In-House Counsel

Two common distortions among many decision traps

By Rees Morrison

Humans are subject to a raft of common irrationalities when they make decisions. This post covers two of those shortcomings. Way back in November of 2001 I published an article in Legal Times about several of these flaws in our reasoning.

Exaggerating the Influence of Available Data. If you know the billing rates of partners at a particular firm (that being the most visible and memorable fact), you accord them too much weight when someone asks you whether the firm is cost-effective. We make decisions by placing too much emphasis on data easily at hand, rather than on data that actually would help but is harder to develop. This pitfall also means that we place more importance on what we can recall. So law firms with a name brand stand out more for us than the legions of lesser-known firms.

Over-Emphasizing Dramatic Past Events. Salient, dramatic events influence decisions disproportionately to their relevance or frequency. In one law department where I conducted an assessment, senior management had recently forced out a popular senior lawyer. The rest of the department?s lawyers remembered that dramatic firing and became overly cautious, slower, and more addicted to decisions by groups. On a different plane, every law department has some horror story about a rogue client, a terrible settlement, or an ambiguity in a press release. Humans seem genetically disposed to remember more vividly the dramatic event in the past?and place disproportionate weight on it?than to recall the unexceptional events that came before and after. We remember a single jury verdict against us more clearly than the monthly toll of summary judgment rulings in our favor.

Full post as published by Law Department Management on January 18, 2009 (boomark / email).