We founded Pactum in 2019 after identifying a need that had not been addressed in the market. On average, enterprises have millions of dollars locked in inefficient agreements, and unlocking such value is difficult. Global enterprises have thousands of suppliers, and they can only actively manage 20% of them (their strategic suppliers). The other 80% are left unmanaged because it would require too much manpower and be too complex to negotiate these thousands of contracts.

Our technology employs a chatbot to reach out to suppliers via email to start a negotiation conversation. It leads the interaction, asking the supplier questions and offering options aimed at better understanding the supplier and what matters to them. It then negotiates contract terms that are important to both the company and the supplier, reaching a mutually beneficial agreement.

In negotiations, the amount of complex data or the pace of changing information is too fast for humans to comprehend — machines can do a better job. Pactum can reach better deals for both sides compared to humans and provides several advantages:

1. The chatbot goes through an equivalent of 100 human hours of preparation time, sifting through all historic and forecasted information in internal and external databases for every negotiation.
2. It tracks all negotiations in parallel, learning from all interactions and keeping terms dynamic — meaning the value of terms changes based on how other parties accept or decline them.
3. The system has unlimited time to spend with the supplier, making sure an optimal outcome can be found.

At first, we started negotiating for small, non-strategic vendors in the procurement industry. As we grew, we moved into more specific categories — negotiating merchandising agreements in retail, negotiating freight for logistics companies, and negotiating maintenance, repair and operations (MRO) deals for production plants.

After achieving initial success in non-strategic supplier negotiations, we approached venture capitalists who posed an interesting question: Which category did our technology fall under? Procurement Tech, FinTech, and LegalTech didn’t fit because they were too restrictive. To put it simply, we conduct negotiations using AI, period.

It dawned on us that we had created a completely new category of enterprise technology — autonomous negotiations. This is a unique industry that enables Fortune 500 businesses and their suppliers to reach optimal, mutually beneficial deals at scale by leveraging AI and negotiation science. While historically humans have been the primary negotiators, they often create inefficient outcomes when they negotiate. Instead, this is a new phase of evolution in enterprise software.

Mainframes provided the computing power. On-premise business software was revolutionized by SaaS offerings. Then robotic process automation provided new growth opportunities, automating mundane tasks that machines couldn’t do previously.

Autonomous negotiations reveal a new stage of development where business processes are not only facilitated but also conducted by a machine. Take smart cars for example. The term most often used is “autonomous vehicle” not “automated vehicle.” While every car is automated, an autonomous car can make the necessary decisions that get it to its destination. Autonomous negotiations powered by AI enable global enterprises to understand the needs of their suppliers, allowing them to make offers, receive counteroffers and ultimately reach mutually beneficial agreements — all without human interaction.

AI automation does not replace people in the negotiation equation but rather augments F500’s capabilities. The technology empowers business leaders to focus on critical, strategic initiatives that drive their business forward instead of spending unnecessary time on repetitive, low-value tasks and processes.

And let’s face it — inflation is soaring, supply disruptions are everywhere and capacity is strained. The next disruption or recession is right around the corner — if it’s not here already. We need to be nimble and leverage new technologies to create value.

The market is ripe for a new approach. Autonomous negotiation is the answer — and Pactum is leading the charge. We have created a category of Autonomous Negotiations.

In 2019, CEO Martin Rand, Kaspar Korjus and Kristjan Korjus founded Pactum, an AI start-up that conducts autonomous negotiations for global enterprises and the creator of the autonomous negotiations market. He previously served as Product Manager at Skype and commercial lead for Europe for The Climate Corporation (owned by Monsanto), where he gained firsthand experience in successfully conducting complex negotiations with culturally and geographically diverse teams.

Introducing the World to Autonomous Negotiations: Learn How Pactum has Created an Industry was originally published in Pactum AI on Medium, where people are continuing the conversation by highlighting and responding to this story.

