How to become a better negotiator by exchanging currencies

"One man's trash, that's another man's come up" – Thrift Shop, Macklemore & Ryan Lewis

I ended up taking another week off, but I am happy to announce that Reframing is back. Today’s topic is a little different and about philosophy; let me know what you think on Twitter.

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Back when I was an international student looking for cheap flights between India and the US, I noticed a disparity in ticket prices depending on which currency you used. Choosing whether to pay in INR or USD could often save you $100 on a $1200 round-trip flight.

Although airlines have closed this loophole since then, the generalized technique of “exchanging currencies” is still valuable and consists of two steps:

1. Listing available currency exchange opportunities

2. Going through the list to find an opportunity with a favorable exchange rate

That’s it. These steps may seem obvious, but they can be powerful if used correctly.

Here are a couple of times they’ve been useful in my personal life:

1. I was once offered $50 as compensation for a delayed flight. Out of curiosity, I asked the airline how many miles they could offer instead. They offered me 10,000 miles, which was equivalent to a $100 flight credit. By exchanging currencies, I was able to get double the value without costing the airline twice as much.

2. When negotiating my latest job offer, I wanted a $X signing bonus. Instead, my recruiter offered me an equivalent $X split across a signing bonus, base salary, and stocks, which I accepted. If some of the most experienced negotiators are continually exchanging currencies, why shouldn’t the rest of us do so too?

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The more I looked, the more I saw this pattern in negotiations in other fields as well. Leonardo DiCaprio’s salary is generally $20 million per movie, but he was only offered $2.5 million for his role in Titanic, then the highest-grossing film at the time. However, since he also negotiated a 1.8% share of the movie’s gross revenue, Leonardo ended up walking away with a cool $40 million instead.

However, exchanging currencies doesn’t have to be solely for financial gain. One can also use it for other goals, like working with interesting people or investing in exciting projects. Internet darling Keanu Reeves has done both by taking a pay cut to work with Al Pacino in The Devil’s Advocate (1997) and setting aside some of his paycheck from the Matrix movies for the special effects and costume design departments.

Perhaps the best example of combining both steps (and what inspired me to write this piece) is Oprah spending $16 million to acquire the rights to The Oprah Winfrey Show instead of continuing to draw a $30 million salary as a talk show host in 1986. By exchanging cash for equity early on, Oprah was able to completely own the future upside of her empire, which has made her the billionaire she is today.

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Hopefully, this article was useful to you; I’ve just started a Twitter account (@k_aranke) and would love to hear what techniques have helped make you a better negotiator. I’m also going to use Twitter for less polished but more real-time reactions, so if you’re interested in that, please follow me there.