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"This is dangerous advice." Having been in these kinds of negotiations many times over the 15 years I've been in business, and having never been sued nor ever

"This is dangerous advice." Having been in these kinds of negotiations many times over the 15 years I've been in business, and having never been sued nor ever had a deal go seriously wrong, the dad's advice seems perfectly sound. The real point here is this: In every significant business transaction (or indeed, major life decision), you have to choose where you're going be on the risk continuum between sheer recklessness and complete security. At some point your efforts to be prudent cross over into excessive paranoia and then a new form of risk: that all the money and time you spend to try and keep everyone safe will be wasted if the deal doesn't go ahead at all, or if it reduces the amount of time and money everyone has to actually do the work. Sooner or later all the de-risking stops being de-risking and starts creating new forms of risk. I'm pretty sure the dad in this story was just advising his son to avoid making that mistake. As the story said, the son sincerely expected to be able to do the work as it was scoped, for the price on offer. If this wasn't the case, the dad's advice would have been very different. The reality is that when a small business is providing a service to a large company, the threat of legal action isn't really much of a motivator, as the small business likely doesn't have anything they can be sued for (aside from any insurance coverage they may have), so it's just not worth the cost and hassle of taking legal action. As a supplier, your reputation, along with the satisfaction of doing good work, are much bigger motivators to deliver a good result. So everyone really knows, in a deal like this, that the only real option is that everyone works together to get the work done well, and if it looks like it's going off track, then you re-negotiate the agreement and if it seems irredeemable, consider cutting ties. Legal action will barely ever be a sensible option in a case like this. I'm sure this was a key part of the dad's advice.

sillysaurus3 9y ago
Meanwhile, my friend is being sued by a nutty old rich guy that thought my friend went out of their way to sabotage him. (They did no such thing, but when a "startup" goes wrong, people go crazy.) More specifically, my friend entered into a contract to deliver X for the old guy. When X turned out not to resonate with customers, the old guy sued him. Nobody saw it coming. My friend will probably win, and he was very lucky that he was able to get a lawyer for free. But what a massive PITA.
- marcosdumay 9y ago
  As you said, your friend will probably win. That means the contract already predicts the situation. That's the point somebody was making about avoiding assholes. There is nothing you can do to avoid that risk. He will sue anyway. Your best hope is avoiding them. And each extra bit of protection you add into your contract will make you look slightly more similar to an asshole, so you'd better keep it to the probable risks.
  - deleted 9y ago
    [deleted]
- tomhoward 9y ago
  Yep, I've been in situations reminiscent of this, and I know it's awful. I wouldn't wish it on anyone, and I'm sorry to hear it's happening to your friend. But, I don't think it contradicts the point of the article. The most watertight contract in the world won't prevent a vexatious client initiating legal action if they really want to; the only protection against that is to be very careful about who you do business with in the first place, and to ensure at every step of the process that both parties' incentives and expectations are aligned.
aswanson 9y ago
Sooner or later all the de-risking stops being de-risking and starts creating new forms of risk. Sage advice.
- ScottBurson 9y ago
  Yes, I love that line too. It reminds me of a small startup I used to work for. Our business model was what you might call a technology-enabled service: a piece of software did part of the work, and then a staff of humans did the rest. We started out using a COTS package to get the business going, while developing our own software internally. We got the thing working well enough to use, though it would have taken some effort to revamp our manual processes to use it. Still, once over the hump, the ongoing manual effort to deliver the service would have been reduced significantly, with further reductions possible in the future as development continued. But the VP of Operations, who ran the team performing the service and who had previously held a similar position in a bank, was dead set against switching from the COTS package to our proprietary one. He thought it was too risky as it might upset the existing business. The problem was, the existing business was not quite profitable, and probably could not have become profitable given the amount of manual effort involved. It seems to me that if you're running an unprofitable business (that isn't growing much either), the biggest risk you face is that your business will continue to be unprofitable! That's not some corner case -- that's the likely outcome! Anyway, because the VPO's objections couldn't be overcome and weren't overrulde, the project was cancelled, I was laid off, and, three years later, the company folded. It still seems to me to be a remarkable failure of management not to see that some risks must be taken. In essence, the decision to bet the company on the software being developed internally had already been made; there was no way to get to profitability without it. But nobody seemed to realize that.
dboreham 9y ago
Agree. I have been lucky to have been schooled in these matters by a wonderful guy who we happened to pick years ago to be our business attorney. I can imagine having done some stupid things and passed on some great deals without his sage advice.
fezz 9y ago
Except when you client is someone with "fuck you" money. Having worked for one of those rich guys with an bulldog legal team on staff, it's hard to win or win without hemorrhaging alot. In his case, he always won or got a good settlement, big or small opponent. It pays to have the agreements air tight but you also have to watch you back and always have your bases covered. Even then, you could still get screwed even though you were in the right.
thomasfedb 9y ago
It's only dangerous in proportion to the degree that: - the terms would be upheld in court, - the terms are (financially) practical to enforce.
mdekkers 9y ago
Having been in these kinds of negotiations many times over the 15 years I've been in business, and having never been sued nor ever had a deal go seriously wrong, the dad's advice seems perfectly sound. That is like saying "my grandfather smoked 3 packs and drank half a liter of bourbon a day, and died peacefully in his sleep aged 108, so all this talk about cancer and liver failure is baloney". Whilst your point isn't necessarily invalid (I agree with you to some extent), your example isn't very good.