In the distant past, individuals used to trade between all kinds of capital, services and goods that were of value. However, in this day and age, trade negotiations take on a rather different and more specific characterisation. Trade deal negotiations are now more associated with the international exchange of goods and services between two or more countries, where the agreements and terms of each deal is facilitated and enforced by a recognised trade body.

These trade negotiations are complex, which means that they are often recognised as the most intricate level of negotiation an individual can be involved in. International trade deal negotiations in an ideal world should be rather straight-forward. The participating countries should agree on the terms of the trade deal, the addition/removal of restrictions or tariffs, and what mechanisms to put in place to enforce these set agreements are honoured.

However, the theory hardly ever matches up with the reality and practicality of these trade negotiations. Modern-day negotiations are lengthy and intricate. This is simply because modern economies are governed by complex and bureaucratic rules and regulations. Trade deals are often riddled with clauses and red tapes, and it doesn’t help that they are also at the mercy of the egos and national interests of the lead negotiators involved. So how exactly can we achieve some form of nirvana when it comes to trade deals at this level, especially when it involves major powerhouses like the U.S and U.K?

A negotiation process like no other

For a long time now, technological innovations have revolutionised nearly every aspect of our lives, and as we venture further into the fourth industrial revolution, their powers and benefits are becoming more evident. From interactive Zoom conference calls to automated delivery robots, technology has made our lives easier. But what if we extended this to more serious matters such as global trade negotiations?

The US and UK are two of the most powerful and influential economies in the world today, and given the UK has recently exited the EU, its government will be looking to strike a number of fresh trade deals to keep its economy afloat.

The UK government recently initiated trade talks with the US in an effort to expand their international trade. This could potentially be the perfect time to capitalise on the power of technology and incorporate it into the negotiations process. If anything, this isn’t too far-fetched from the diplomatic talks that the leaders of both nations have already been hosting on video conferencing tools. Advancements in technology now means that trade negotiation representatives can leverage the power of Artificial Intelligence (AI) negotiation platforms to do all the heavy lifting and help facilitate a mutually beneficial deal, without any hassle or misinterpretations.

That’s not to say that the AI program will completely replace the trade negotiators but rather provide as much support and automation as possible. This could actually be to the extent that the negotiation representatives can pass on the bulk of the job to the AI computer and focus on other activities that require more critical thinking and skill in the process. Think of this as a self-driving vehicle that still requires human guidance and intervention when needed. Human negotiators will still have the last say on any deal.

The augmented negotiation process

Generally, when a person is engaged in a negotiation, they focus on a few different things such as numbers, stock prices and payment terms in contracts, and they cannot do dynamic pricing or several multi-tiered negotiations in real-time. Therefore, the more complex and varied the negotiation process is the more difficult it will be for humans. This is where AI can come in to make the process a lot less complex and do most of the work in the negotiation. People also suffer from biases, and inherently have zero-sum thinking. In contrast to this, an AI and machine learning powered negotiation tool can find valuable trade-off combinations between unlimited negotiation items, maximising value for both sides. It can also handle 10,000 simultaneous negotiations whilst doing complex tasks like dynamic pricing across all negotiations. The AI tool essentially has no biases and can conduct multiple negotiations without losing time.

However, in this scenario, given that both countries want the upper hand and the better deal, either of one or both the UK and US negotiators can actually configure the AI tool to display a level of bias that works in their favour. But more generally, the AI tool is unbiased by default as it will be designed to produce win-win outcomes for both sides.

Trade deal negotiations generally take a long time to reach a level where both parties are happy with their ends of the deal. They are incredibly detailed which adds to the complexity of it all. The more details that need to be covered, the more individuals that are needed to assess and advise on each of the terms. This further adds to the time frame for completion. The benefits of utilising an AI negotiation tool with respect to this is that it can achieve better and faster results than human negotiators and can deliver greater value for both sides. Currently, 80% of deals are not Pareto optimal, meaning that one party cannot get a better deal without negatively impacting the other. The AI platform can increase the value for both parties substantially, making it as equal as possible. Some negotiations are too important to leave for just humans to solve, and international trade deals is a good example of this. It is simply too difficult for humans to reach Pareto Optimal with their emotions, political agenda, communication, and limited timeframes.

