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Super-Optimizing For ADR Disputes


Alternative dispute resolution is traditionally defined as resolving disputes
peacefully by means other than going to court. Under that traditional definition, the
main goal is to avoid time-consumption and expense of litigation to the disputants and
the taxpayers. Such an ADR procedure is still a win-lose procedure just like a court
case with one side winning and the other side losing. Sometimes the ADR procedure
may involve a mediator (rather than an ad hoc arbitrator) who seeks to arrive at a
compromise where both sides lose something although they rationalize by saying that
the results could have been worse.

More recently, the American Bar Association has renamed its ADR Section to be
the DR Section or simply the Dispute Resolution Section. This is partly in recognition
that lawyers and other people are interested in resolving disputes in a better quality way
than the win-lose emphasis of the courts. This, however, is not necessarily the kind of
win-win emphasis that public policy is moving toward, as indicated by the numerous
win-win mentions in the Policy Evaluation quarterly.

The purpose of this article is to show how win-win analysis can be applied to the
10 most common kinds of legal and non-legal disputes. These 10 disputes are divided
into five kinds of citizen-to-citizen disputes and five kinds of disputes with the
government frequently as the disputant. Citizen-to-citizen disputes can involve
businesses, aliens, individuals, or any non-governmental entities. The more common
term is private disputes, but that sounds like something related to privacy. The disputes
with the government as a disputant include international disputes, which are
increasingly business-to-business transactions, rather than public international
disputes. Likewise, litigation disputes could be between two private parties, but the
most common litigation is probably a traffic violation or a misdemeanor in which the
government is on one side.


A typical Legal Services Agency case involves a family dispute and a super-optimum solution. The immediate beneficiary is the woman who gets a divorce so that
she can marry a more responsible new husband. The new husband is a beneficiary,
and the old husband is freed of some responsibilities generally by virtue of the new
husband taking over some aspects of supporting, the wife and children. The children
are better off with a new father versus no father or versus the father that deserted the
family who may have also been violent or alcoholic or had other undesirable
characteristics. The taxpayer is better off because the mother and her children are now
off welfare as a result of obtaining the divorce which enables her to marry the new
husband. It is a clear cause- and-effect relation since none of the Legal Services
divorces are provided unless they are either for the purpose of marrying a new more
responsible husband or for the purpose of getting rid of a violent previous husband.

One irony ties in with getting super-optimum solutions adopted. Even though
these divorces (which are the most common Legal Services case) benefit everybody
including conservative taxpayers, the whole program was strongly opposed by
President Reagan and the American right wing in spite of their professed concern about
saving taxpayer money and being interested in good families. This raises some SOS
psychology questions as to how they can be so inconsistent. Some of the answers are:

1. Traditional conservatism tends to think of poor people on aid (especially aid to
dependent children) as being at fault and deserving of punishment. Providing them
with free legal aid no matter how much it benefits the taxpayer and promotes family
values is considered providing them with some kind of benefit. It is another example
of the classic impediment to adopting super-optimum solutions–namely, the
willingness of some people to hurt themselves out of negative feelings toward other
people. The conservatives are hurting their cause of promoting the family and
saving the taxpayer money, but are partly doing so because of their negative feelings toward people who receive public aid.

2. If Legal Services did absolutely nothing but divorce cases, conservatives might be
able to tolerate it. Many conservatives would say that the above case is acceptable,
but that it is not acceptable for a Legal Services attorney to question the
constitutionality of the concept of fault in divorce. It is even worse also to be
handling cases against merchants, welfare officials, other government people, or
landlords. What they are in effect saying is that what they consider as
trouble-making activities are so heinous that they are willing to throw out what they
might concede are useful purposes. It is interesting to note the heinous activity they
are referring to is forcing compliance with the law–namely, the legal obligations of
landlords, merchants, and abuses by government people. But those kinds of
conservatives do not want law and order when it comes to expecting landlords,
merchants, and abusive government people to comply with the law.

3. Some rich and middle-class conservatives may have guilt feelings that they will not
admit to. In order to lessen their guilt feelings, they consciously or subconsciously
seek to put poor people in positions where they are forced to behave in criminal or
semi-criminal ways or forced to be unemployed. Then those conservatives can say
how terrible poor people are. They can then feel that their negative feelings toward
the poor and their own wealth are not something to be guilty about. Thus if one
argues that this kind of program will enable poor people to do better, it may not be a
plus in the eyes of those who would like to argue that poor people are worthless and
will never do well.

