DECISIONAL ERRORS Why We Make Them and How to Address Them
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ADR DECISIONAL ERRORS Why We Make Them and How to Address Them mpiring errors were a bigger story in the recently completed World Series than the U New York Yankees’ record-setting 27th pennant. Decision errors reached comic propor- tion in game four of the American League playoffs in Anaheim. In what ESPN dubbed “the worst umpiring performance at an Angels game since Leslie Nielsen in The Naked Gun,”1 third-base umpire Tim McClelland called Yankee Nick Swisher Umpiring errors reached comic proportions in the recently completed World Series, highlighting the fact that people reg- ularly make decisional errors. There are many reasons for this and a variety of dispute resolution processes that can be tailored to fit the specific fuss in a cost-effective way. BY DONALD R. PHILBIN JR. Don Philbin is an attorney-mediator, negotiation consultant and trainer, and arbitrator. He has resolved disputes and crafted deals for more than 20 years as a commercial litigator, general counsel and president of communications and technology-related companies. Don has mediated hundreds of matters in a wide variety of substantive areas and serves as an arbitrator on several panels. He is an adjunct professor at the Straus Institute for Dispute Resolution at Pepperdine Law School, Chair of the ABA Dispute Resolution Section’s Negotiation Committee, and a member of the ADR Section Council of the State Bar of Texas. Don is listed in The Best Lawyers in America (Dispute Resolution), The Best Lawyers in San Antonio, and the Bar Register of Preeminent Lawyers. Reprinted with permission from the Dispute Resolution Journal, vol. 64, no. 4 (Nov. 2009-Jan. 2010), a publication of the American Arbitration Association, 1633 Broadway, New York, NY 10019-6708, 212.716.5800, www.adr.org. ADR safe when he was out, out when he was safe, and think that if humans were completely rational and “blew an obvious call on what should have been a shared all the available information, they would double play at third base.” McClelland could not reach similar decisions. But you would be wrong. even explain why he missed what seemed obvious This was confirmed by a study showing that peo- with the benefit of instant replay. ple with exactly the same information reach differ- Fortunately, McClelland’s mistakes were not ent conclusions. For example, one study showed outcome determinative, but they fueled the case for that buyers rarely want to pay as much as sellers expanding Baseball Commissioner Bud Selig’s lim- demand. Subjects asked to price a generic coffee ited replay system beyond disputed home run calls. cup for sale assigned it a value of $7.12. Their But those of us who work in the dispute reso- would-be buyers initially offered $2.88 for the lution field were probably not surprised by the same cup—2.5 times less.8 While the different val- umpiring errors, since we know uations may largely be a matter of that errors are inevitable in sports, assigned position, the spread our personal and business lives, Decision-making between the offers is attributable and certainly in the crucible of in large part to the assigned posi- litigation. As Yankee Derek Jeter errors have tion of the parties making or put it post-game: “Umpires are many causes. receiving those offers. human. They make mistakes Interestingly, people with less sometimes.”2 The negotiator for Overconfidence information about an issue are the umpire’s union also noted more definitive in their position that players are just as susceptible can certainly than are those with more com- to making mistakes: “Part of the plete information. They tend to game,” he said, “is the potential push parties to undervalue aspects of a situation for human error, not just for about which they are ignorant. In umpires, but for players, that’s the margins of one study, subjects given only part of the game.”3 half of the evidence in a case pre- Decision-making errors have a negotiating dicted the jury’s decision with many causes. Overconfidence can range. It’s human greater confidence than those certainly push parties to the mar- who were given all of the infor- gins of a negotiating range. It’s nature to place mation.9 Not only were they human nature to place more more confident than those who emphasis on facts supporting a more emphasis were better informed, they were desired outcome than those that not able to adequately compen- contest that position. Over- on facts sup- sate for their overconfidence confidence leads people to dis- when told that their evidence was count small probabilities and porting a desired lopsided. Not only are we predis- luck, and overestimate their own posed to camp near our positional situation. It’s sometimes referred outcome than interests, it’s human nature not to to as the “Lake Wobegon” effect. those contesting fully appreciate another perspec- Researchers have begun to tive. A noted 19th Century quantify the magnitude of this that position. Boston educator observed that, cognitive error. In one study, “To be ignorant of one’s igno- more than 80% of interviewed rance is the malady of the ig- entrepreneurs described their chances of success norant.”10 as 70% or better, and 33% described them as Decision-making errors could also involve the “certain.” 