The potential for AI to augment the negotiations process for humans is huge and this is a strong example of how we can use AI to further strengthen not only the economic output of our industries but also whole countries. At the end of the day, humans are still expected to have the final say on all business decisions, but AI can be an important ally in augmenting what we do best and taking it to the next level.

Could technology be the key to the world’s most important trade deal negotiations? was originally published in Pactum AI on Medium, where people are continuing the conversation by highlighting and responding to this story.

Negotiations can be nerve-racking.

So much of our life quality is determined by the outcome of them — from where we live to how we work, as well as how much free time and money we have to engage in yet more negotiations. For companies, it’s even more fundamental. Good negotiations build successful businesses with quality products and services, motivated employees, and satisfied customers.

Good negotiating is an art, but I want to show you how we are now changing it to a science.

We’ve built an AI that can complete complex contract negotiations in just a few clicks and provide a better deal for all sides. It’s already being used by a wide range of companies and if you’d like to get more value from your suppliers too then I hope to make a case for using AI to have more effective business negotiations.

Like most people, I’ve never had any kind of training in how to negotiate. But I had to learn fast when tasked with building an organisation for the first time.

My background

Five years ago, I negotiated myself a job with the Estonian government to launch a new idea called e-Residency. We envisioned a future in which all countries would eventually compete to offer the best services online to entrepreneurs globally.

During my four years as Managing Director of the e-Residency programme, we negotiated with every part of the state, as well as Parliament, to turn this idea into reality and make it work. It wasn’t enough to have the support of the startup community in our capital. We needed to speak to the granny growing onions on her rural home farm or the low paid labourer concerned about globalisation so that they could see how they benefit from supporting this idea.

There are now more than 60,000 e-residents for Estonia with more than 10,000 new Estonian companies, generating more than €1 billion in revenue, and making a significant contribution to our country’s economy, including by paying more than €35 million directly in taxes. And that vision of the future is already reality. Several other countries have launched or are preparing to launch their own versions of e-Residency — from Dubai to Lithuania — while Estonia is already developing e-Residency 2.0. This time, negotiations aren’t necessary. It already has the rare consensus support of all political parties.

Along the way, we came up with a second big idea. What if Estonia became the first country to launch its own crypto tokens so that global entrepreneurs could invest directly into our country’s development? We called this idea Estcoin and it generated intense discussion around the world. I’ll be honest though. My attempt to negotiate Estcoin into existence failed to get off the ground. In addition to insurmountable opposition here in Estonia, even the Head of the European Central Bank publicly slapped down the idea.

I’ve now returned to business and, for the third time in my life, I’m incredibly excited about a new idea that I think can radically change our world. And, once again, I’m working with an incredible team that is passionate about turning this idea into reality. We’re already negotiating with some of the world’s largest and smallest companies, some of which are already using it.

Will it succeed like e-Residency or fail like Estcoin?

Well, this time, our success depends not just on how well we negotiate, but whether we can change the very nature of how companies negotiate.

Our idea is Pactum. It’s an Artificial Intelligence software designed to negotiate contracts on behalf of companies. While most software is designed to help people do business, Pactum is actually doing business for them.

In fact, we believe in the near future that machines will take on almost all operational work while humans can concentrate on strategy and creativity.

It’s now been 12 months since the initial idea with my two co-founders, Martin Rand and Kristjan Korjus, 9 months since the launch of the company and then 8 months since world class investors backed our idea, including former Skypers Jaan Tallinn and Taavet Hinrikus. You can read our initial blog post here.

It’s no longer just an idea though now. The software is already being used by paying customers to handle their supplier negotiations. We are particularly proud of how the world’s largest company, Walmart, is finding it valuable.

The art of AI negotiation

Here’s the thing about negotiating. It may be an incredibly important skill, but most of us are remarkably bad at it.