Those are the same people who argue that poor people have no ambition and
simultaneously want to take away every dollar they earn by way of a 100% income tax
levy. That is what the Reagan administration advocated–namely, that every dollar that
a person on welfare earns should be confiscated to reduce the welfare payments. One
provides the poor with a negative disincentive system to earn any money, and then
complains how lazy they are that they are not earning any money.

In the case of Legal Services to obtain divorces to get off welfare, the traditional
conservative argues that poor people like welfare, and that they have children to get on
welfare. Thus, if a substantial percentage of women on welfare are found to be seeking
divorces from violent husbands or husbands who have deserted them so that the
women and their children can better themselves, this is disruptive to the conservative
theory that they have no desire to better themselves, and especially no desire to get off
welfare. Therefore, to make it a self-fulfilling prophecy, one deprives them of the ability
to get divorces that will enable them to get off welfare.

It is a more pathological frame of mind than just being a hypocrite. A hypocrite
says doing X is bad, but does X. The kind of pathology we are referring to here is
where the person says doing X is bad and we should wipe it out, and then he or she
does various kinds of things to encourage people to do X and to prevent them from
doing otherwise. That kind of person is more dangerous than the hypocrite. The
hypocrite is largely only hurting himself (although may be hurting other people by setting
a bad example). The pathological conservative, though, does more than just set a bad
example. He supports legislation and government activity designed to worsen the
things that he claims he wants to better so he can consciously or subconsciously say,
“See, I told you so.”

There are people on the left like that, too, although they usually do not have
much influence on government policy. Subsequent to World War II in France and Italy,
the Communist Party frequently opposed legislation designed to reduce unemployment,
arguing that the legislation was just small potatoes and that they wanted to hold out for
really important reform. Consciously or subconsciously, they were doing things to
worsen unemployment so that they could say, “See, I told you how bad a capitalistic
economy would be with regard to unemployment.”


The approach to arriving at super-optimum solutions of having big benefits on
one side and low costs on the other especially applies to resolving disputes between
litigants in damage suits. For example, in the case of the U.S. insurance company
versus the foreign electronics company, the plaintiff demanded a minimum of $700,000
or else they would go to trial, especially since they had receipts to show they had
already paid out $950,000 to their insurees for fire damage. The electronics company
offered to pay a maximum of $350,000 or else they would go to trial, because they
considered payment of more than $350,000 as an admission of negligent wrongdoing,
whereas less than $350,000 could be written off as a nuisance payment to avoid
litigation costs. The object for a court-appointed mediator in this case (operating from a
super-optimum perspective) is to come up with a settlement that would be worth more t
han $700,000 to the insurance company and simultaneously worth less than $350,000
to the electronics company.

The solution was for the electronics company to supply the agents of the
insurance company with computers for use in their insurance work. The electronics
company also agreed to provide large television sets for use as bonuses to the
insurance agents to encourage them to sell more insurance. The foreign insurance
company that the electronics firm employs also agreed to give the U.S. insurance
company about $300,000 worth of claims they had against Americans but were
unenthusiastic about trying to collect. Other elements were also included in the total
settlement that had a value to the U.S. insurance company of more than $1 million but
would cost the foreign electronics firm and its insurance company less than $200,000,
mainly because all that they had to do was pull some computers and television sets out
of the warehouses without having to manufacture anything new or buy anything new.

Another illustrative example involves a leading agricultural grower in the Peoria,
Illinois area (who employs approximately 700 farmworkers a year) being sued by the
Migrant Legal Counsel, which is a legal services agency that specializes in the legal
problems of migratory farmworkers. The workers as a large class action were suing to
recover approximately $3 million in wages that had been deducted to pay for loans,
rents, and other expenses without proper legal authorization. The money had actually
been loaned or advanced to the workers, but the procedures designed to prevent illegal
exploitation had not been followed. The growers insisted they should pay nothing since
the money they deducted was for loans actually made, regardless of the paperwork
followed. The best expectations of the workers in terms of net gain would be rather low,
since whatever they collected they would have to repay, with the exception of maybe
about $50,000 in compensation to some of the named plaintiffs who were fired or quit
their jobs, unless unlikely punitive damages could be obtained. The best expectations
of the growers would be to spend $50,000 or more going to trial and win with no liability.
Thus, the object for an SOS court-mediator would be to come up with a settlement that
would be worth more than $50,000 to the farmworkers and would simultaneously save
more than $50,000 in litigation costs for the growers.

