A $15 Billion Lesson on Stipend Negotiations

April 24, 2023

We’ll take your $15 billion stipend, but as to those strings you put on it, “F*^%” you”.

No, it’s not a perfect analogy to medical group–hospital negotiations, but, well, it’s close enough for government work.

TSMC, the world’s largest contract microchip maker, is balking at up to a $15 billion government stipend in connection with its construction of two new chip factories in Arizona in which TSMC will invest $40 billion.

The problem isn’t the $15 billion, it’s that the government has put some strings it, such as “tell us how you are spending it” or “if you make more than $X, give us some of the money back”.

As an aside, how you or I conceive of the wisdom of, to put the nicest moniker on it, “public –private partnerships”, is beside the point.

What is almost directly on point is how TSMC, which I doubt even needs the money, is playing its cards. Essentially, they are saying, “we know that you need us more than we need you, so we’ll just take the money, no strings attached.”

It’s true that there are distinctions between one time negotiations, what I call Transactional ContractsTM, say for the purchase of some real property, and Relationship ContractsTM, the negotiation of a hoped-for many decades long relationship between your medical group and some facility. But it’s not clear that TSMC’s dealings with the government aren’t hoped by both parties to be of the Relationship variety because far more than two new chip factories are needed.

Some consultants think that it pays to be reasonable when making a first offer. Those with an understanding of human nature don’t think that that advice is very, well, reasonable.

Of course, being “unreasonable” from the hardball perspective and being “unreasonable” from the perspective of wanting to be liked are two wildly different things. Note that using legal counsel wisely in negotiations allows you to maintain your need to be liked while still pushing the envelope. “It’s Weiss’s fault that we asked for $15 billion. Had we known, we’d have come in at $12 billion.” Either way, try being a bit more unreasonable.

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