It’s not just a lack of training though. Negotiating goes against our very nature because pursuing our own immediate needs is woven into our DNA as animal instinct.

In negotiations, we need to look beyond that yet we struggle to weigh up all the complex considerations involved because there is too much data to consider in too little time. Instead, we let our own egos and biases shape the outcome to our own detriment.

Humans just aren’t rational in negotiations. An aversion to loss can overpower our ability to appreciate far greater gains. For example, companies are frequently reluctant to make simple concessions they can afford, like longer payment in terms, in return for deals that could significantly boost their revenue. A ridiculous opening offer can anchor a certain value and lead to us agreeing an outcome that’s still too close to that ridiculous offer. There are more than 60 other negotiating mistakes like these based on human psychology.

People tend to think of it as a zero sum game in which there must be a winner and a loser. But this is also a mistake. It’s more often the opposite: every accepted trade-off makes the deal better for both parties and should be considered a win-win, not a win-lose.

But there is a science to good negotiations.

The ideal negotiation results in something called a Pareto efficient deal. That’s an agreement in which both sides can’t get a better deal without harming the interests of the other side.

We initially wanted Pactum to learn by observing professional negotiators, yet we quickly discovered that even experienced negotiators waste too many opportunities for both sides and rarely achieve Pareto efficient deals at the end.

You might think that large companies at least have sophisticated processes and enough power to get what they want. But a KPMG analysis found that the average commercial deal could be improved by up to 40%. That’s because 80% of commercial agreements are high volume and low value. That’s called the ‘long tail’ — or ‘unmanaged tail spend’ because it’s so difficult for employees to keep on top of them and consistently negotiate anywhere near optimal deals on a consistent basis.

How Pactum is changing negotiations

Companies need to focus on their strategy, but instead of leaving suppliers unmanaged, Pactum is able to manage the long tail for them by negotiating the optimal win-win scenario in a vast number of complex contracts simultaneously.

Our AI produces better contracts through automation than if a human even had the time to negotiate them all instead. We’ve discovered that every deal Pactum has negotiated has increased the value of the deal on average by 11%-27% for our clients.

And when I say ‘better contracts’, I mean for both sides. The simplest way to increase value for the client is to increase value for the supplier too. It’s always a win-win outcome we’re aiming for. More suppliers are accepting more deals negotiated with Pactum than they previously did with human negotiators, which is the clearest evidence that they also like the outcome.

Our AI saves time and human resources. So far, we’ve found that 96% of our clients’ negotiations are fully automatic using Pactum without any human involvement needed at all.

This isn’t automation that you switch on and forget about though. That time saved can be used instead for developing your strategy, which is informed by the unprecedented level of data about these contracts that Pactum can deliver.

Not only that though, but 76 to 82% of the suppliers we surveyed afterwards actually preferred dealing with our chatbot style interface. They said it’s because they were able to reach agreements faster with less hassle and, most importantly, with better terms for them. Perhaps most surprisingly, some even mentioned that the AI was polite and friendly. Human to human negotiations can get pretty tense, afterall.

The best part is that Pactum is constantly learning from its own negotiations and improving.

How Pactum works

Our artificial intelligence software works best in repeatable, rules-driven, high volume commercial negotiations. It can’t negotiate Brexit (yet!), but it can help companies handle the majority of their suppliers.

Automation has already proven itself successful at handling processes of this nature, such as by automatically paying invoices. This is known as Robotic Process Automation (RPA). However, this is the first time that it has been applied to negotiations, which can then shape and improve the actual processes too — whether they are automated or not. We’re calling this Robotic Process Enhancement or RPE.

It works because Pactum has learnt how to talk about business, as well as the limits of what can be offered on a vast number of factors and how to value the trade-offs between them. Humans can only focus on a small number of trade-offs, like the price and basic payment terms. Beyond that though, it becomes a serious mathematical challenge when considering factors like exclusivity, payment periods, quantities, demand, and margins. Only a system like Pactum can handle that properly.