The essence of the solution was that the growers agreed to deposit $100,000 to
begin an employee credit union. Depositing $100,000 costs nothing to the growers
since it is insured by the federal government, and can be withdrawn after an agreed
upon time period, possibly even with interest. The $100,000, however, serves as the
basis for the beginning of an economic development fund that enables the workers
through real estate leveraging to obtain a mortgage for building over $500,000 worth of
housing for the workers as a big improvement over their current housing. The
existence of the credit union also enables them to avoid having to get advances from
the growers, which generates a lot of friction as a result of alleged favoritism in giving
and collecting the advances. There are other elements involved, too, such as new
grievance procedures and reports regarding compliance with other rules governing the
working, conditions of migratory labor. The essence of the solution, though, is that both
sides come out ahead of their original best expectations.

For further details on this farmworkers case, see Chapter 15 on “Finding a Super
Optimum Solution in A Labor-Management Dispute” in Nagel and Mills, Multi-Criteria
Methods for Alternative Dispute Resolution: With Microcomputer Software Applications

(Greenwood-Quorum, 1990). That chapter analyzes the case from a broadening
perspective. That perspective sees the problems as going beyond the immediate
back-wages dispute into the need for upgrading the skills and job opportunities of farm
labor and the need for upgrading the technology and profitability of farms that currently
employ such labor.


For merchant-consumer disputes, especially at the policy level, we could draw
from the Legal Services material. The object is to arrive at a solution where everybody
comes out ahead. This is actually very common in Legal Services mediation. Without
the Legal Services Program as an intervener, the consumer might collect nothing, or
collect something but at great expense. The consumer might wind up having property
confiscated illegally. The traditional resolution was either very one-sided in favor of the
merchant, or was mutually hurtful where both sides suffered from the lack of mediation.
The typical Legal Services Program solution is to work out a system of smaller
payments over a longer period of time. That way the merchant gets fully paid, the
consumer gets to keep the goods, and everybody comes out ahead.

That is individual dispute resolution. If we are going to talk about policies, we
could talk about the small loan acts, which involve fairly high interest rates, but far lower
than loan sharking. The consumer is able to borrow money without the loan shark
rates, and also without the loan shark pressure that can be life threatening. The
merchant is able to charge high enough rates to make lending profitable. The
consumer adds to his quality of life by being able to purchase a car, a refrigerator, or
other such things. The liberal solution would be to force rates down. Then the
merchants cannot lend, and they sell nothing and make no profit. The conservative
solution would be to force rates up, and then consumers do not buy.


Neighborhood disputes involving landlords and tenants are like merchant-consumer disputes except the landlord sells housing instead of cars or refrigerators.
The same types of dispute-resolving are applicable.

As for disputes between property owners, the classic example of a resolution
that benefits everybody at the policy level is zoning to avoid what amounts to a tragedy
of the commons. Without zoning, each property owner would seek to bring in the most
profitable but maybe the most undesirable use of the property. Eventually the market
value of the neighborhood would go down. Some property owners would get out before
the deterioration and come out ahead. A classic example is four people on a block who
own property that is not zoned. One person decides to rent his property to a stable. He
makes some good short-term money from the rental. Soon, however, nobody wants to
live on that block anymore, and the value of all four buildings drastically deteriorates.
Zoning would provide for stables only outside residential areas.

If the one owner sold his property to the stable at a big profit and moved out,
then he would lose nothing as a result of the subsequent deterioration in the values.
Thus zoning is really more a way of maximizing the greatest happiness for the greatest
number, or the greatest benefits minus costs for the greatest number, but it is not a
super-optimum solution. In the stable case, at the beginning each lot is worth 100 units.
One owner sells to a stable for 120 units and comes out ahead. The value of the
remaining property drops to about 80 units each. Three people collectively lose 60
units so that one person can gain 20 units. With zoning, the net result is nobody loses
anything or they may gain through the normal appreciation of property. Zoning does
not enable people to come out ahead of their best expectations. It just prevents one
person from making a substantial gain at the expense of a number of other people
whose losses total more than his gain.


