Sun Tzu wrote that when you surround an army, you leave an outlet free.

Most people read that as mercy.

It is not. It is engineering. The road is left open because a party with no way out stops behaving rationally, and a party behaving irrationally cannot be dealt with on any sensible terms.

The principle is not confined to disputes. It applies in share sales, asset acquisitions, supply agreements, leasing, and every commercial negotiation where two parties want the same deal and cannot work out how to admit it.

Here is what most people get wrong about concessions.

1. Value is not symmetrical. What a concession costs your client and what it is worth to the other side are two entirely different numbers, and the gap between those numbers is where every good deal gets done.

2. The best concessions are the cheap ones that do not move the commercial dial, but which everyone sees as a trophy.

3. Dignity is free and enormously valuable. People will pay real money to feel like they did not lose. Very few negotiators think to charge them for it.

4. Corners produce litigation, not deals. A vendor who feels ambushed does not sign. They go quiet, they go to another adviser, and six months later someone is explaining to a client why a good transaction died over a point worth almost nothing.

The advisers who consistently get results are rarely the loudest people in the room. They are the ones who worked out, before anyone sat down, exactly which of their client’s chips were made of cardboard, and precisely how much those chips could be sold for.

Give the other side a door. Then decide what you charge for it.

What is the cheapest concession you have made that the other side treated like gold?

Authored by Connor Pangallo, Lawyer at Bird Law