Pactum triggers the conversation with ideal suppliers, as set out in the company’s strategy, then speaks to them through a chat-like interface to help them reach a deal that works better for both sides. The company using Pactum decides the overall strategy, priorities and limits. Then the negotiation flow is determined by data and various triggers that keeps the supplier updated.

The interface matches the client’s brand, including the URL, logo, and color scheme. That link is valid for a limited number of days, but can be reopened at any time from any device to continue negotiations where they were left off. The supplier can write text or numbers, as well as choose from multiple choice answers where necessary.

A deal is only reached if both sides find a better agreement than if they walked away and it’s no longer possible to improve it without harming one side’s interests. Here’s what that looks like on a graph.

The X axis represents the value of the deal to the company that has decided to use Pactum. The Y axis represents the value to their supplier. Each dot represents a different contract being negotiated. The red curve represents the Pareto optimal line to which all negotiations should lead. It’s unbelievable to think that according to KPMG 80% of contracts negotiated by humans never reach that red line, which wastes value for both sides.

The AI is designed to find the tradeoffs that enable both sides to move closer to the red line as efficiently as possible. Every company has different needs so the AI will listen to what the supplier values and then figure out what can be acceptably offered to help the client and supplier get as much value as possible.

The Pareto optimal deal is so much a part of Pactum’s DNA that even our logo is a representation of it.

At the end of this process, the contract is automatically created and can then be digitally signed by the supplier before the Enterprise Resource Planning systems are automatically updated.

Our AI is learning fast

It’s never before been possible to conduct A/B testing on something as open and complex as negotiations, which is why scientific research on the subject is incomplete and contradictory. Yet Pactum is repeatedly learning by conducting negotiations in a relatively controlled environment with insight into thousands of data points. This is producing both better results for each client as Pactum understands their business better, but also improves the overall performance of Pactum for everyone.

Take a look at the results from 100 recent negotiations using three different iterations of the Pactum AI.

First, the preference of suppliers for using Pactum over a human negotiator rose from 50 to 74%. This is because the bot simply became better at communicating and was able to provide a more hassle-free experience. In addition, the percentage of suppliers who agreed to the final deal increased from 60 to 81%. This shows how well Pactum was able to listen to what the client wanted while moving the final agreement to the Pareto optimal line.

Most importantly though, the average value of the deal to our client using Pactum increased by 11% in added revenue. Through data science and machine learning, Pactum is able to constantly improve its strategies, tactics, and offerings.

The future of negotiations

Pactum is already at work for the largest companies of the world. Our team of developers and data scientists are also constantly working to improve both the AI and the user experience.

Today, the software has proven its ability to improve a company’s bottom line by optimising its contract negotiations on a large scale. Where do we go from here?

Let’s imagine you are the Chief Merchandising Officer for a new retailer.

It’s 2021. You start your day at work by opening Pactum’s dashboard, which by that point will provide enhanced oversight to the user. You see that the AI is conducting hundreds of negotiations simultaneously with both existing and potentially new suppliers. You can also look through the new negotiations that have been concluded in just the past 24 hours alone. The deals have already been digitally signed, your systems have been updated and supplies are already being loaded into vans and moved across the country to your warehouses as per the terms of the deals. The suppliers are happy. You can see the number of successful deals is up and so too is their net promoter score.

It’s 2023. In addition to even more oversight, Pactum has more in-built tools for you to choose the company’s strategic direction directly through the dashboard. By this point, your business has been growing steadily in large part due to Pactum. The automation of vast numbers of contracts allowed you to quickly keep adding products to your store with favourable terms. The oversight of these contracts combined with the time saved enabled you to focus on what products were selling the best and likely to sell better in future so you could then instruct Pactum which types of suppliers to focus on triggering negotiations with. In addition, the growth of your business has changed your needs and priorities so you can instruct Pactum to relax some of your previous negotiating red lines. You’ve got plenty of money in the bank, for example, so let your AI go softer on payment terms to get even better deals.