A dispute between two business firms usually involves a buyer-seller relation, but
it is not like a poor consumer and a slum merchant. The buyer may be General Motors
and the seller may be DuPont selling upholstery. Suppose DuPont sells GM some bad
upholstery or contrary to specifications. Both sides might have a fair chance of winning
in court. DuPont could argue that it was GM’s fault and that the specifications were not
sufficiently clear. DuPont could argue that it was GM’s fault and that the specifications
were clear, and DuPont did not comply. They could spend a lot of money fighting each
other. General Motors then loses what may have been a good source of upholstery,
DuPont loses a good customer, and everybody winds up substantially worse off than

The commercial arbitration approach seeks to work out traditional compromises
that are better than that, but not necessarily super-optimum solutions. A
super-optimum solution in the big business world might involve some kind of a merger
of interests that goes beyond the immediate sale. Maybe General Motors would like to
own a company that makes auto upholstery, and thereby cut out the middleman and
the profits that go to some other company. Maybe DuPont would like to own a
company that makes cars and it could thereby have a big place for selling a lot of its
auto upholstery. The super-optimum solution might be to work out a partial merger
whereby GM buys into a spinoff of DuPont that does nothing but make auto upholstery.
General Motors does not need to buy DuPont’s manufacturing of kitchen cleanser or
whatever else they make. Likewise, DuPont does not need to buy into whatever GM
makes that does not have anything to do with auto upholstery, such as spare parts for
motors. They could set up a separate company that they both own, or DuPont buys a
piece of General Motors, or General Motors buys a piece of DuPont. The idea, though,
is to develop a merger where they both come out ahead of their best expectations in
terms of future benefits minus costs, as contrasted to merely resolving a question over
whether some specification were for one kind of fabric versus another on one specific

We could use the foreign electronics firm case as an example. A big super-optimum solution involved the foreign insurance company giving some thought to the
possibility of making the U.S. insurance company its agent for marine insurance in the
United States. That could have involved millions of dollars worth of sales per year. It
fell through partly because it was too super-optimum a solution and too broad for the
minds that were present to handle.



Both the government and the private firm can easily come out ahead if the
dispute is resolved through a subsidy approach, rather than through a punishment
approach. The punishing or fining approach may cost the government a great deal to
impose. Even if the private firm wins, it may spend a great deal of money defending

A good example is environmental protection. It is much easier to get compliance
by providing subsidies to cover part or all of the excess cost than to try to get
compliance by fining business firms for not incurring the costs, especially if the fines are
less than the costs. It is almost a super-malimum solution if the government winds up
spending a lot of money to impose the fine, the private firm winds up spending a lot of
money to fight the fine, and the pollution still continues while the fighting is going on and
maybe even continues after the fine is paid. With an appropriate subsidy, everybody
saves money and the pollution gets substantially reduced.


There is a lot of talk about cooperative federalism with states and other
government units working together. The environmental field offers good examples,
such as that of Illinois and Wisconsin in the dispute between Milwaukee and Chicago
regarding how Milwaukee disposes of its garbage. There have been 20 years of
numerous lawsuits between the attorney general of Illinois and the attorney general of
Wisconsin. The situation has not changed substantially. Milwaukee still uses Lake
Michigan for some garbage disposal and thereby pollutes the Chicago beaches.

The solution seems more appropriate to have the federal government subsidize
some kind of garbage disposal system for Milwaukee that involves landfills,
incinerators, or something other than dumping in Lake Michigan. The cost to the
federal government would be less than what it has cost Illinois and Wisconsin to fight
each other all these years and not accomplish anything, partly because it is not a
problem of who is at fault or who is in the right. It is a problem requiring money for a
subsidy to provide for an alternative way of disposing of Milwaukee’s garbage.
Milwaukee is not going to stop having garbage, and they are not going to spend a lot of
money on their own if they have a convenient lake to put it in. They do not dump raw
garbage into the lake, it is processed to some extent, but apparently not enough.


