IN 2005, a Canadian named Kyle MacDonald went online and offered to trade a red paper clip for anything of greater value.

About one year later, he completed his 14th and final trade — for a house!

How was he able to make this series of trades to such advantage?

He used the power of leverage to create great value from virtually nothing.



Currencies

Before we continue, we must understand the concept of currencies.

A currency is anything of value that can be exchanged. Currencies can be tangible or intangible.

The best-known currencies are money, products and services.

But there are many other currencies, including method of payment, timing, delivery schedule, other terms and conditions, brand and reputation, allocation of risk, emotional needs, status, power, perceptions and anything else of value.

It isn’t just about the money! 

Several of Mr MacDonald’s trades appear to be for items of comparable value. For example, trading a generator for a beer keg and neon sign sounds equitable.

But some of his transactions appear ludicrous, for example, a snow globe for a movie role.

Most people would value a snow globe at only a few dollars, if they wanted it at all.

However, if you have a huge collection of snow globes, you might be willing to pay a high price for a special acquisition.

And while many people would kill for a movie role, a Hollywood producer has plenty of them, and filling them can be a chore.

These differences in the way individuals assign value to currencies open up a world of possibilities and increase the likelihood of a favourable result in a negotiation.

Different valuations and motivations

Why are people willing to make disproportionate trades?

There are two reasons. The first is that not everyone values currencies the same way. One man’s trash is another man’s treasure.

It is easy to assume that others see things as we do. If we value something, others must value it as well.

Of course our assumption that others are like us is erroneous.

We all see things differently. You have your idea about what you want and value, and others have their ideas about what they want and value —which may be very different from yours.

This is a good thing. It gives us a better chance of reaching an agreement that works for both parties.

The second reason for seemingly unequal exchanges is that people have different motivations for their behaviour. It is not simply a matter of monetary value.

People value things for different reasons, including many intangible ones.

Some people would buy a cheap polo shirt with no brand, while others would pay much more for a similar shirt with a particular logo stitched on.

In the latter case, most people value the image they project, how they feel about themselves and how others perceive them, rather than the quality of the shirt itself.

Some of Mr MacDonald’s traders valued more than the tangible items they were exchanging.

They may have valued being part of this wacky quest, getting a small measure of fame, or perhaps they just wanted to help.

The town of Kipling gave up a house, but got a lot in return.

They held American Idol-style auditions to fill the movie role, raised money for the town coffers and put up the world’s largest red paper clip as a town landmark, all generating a huge amount of publicity.

These currencies — though hard to value in dollars — were important to the town.

Mr MacDonald got much more than a house for his efforts.

He published a book chronicling his experience and launched a speaking career.

He is doing well enough that he donated the house back to the town of Kipling.

Your payoff

How can you leverage currencies to create more value in your negotiations?

Think of everything your counterpart has that you want. Then list everything you have that your counterpart might want. 

Your counterpart may have many needs that are not readily apparent, including emotional and intangible ones.

The more of these needs you can identify and offer to meet, the more value you have to trade.

You will find that at times you value something far more than the other party, and vice versa.

This is an ideal opportunity to create value.

If you can give the other parties something that they value highly at little or no cost to yourself, you can get a lot of mileage out of it. Perhaps they can do the same for you.

Now you each leverage a little to gain a lot. This is a key to reaching win-win agreements.