It’s 2025. Pactum is now giving you deeper insight into your strategic options. Your company has grown exponentially. But just as the economy is recovering from the pandemic, there is yet another black swan event that causes enormous disruption globally. This time though, you are prepared with Pactum. The AI looks at the impact of this disruption on your suppliers and consumers then explains to you a range of options you can take based on their probable impact on the bottom line. You instruct Pactum to diversify the supply chain and add more local suppliers to improve the resilience of the supply chain to the situation. You also refocus the target products towards those most likely to be in demand based on how you think consumer habits will change through this crisis.

It’s 2030 and you’ve been using Pactum for a decade in which your company has grown through the good times and the bad. Except, Pactum is no longer an interface used by your company. It’s your company’s first AI employee that sits in the boardroom and helps directly advise on the company’s decision making. By the time the meeting ends and the way forward is agreed, your AI employee is already implementing thousands of new actions simultaneously.

Start this journey with us

Pactum is still a new idea, but we are working with companies in various industries from retail to logistics, from the music industry to internet marketplaces. Now is the best time to come onboard with us and find out how our AI can work for you.

To find out more, write to me directly at kaspar@pactum.com. It won’t take long until a robot takes this job from me too, of course.

I’ll give you a 10 minute demo of Pactum then we can figure out how we can apply it to your business needs. By automating negotiations, you may find new sources of value that so far you have only dreamed off.

Your next contract negotiation might be with a machine was originally published in Pactum AI on Medium, where people are continuing the conversation by highlighting and responding to this story.

The words “Never let a good crisis go to waste” ring more true than ever. Retailers should use this crisis to implement novel technologies, embrace innovation and come out stronger on the other end. Stepping in to fill the void, Pactum’s AI can negotiate low value, high volume supplier deals automatically. For most large retailers, these long tail deals have been neglected for years. This means a lot of value can be gleaned for both sides by renegotiating them. Pactum does exactly that, in an automated way. Pactum’s customer sends out an email with a request to renegotiate the current deal. The supplier clicks on a link and a chat-like interface opens. The system knows in-depth information about the supplier and is able to conduct the negotiation.

Will all of this make business less human? It is true that with consolidation and globalization business has become less personal. Conversely, AI Is making business more human again. We have seen cases where companies interact with their long tail suppliers just once in five years. The AI however, always has time for the supplier, is always informed with the latest data and is able to spend as much time as needed with the supplier to find the best deal for both sides. We have received feedback like ”The system was polite and it listened”. This shows that AI can bring humanity back to areas where human interactions are not “profitable” anymore.

Pactum is also a superior negotiator for non-strategic long tail deals compared to a human. How does this translate into real world value? The following examples illustrates this fundamental truth in a simple way. There are over 30 negotiable items or positive and negative levers in the retail industry. These include price, price gap, stores, payment terms, packaging, features, etc. The combinations between those negotiation parameters are so vast that people have a hard time grasping the most beneficial combinations for both parties. Yet this task is perfect for a machine. Thus Pactum can unlock hundreds of millions of dollars for large retailers while improving the deal for the supplier as well.

The bottom line: AI could make all the difference when it comes to critical margins that decide whether a business will buckle under the pressure of this pandemic or rebound with smart new strategies in place.

Can AI Negotiate Retail Merchandising Deals? was originally published in Pactum AI on Medium, where people are continuing the conversation by highlighting and responding to this story.

It was a beautiful day in France. Springtime was well on the way.

I could not marvel at it though. I was in a meeting room negotiating with seasoned French businessmen. Why are they so different from the Germans, I thought? And why are the Germans so different from Ukrainians and Spaniards? The French executives deemed my clever proposals grossly inadequate and closed the door on my way out. Does this have to be so painful? After two years of this, I thought there is no cognitive bias or cultural difference I have not painfully experienced. Could technology help here? I was not sure.