We will use the arms control negotiations between the United States and the
USSR as an example. Since starting that problem, it has expanded greatly to be even
more of a super-optimum solution than originally imagined. The arms control
negotiations have been the springboard for all kinds of thawing of the Cold War, which
has enabled both the Soviet Union and the United States to cut back on defense
expenditures and have more funds available for domestic economic development. It
goes beyond the relatively small agreement regarding medium-range missiles, which
constitute only about 5% of all the missiles. It is a bit like the United States and Red
China getting together to play ping pong in the early 1970s. That resulted in all kinds of
thawing of hostile U.S.-China relations, far beyond anything it did for international ping
pong. Likewise, the thawing from the medium-range ballistic missiles is much more
important than those missiles were. One of the direct after effects is the liberalizing of
the government and the economy in Eastern Europe. One, however, cannot expect
such world-impact results from every dispute resolution.

It is interesting that when the arms control negotiations were going on, the
liberals who were in favor of peace did not want any other controversies discussed.
They feared that doing so would disrupt an arms control agreement. They wanted to
exclude the status of Eastern Europe, Central America, Africa, or Asia. This is an
example where pushing for a broader perspective on the negotiations did to some
extent pay off, and it was conservative pushing. However, it may be no credit to the
conservatives, since part of their motivation was to wreck the talks. They believed that
if anything was brought up about the USSR getting out of Nicaragua, Angola, or
Eastern Europe, then the USSR would break off the talks, which the conservatives
never liked in the first place. This is an example of both liberals and conservatives
being surprised by the results.

The negotiations illustrate that super-optimum solutions at least sometimes have
a strong element of luck to them. Due to unforeseen changes in who is going to be
making the decisions or other changes, things can turn out to be much better than
anticipated, not because they were so carefully planned. Gorbachev’s attitudes were
not well anticipated by the CIA or the State Department. A big indication of that is what
happened in Iceland, where Reagan proposed a drastic reduction in Soviet missiles.
This may have been designed partly to antagonize or partly to start from an
exaggerated position for bargaining purposes, but Gorbachev agreed to the proposal.
As a matter of hindsight, his behavior was not so bizarre or unpredictable. It reflected
some good thinking on his part with regard to the needs of the Soviet Union for getting
money into the domestic economy out of wasteful defense expenditures.


The use of win-win analysis in litigation disputes was discussed in detail in the
article on “Win-Win Mediation” in the Autumn, 99 issue of Policy Evaluation. An
example was given of a product liability case and a labor-management case. Litigation
could include divorce, employee relations, sales, and property disputes. It normally
only refers in this context to personal injury matters like auto accident cases or like
much bigger things such as the Dalkon Shield, the Johns Mansville asbestos case, or
the Union Carbide Bhopal case. It is an important separate category, especially to


The minimum wage dispute could be used as an example of a potential super-optimum solution in a public policy dispute. The liberals in Congress as of 1989 are
arguing for a minimum wage of approximately $6.00 an hour. The conservatives are
arguing for approximately $5.00 an hour. A traditional compromise would be $5.50 an
hour. This might be greeted as a victory by liberals since it is $.15 more than the
current $4.35. It might be greeted as a victory by conservatives since it is $.50 less
than what the liberals are seeking.

A wage of $5.50 an hour, though, could be considered a loss for both sides. It is
a loss to liberals if $5.00 an hour is necessary for minimum food, shelter, clothing, and
other necessities for an average family of four. The $5.50 is a loss to conservatives if
$5.00 an hour is the maximum that business firms can afford to pay to minimum-wage
employees, and thus anything higher than $5.00 an hour will mean laying off workers
who will thereby suffer a lack of minimum food, shelter, clothing, and other necessities.

A super-optimum solution might involve the minimum wage being raised to $6.50
an hour in terms of what each worker would receive, but simultaneously requiring each
employer to pay only $4.50 an hour. The $2.00 difference would be paid by the
government for every minimum-wage worker who would otherwise be unemployed
either because the firm could not afford to hire the worker, or because the worker would
not be sufficiently inspired to take the job at less than the increased minimum wage.

Under such an arrangement the liberals come out ahead of their initial bargaining
position of $6.00 and probably ahead of their best expectations. Likewise the
conservatives come out ahead of their initial bargaining position of $4.00 and probably
ahead of their best expectations.