sillysaurus3 9y ago

Meanwhile, my friend is being sued by a nutty old rich guy that thought my friend went out of their way to sabotage him. (They did no such thing, but when a "startup" goes wrong, people go crazy.) More specifically, my friend entered into a contract to deliver X for the old guy. When X turned out not to resonate with customers, the old guy sued him. Nobody saw it coming. My friend will probably win, and he was very lucky that he was able to get a lawyer for free. But what a massive PITA.

marcosdumay 9y ago
As you said, your friend will probably win. That means the contract already predicts the situation. That's the point somebody was making about avoiding assholes. There is nothing you can do to avoid that risk. He will sue anyway. Your best hope is avoiding them. And each extra bit of protection you add into your contract will make you look slightly more similar to an asshole, so you'd better keep it to the probable risks.
- deleted 9y ago
  [deleted]
tomhoward 9y ago
Yep, I've been in situations reminiscent of this, and I know it's awful. I wouldn't wish it on anyone, and I'm sorry to hear it's happening to your friend. But, I don't think it contradicts the point of the article. The most watertight contract in the world won't prevent a vexatious client initiating legal action if they really want to; the only protection against that is to be very careful about who you do business with in the first place, and to ensure at every step of the process that both parties' incentives and expectations are aligned.

aswanson 9y ago

Sooner or later all the de-risking stops being de-risking and starts creating new forms of risk. Sage advice.

ScottBurson 9y ago
Yes, I love that line too. It reminds me of a small startup I used to work for. Our business model was what you might call a technology-enabled service: a piece of software did part of the work, and then a staff of humans did the rest. We started out using a COTS package to get the business going, while developing our own software internally. We got the thing working well enough to use, though it would have taken some effort to revamp our manual processes to use it. Still, once over the hump, the ongoing manual effort to deliver the service would have been reduced significantly, with further reductions possible in the future as development continued. But the VP of Operations, who ran the team performing the service and who had previously held a similar position in a bank, was dead set against switching from the COTS package to our proprietary one. He thought it was too risky as it might upset the existing business. The problem was, the existing business was not quite profitable, and probably could not have become profitable given the amount of manual effort involved. It seems to me that if you're running an unprofitable business (that isn't growing much either), the biggest risk you face is that your business will continue to be unprofitable! That's not some corner case -- that's the likely outcome! Anyway, because the VPO's objections couldn't be overcome and weren't overrulde, the project was cancelled, I was laid off, and, three years later, the company folded. It still seems to me to be a remarkable failure of management not to see that some risks must be taken. In essence, the decision to bet the company on the software being developed internally had already been made; there was no way to get to profitability without it. But nobody seemed to realize that.

dboreham 9y ago

Agree. I have been lucky to have been schooled in these matters by a wonderful guy who we happened to pick years ago to be our business attorney. I can imagine having done some stupid things and passed on some great deals without his sage advice.

fezz 9y ago

Except when you client is someone with "fuck you" money. Having worked for one of those rich guys with an bulldog legal team on staff, it's hard to win or win without hemorrhaging alot. In his case, he always won or got a good settlement, big or small opponent. It pays to have the agreements air tight but you also have to watch you back and always have your bases covered. Even then, you could still get screwed even though you were in the right.

thomasfedb 9y ago

It's only dangerous in proportion to the degree that: - the terms would be upheld in court, - the terms are (financially) practical to enforce.

mdekkers 9y ago

Having been in these kinds of negotiations many times over the 15 years I've been in business, and having never been sued nor ever had a deal go seriously wrong, the dad's advice seems perfectly sound. That is like saying "my grandfather smoked 3 packs and drank half a liter of bourbon a day, and died peacefully in his sleep aged 108, so all this talk about cancer and liver failure is baloney". Whilst your point isn't necessarily invalid (I agree with you to some extent), your example isn't very good.