Do you recall the nursery story of Goldilocks and the three bears? The key concept that was derived from the story is called the Goldilocks principle which states that for long term stability, a balanced approach will be superior to following an extreme path. But I am jumping ahead. Let me summarize the story first.

The story is about a little girl who goes for a walk in the forest, comes across a house and decides to enter it. She notices three bowls of porridge on the table. She finds the porridge from the first bowl to be too hot and the porridge from the second bowl to be too cold. She tastes the third bowl of porridge and exclaims “this porridge is just right”. She spots three chairs and sits on each chair to find out that only one chair is “just right”. Goldilocks sees three beds and tries all three beds to find out that only one bed is “just right”. Goldilocks then runs away from the house when the three bears come home.

The “just right” concept of the Goldilocks principle is widely used in various disciplines to illustrate the immense value of being in the center rather than working in the extremes which could lead to wild gyrations. For example, an economy that grows at a moderate pace, with low inflation while supported by moderate monetary policies will perform very well over the long term as compared to an economy that grows very fast and then declines very rapidly.

I recall a piece of business advice I received from an experienced executive, early on in my career, commenting on what signal can be used as a leading indicator to reaching a sound agreement that will have a higher likelihood to stand the test of time. The indicator is that after the negotiation process, both parties must be either happy due to the fact that each party secured all of its objectives in the agreement and/or unhappy because each party had to compromise some of its objectives in order to reach an agreement.

On the other hand, when one party is happy and the other is unhappy, it is a leading indicator that the agreement will face an uphill battle during the execution phase and may not be successful in the long term. In these situations, the unhappy party feels that it was forced to accept a sub-optimal agreement, from its perspective, due to circumstances outside of its control.

It is in these situations that it behooves both parties to follow the Goldilocks principle, rather than focusing on the adversarial approach implied by the “Caveat Emptor – buyer beware” principle. They need to create an environment that enables each party to reach an agreement that meets their key objectives and is ”just right” for each party.

Edited by Jamie Keeley, Marketing Manager, L-SPARK

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Written by

Eli Fathi

Eli has been a technology entrepreneur for the past 30 years and has founded or cofounded a number of companies with a few successful exits. Currently, he is the CEO of Squanto.net a company offering automated fraud detection platform. Eli was the cofounder of Fluidware Corporation, an Internet software company offering Software as a service (SaaS) online applications based on collaborative feedback. He was the co-CEO from inception until the acquisition by SurveyMonkey.

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