The government and the taxpayers might especially come out ahead by virtue of
(1) the money saved in terms of public aid, public housing, Medicaid, and
unemployment compensation; (2) the decreased cost of antisocial behavior associated
with people who are embittered by unemployment or who resort to criminal sources of
income; (3) the increase in the GNP as a result of the product these people produce
and the accompanying increase in the taxes they pay; (4) the better role models they
now provide for their children and grandchildren who might otherwise be caught in a
cycle of unemployment, public aid, criminal activity, and lack of productivity; and (5)
pushing up the bottom of society has the effect of pushing up those above the bottom
without being inflationary if the increases are accompanied by increased societal

In that regard, as an additional requirement for a business firm to be eligible to
pay only $4.50 an hour, the firm would be expected to provide on-the-job training so the
workers would become even more productive to the firm, the economy, and
themselves. One thing to especially point out regarding this example is that, by getting
off the single track of the exchange of dollars between an employer and an employee,
one cannot only arrive at mutually beneficial solutions, but also at solutions that exceed
the initial best expectations of both sides. This example is summarized with a win-win
matrix in the context of the Philippine minimum wage at page 21-22 of the article on
“Government Innovation: Win-Win Vouchers” in the Summer, 2000 issue of Creativity


That minimum wage example may be a good note on which to end this article.
When it was written, the dispute had not yet been resolved in Congress. The dispute
has now been resolved. The resolution was a textbook compromise that involves
splitting the difference between the relatively high amount that the Democrats
advocated and the relatively low amount that the Republicans advocated. Perhaps a
more mutually satisfying resolution could have been achieved by thinking more broadly
than just the exchange of money. Perhaps there should have been more of an attempt
to develop a multi-criteria solution that would involve a package of alternatives, some of
which would favor the Democrats and some the Republicans. Maybe it would have
been impossible to develop a super-optimum solution where both sides could come out
ahead of their best expectations. Unfortunately, there did not seem to be even an
attempt to find that kind of solution.

One might conclude from the minimum wage experience that multi-criteria
dispute resolution and super-optimum solutions may be too idealistic. On the other
hand, there are encouraging signs, such as the streams of relevant literature and ideas
mentioned in the introduction to this book. Those streams relate to decision-aiding
software, win-win mediation, and expansionist economics. Perhaps a few years from
now, debates like that for minimum wages will involve the disputants consciously
seeking mutually beneficial super-optimum solutions. It is hoped that this book will
make at least a small contribution toward that kind of thinking, especially in individual
disputes, as contrasted to broader public policy disputes. The policy disputes deserve
a book of their own. Two such books are Nagel, Super-Optimum Solutions and Win-Win Policy: Basic Concepts and Principles (Quorum-Greenwood, 1997) and Nagel,
Public Policy Evaluation: Making Super-Optimum Decisions (Ashgate, 1998).

A better hope on which to end (or on which to commence as they say at
graduation ceremonies) is not so much in terms of the potential impact of this book or
its companion volume. Just as one does not need to have a third-party mediator to
have a mediation orientation in bilateral disputes, likewise one does not need to have a
book or books in order to think along the lines of arriving at super-optimum solutions
where all sides come out ahead of their best expectations. It does require thinking
more broadly than the traditional single track of exchanging money, or one side giving
and the other side taking. It requires thinking along the lines of multiple goals, multiple
alternatives, and multiple relations between goals and alternatives in order to choose
the best alternative, combination, or allocation, with best being defined as better than
each side’s initial best expectations.

For further details on alternative dispute resolution see Lawrence Susskind,
Sarah McKearnan, and Jennifer Thomas-Larmer (eds.), The Consensus Building
Handbook: A Comprehensive Guide to Reaching Agreement
(Sage, 1999); Wenday
Trachte-Hyber and Stephen K. Huber (eds.), Alternative Dispute Resolution: Strategies
for Law and Business
(Anderson, 1996); and Stephen Goldberg, Eric Green, and
Frank Sander (eds.), Dispute Resolution (Little, Brown, 1985).


Stuart Nagel

Stuart S. Nagel was Professor Emeritus of Political Science at the University of Illinois at Urbana-Champaign. He was secretary-treasurer and publications coordinator of the Policy Studies Organization and coordinator of the Dirksen-Stevenson Institute and MKM Research Center. His major awards include fellowships and grants from the Ford Foundation, Rockefeller Foundation, National Science… MORE >

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