Human Negotiators
To revisit the question asked at the beginning, will human negotiators see an end? Effective human negotiators demonstrate ten traits identified by The Gap Partnership, which robots currently cannot. These traits are nerve, self-discipline, tenacity, assertiveness, instinct, caution, curiosity, numerical reasoning, creativity, and humility. While computers can undertake complex calculations, they cannot make decisions based on what-if scenarios using intuition to identify optimal opportunities.
Academic research supports the concept of these traits. Erik Brynjolfsson and Andrew McAfee at the Massachusetts Institute of Technology (MIT) demonstrated that fears of all tasks or jobs being undertaken by robots are probably a half-truth. MIT concludes that humans still perform better in creative endeavours, social interactions, and physical dexterity and mobility. In social interactions, where negotiation sits, robots do not possess the emotional intelligence humans have, and motivated people sensitive to others’ needs make great negotiators.
While the development of artificial intelligence and machine learning may eventually allow automated negotiation agents to acquire some traits of human negotiators, widespread adoption in major corporations is likely still a long way off. The extent to which automated negotiation will expand into more complex scenarios depends on future developments in AI, machine learning, and deep learning. Just as science fiction once predicted technologies we now take for granted, the next fifty years may bring surprising advancements in the field of negotiation. However, for now, the human touch remains irreplaceable in many negotiation scenarios.
About the Author: John Clements is a highly skilled sourcing and strategy advisor at The Gap Partnership with over 20 years of experience in the banking and insurance sectors. As a former director at ISG, he has led teams across the sourcing lifecycle and is an authority on commercial negotiation techniques. John specializes in the financial services sector, having worked with over 30 clients on outsourcing programs worth over £1 billion. His expertise spans sourcing strategy, business case formulation, deal-shaping, and negotiation. With a proven track record in delivering large, complex business change programs and building long-term client-service provider relationships, John brings valuable insights to the evolving landscape of business negotiations.
