Look, I tried
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From our “understanding the implications of behavioural science for contract negotiation” series — it is a short series at present — comes this oft-overlooked motivation for your counterparty’s apparently absurd negotiation demands: not to be able to enforce them, per se, but to persuade its own, absurdly demanding clients, that it tried.
In our crazy, inter-connected world, much financial markets activity comprises of fattened intermediaries sitting cross-legged in a circle, passing around a parcel belonging, at some remove, to the ultimate client. As it passes by, each one takes a nibble at it.
The ultimate client himself is probably some benign, well-meaning, atavistic pensioner with few expectations beyond seeing out his autumnal years dandling a grand-daughter on his knee, watching her blow dandelion fronds around a meadow bathed in golden light. To this unitary goal his extra pennies have all gone into a pension plan managed by an asset manager, who has outsourced its trading function to a trading desk, who is hedging the actuarial delta with a fund of hedge-funds, which in turn invests in a diversified portfolio and hedge hunds, who
Now the intermediaries need to agree the terms on which the parcel passes. Their main concern is that they get enough of a handle on the asset for long enough to have a good bite before they pass it on, but each needs also to prepare for the consequences of the parcel not, eventually coming back to them when their immediate client — in most cases the person who passed the parcel to them — decides to ask for it back.
See also
- The mythical ultimate client
- Software as a service
- Disintermediation