Leverage, Leverage, Leverage: Morgan Reed, An American Who Negotiates Like a Chinese

March 19, 2012 Updated: October 1, 2015
Epoch Times Photo
Morgan Reed, executive director of the Association for Competitive Technology, in his offices in Washington DC. Reed has developed a particular approach for dealing with Chinese interlocutors. (Matthew Robertson/The Epoch Times)

WASHINGTON—Americans, good old fashioned straight-shooting Americans, go into negotiations looking for the “win-win.” When doing deals with Chinese counterparts, they regularly lose their shirts.

And it’s no small wonder, says Morgan Reed, executive director of the Association for Competitive Technology, or “ACT,” which represents small-scale software developers. The Chinese do business with their gloves off, while Americans are not aggressive enough, too bound by their rules, and so far have been unable to recognize just what they are up against.

The stance Reed adopts to the problem is a bit like a skills coach: he just accepts the fact that the Chinese are playing a different game, and has come up with all sorts of ideas for how Americans can learn that fact and try to fight back a bit. He takes it for granted that the Chinese recognize no such thing as a “business partnership” with a foreigner.

Reed’s thinking toward China was shaped early on, when he wrote an undergraduate thesis in the late 1980s about what Hong Kong’s fate would be after it was handed over to Chinese communist control. “At the time much writing was yes/no, up/down answers,” Reed says: either that everything would remain hunky-dory, or that there would be a mass exodus. Reed called it somewhere in the middle: As China’s shadow over Hong Kong grew larger, “the things that people liked about Hong Kong would disappear slowly over time,” not right away.

But it became clear that in order to understand further, “I needed to read in Chinese, needed to learn more about China linguistically and culturally in order to have a true sense of what was going on.”

He worked hard studying “chengyu,” or idioms, usually composed of four characters, that often summarize some lesson or story from history. They can be put to devastating use in discussions. “If you ever have long conversations with older Chinese gentleman, the ability to deliver the right chengyu at the right time is very powerful, and will often be the key punctuation of a discussion,” Reed explains. “The guy that can drop the right idiom always wins the debate.”

In his role as head of ACT, Reed draws from his background in computers–his father was a professor of computer science (“I learned programming with my father on old punch card computers in the 70s, and we had a computer at home, non-stop from 1978 onwards”)—and his study of China, its language, and importantly, its contemporary business culture. 

ACT collects membership dues, calibrated to the size of member companies, and in return conducts training boot camps, produces reports, and serves the interests of its members in policy discussions with the U.S. government. Reed is regularly invited to testify before Congressional committees.

Reed’s role sees him interface with companies trying to crack the China market, and in receiving delegations from China who want to learn about innovation. This gives him a broad set of interactions with multiple actors, and a consequent treasure trove of lessons for would-be entrepreneurs considering an engagement with China.

“The most common failure that Americans enter into,” Reed says, “is where the offer on the table is trying to achieve as much as possible” for both sides. But that’s not how to go about it.

“In negotiations with Chinese, they’re trying to extract as much as possible. They’re not looking for a compromise that leaves all sides happy. They’re pleased with a result what leaves you unhappy and them entirely happy.”

Chinese negotiating with Americans have no interests in the latter’s success, Reed says. “They don’t make the same ties or connections with Westerners. Part of it is the supply model: we go to China, get something made, it leaves. You’re not building a network of relationships. He doesn’t have a deal with you in the same regard he does a family member, an aunt, or someone he’ll need down the road.”

Basically, “don’t look for win-win, look for the situation that gives you the maximum win. If you go in saying we’re going for a win-win win, you’re going to get taken, and you’ll be like: ‘What happened?!'”

Cultural assumptions going both ways complicate the matter. Chinese, for example, have adopted the idealized American self-image through imbibing Hollywood movies and American pop culture. Americans don’t play dirty, the thinking goes. 

But not playing dirty doesn’t mean one shouldn’t be creative. “You have to be willing to understand that it’s a complex social ecosystem. Looking for simplistic answers in how to deal with the Chinese, it’s very difficult. The one touchstone, if there was one, is seeking leverage.”

“Leverage” is really a fancy term for figuring out ways to push other people into doing what you want. And in this context, that’s fine by Reed.

The standard dichotomy is this: Americans are rule-bound and guided by their good faith in others, whereas the Chinese will cut corners and do whatever’s needed to win the day. More simply: “We enter into it from a rules-based perspective, they look at it from a leverage perspective.”

Continued on the next page: The American approach needs to be seriously revised