4 That compares with a 33% five-year phenomenon called “anchoring” (an over- survival rate for new firms. In another study, cou- reliance on a particular fact or piece of informa- ples about to be married estimated their chances tion, especially information dropped early to of later divorcing at zero, even though most knew anchor negotiations). The problem is that the that the divorce rate is between 40%-50%.5 anchor may be unreasonable and increase the Yet another study found that negotiators in odds of impasse and other unintended conse- final-offer arbitration6 overestimated by 15% the quences. There is evidence that even knowledge- chance that their offer would be chosen.7 able professionals are susceptible to manipulation Optimistic overconfidence can make it very dif- of anchors. By varying real estate asking prices, ficult for parties to see the same problem similarly. researchers were able to throw professional real It can be involved whether we have equal infor- estate agents off track in negotiations.11 mation or asymmetric information. You might Negotiation training, or obtaining a legal 2 NOVEMBER 2009/JANUARY 2010 opinion or an economic analysis, can help assess that “there are highly skilled doctors who get the reasonableness of an anchor. It can also place sued a lot and doctors who make lots of mistakes us in a better position to decide whether to make and never get sued.” He says the differentiator is a first offer or wait, or disregard an offer or not shoddy medical care but rather a shoddy atti- demand by the other party that is based on an tude: “[P]atients say that they were rushed or unreasonable anchor. ignored or treated poorly” and it made them Then there is the phenomenon of reactive mad. Gladwell quotes medical malpractice lawyer devaluation, in which people tend to reject or Alice Burkin: “People just don’t sue doctors they devalue whatever the other side offers, even if it’s like ... [A good] bedside manner and a willingness favorable (“They wouldn’t have offered those to answer patient questions are effective ways to terms if those terms strengthened our position reduce the odds of facing a malpractice suit,” she relative to theirs.”). We also tend to reject things said. that are free and want things that are expensive— Judges also makes mistakes—or at least many an example of the adage that the “grass is always litigants think so after they force a judge to greener on the other side of the fence.” decide a case that they could not resolve among Why do people reactively devaluate offers themselves. While we do not know that much from the other party? The simple fact is that about judicial decision-making, efforts have been there are things we just do not want to hear from made to quantify decisional errors among judicial adversaries. Our perception of the source of the populations. Chris Guthrie, Jeff Rachlinski and offer colors our perception of the offer. This was Andrew J. Wistrich, using Gladwell’s “rapid cog- demonstrated in an experiment in which different nition” concept (i.e., that people make decisions groups of students were told a different story based on a snap answer that comes to mind first; about the Cold War. One group was told that a Gladwell calls it a “blink”) attempted to deter- group of unknown strategists made a proposal to mine whether judges make snap decisions.14 reduce nuclear warheads by one-half, followed by They asked over 250 Florida trial judges who further reductions over time.12 Another group were attending an annual judicial conference to was told that President Reagan made the propos- answer a survey questionnaire containing three al, and a third group was told that Soviet leader questions (called the Cognitive Reflection Test): Gorbachev was the source of the proposal (he 1. If it takes 5 machines 5 minutes to make 5 was the real author). The surprise was not that widgets, how long would it take 100 the groups reacted differently to the proposal machines to make 100 widgets? depending on its source, but the wide range of 2. A bat and a ball cost $1.10 in total. The bat difference between two of the groups. When costs $1.00 more than the ball. How much attributed to the U.S.