Seven more cognitive traps in-house lawyers may fall into

Having laid out in prior posts ten ways our thinking fall short of rational objectivity, I was interested by seven more in Niall Ferguson, The Ascent of Money: A Financial History of the World (Penguin Press 2008) at 345 (See my post of Jan. 18, 2009: two traps — availability of data and dramatic past events; and Feb. 5, 2009: eight traps — selective attention, cognitive dissonance, overconfidence, information salience, confirmation bias, sunk cost fallacy, risk aversion, and peer pressure.).

Hindsight bias, which causes us to attach higher probabilities to events after they have happened (ex post) than we did before they happened (ex ante).” “I told you we should have settled since we had no chance of winning!” betrays this trap, as does the canard, “Hindsight is 20/20.”

The problem of induction, “which leads us to formulate general rules on the basis of insufficient information” (See my post of Aug. 22, 2206: the fallacy of induction.). A head of litigation who predicts a rise in lawsuits because three similar ones arrive in two weeks may fall into this trap.

The fallacy of conjunction, “which means we tend to overestimate the probability that seven events of 90 per cent probability will all occur, while underestimating the probability that at least one of seven events of 10 per cent probability will occur.” Predicting the outcome of a complicated law suits runs the risk of succumbing to this common shortcoming.

Contamination effects, “whereby we allow irrelevant but proximate information to influence the decision.” Say we are hammering out a difficult lease and we learn that the landlord just got remarried. The illogical trap is to think that nuptial bliss will soften the negotiation stance.

The affect heuristic, whereby preconceived value-judgements (sic) interfere with our assessment of costs and benefits” (See my post of May 14, 2006: fundamental attribution error; July 10, 2007: fundamental attribution bias; and Nov. 21, 2008: value attribution distorts perceptions.). All we need to reflect on is our biases about physical appearance to find truth in this mistaken sensibility.

Scope neglect, “which prevents us from proportionately adjusting what we should be willing to sacrifice to avoid harms of different orders of magnitude” (See my post of May 14, 2005: “identify, size, and match” legal risks; and Nov. 11, 2005: quantify risks.). Efforts to shave disbursement fees are out of proportion to what we should devote to choosing and directing law firms.

Bystander apathy, “which inclines us to abdicate individual responsibility when in a crowd.” Teams and committees that waffle indecisively often suffer from this human failing to “let someone else do it.”

The posts referred to at the start, with ten other biases discussed, cite a number of back references (See my post of April 5, 2007: cognitive dissonance; Nov. 21, 2008: cognitive dissonance and law firms we like; April 8, 2008: overconfidence, salience and confirmation biases; Jan. 28, 2009: availability and self-confidence biases; Oct. 24, 2008: try to disprove your “certain” belief; Jan. 18, 2008 #4: fallacy of misplaced concreteness; April 5, 2007: diagnosis momentum; April 17, 2006: proclivity to seek confirming evidence; July 10, 2007: confirmation bias; and Jan. 28, 2008: availability and premature solutions.).

Other posts cited refer to a range of cognitive errors such as distortions based on previous investments (See my post of March 23, 2006: sunk-cost fallacy; and Aug. 5, 2005: illustrates sunk-cost fallacy with facilities charges.), risk aversion (See my post of Aug. 24, 2008: lawyers and risk averse behavior with 11 references.) and peer pressure (See my post of Jan. 15, 2006: groupthink; and Sept. 1, 2008: peer pressure, cognitive dissonance, and selective attention.).

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