Fast forward 1.5 years. Friends and former colleagues Kaspar Korjus and Kristjan Korjus called me to ask advice on a potential startup. My sole mission became to persuade Kaspar and Kristjan to stop and to start something in negotiations instead.

Kaspar was just a role model in solving something like this. He was the MD of e-Residency, one of the most ambitious government tech projects in Europe. He had persuaded the police, the Foreign Office, the prime minister, the president and all ministries to invest government money to open Estonia’s sensitive electronic infrastructure to all foreigners in the world so they could start companies in the European Union without ever having to visit. Crazy, right? That’s some negotiation skills.

Kristjan, Kaspar’s brother, is a PhD mathematician who was building artificial brains for autonomous delivery robots at Starship. His PhD thesis was about deep learning agents aligning their values and collaborating. He led a team that replicated DeepMind’s original work that made waves in scientific media and his team members went to work for Elon Musk’s OpenAI and to DeepMind.

With Kaspar and Kristjan we had the strongest team for automating negotiation in the world. So we set about raising money. Our first investor was Jaan Tallinn — AI philanthropist and founder of Skype and investor in DeepMind. He was the most intelligent person we had the privilege to speak to, ever. He could finish our sentences on reaching Pareto efficient outcomes through value alignment. This was powerful. Then came Taavet Hinrikus (Founder and CEO of Transferwise), Ott Kaukver (CTO of Twilio) and Sten Tamkivi (ex MD of Skype and a CPO of Topia) followed. We can proudly say we have one of the best team of angel investors one could find when fundraising in Europe.

We knew what we had to do. We wanted to create a system that could negotiate without human biases on a superhuman level. It had to be able to learn from each negotiation and get better in closing Pareto efficient deals. These are agreements where one side cannot get a better deal without hurting the other party.

Initially, we wanted to create a global sparring platform for negotiators and teach the AI based on these learnings. We took Harvard Business School negotiation simulations and asked people to negotiate. What we quickly noticed was that no matter how proficient negotiators they were, they almost never achieved Pareto optimum. There was an effect that made the situation even worse. According to the Pareto principle, 80% of commercial agreements are ‘long tail’- meaning low value, high volume. Negotiating this vast number of contracts in large corporations is almost impossible with people. Enterprises even have a name for them — the unmanaged long tail.

Achieving superhuman levels in a situation where the largest companies in the world called 80% of their contracts ‘unmanaged’ became easier than we thought. We don’t need to build a bot with general intelligence. We just need to build a system that is better than the status quo- which is people avoiding having to negotiate low-value high volume deals at any cost.

So we built a bot that can negotiate. Our system consists of two parts: the value function and the negotiation flow. The value function defines every possible variation and all dependencies between the negotiation items. The negotiation flow is a collection of recursive graphs of human-understandable negotiation strategies and tactics. The role of AI is to learn from each negotiation and get better in the next. Mathematically the shortest way to a Pareto optimal deal is by creating value for both sides. Note that AI will learn about humans not from humans during these negotiations. The negotiation strategies and tactics are prepared by our negotiation scientists. Thus it does not perpetuate existing human biases. The task of AI is to find the best way to get to a Pareto efficient deal.

Pactum’s first negotiation was for an online limousines services aggregator. The bot negotiated with an elderly limousines rental company owner in Spain. Pactum was able to complete the negotiation in 8 minutes. When we asked for feedback the gentlemen said that he hates computers, but this system was really nice and polite to him. This gave us a lot of vigor to continue. We realized that negotiation is a source of stress for most people so they try to avoid it. They would more likely negotiate with a robot which is kind, polite, professional, does not push the other party into concessions and does not have an ego to deal with.

We’re now focusing on helping Fortune 500 type companies pick up locked value from their long tail agreements while increasing value for the other side. People can thus focus on important deals where human ingenuity is always needed.

Why did we create an AI that can negotiate? was originally published in Pactum AI on Medium, where people are continuing the conversation by highlighting and responding to this story.