Langford: Overcoming overconfidence bias in the settlement process

The Titanic. Chernobyl. The subprime mortgage crisis of 2008. Your recent disappointing jury trial result. What do these have in common? They may have occurred because of something that psychologists call overconfidence bias. The American Psychological Association defines overconfidence bias as an overestimation of one’s actual ability to perform a task successfully.

There’s no question that trial lawyers must remain confident in building their cases and delivering case themes. That confidence also must ride sidecar with you during settlement negotiations. Carrying a flimsy settlement position is like walking into the O.K. Corral with a water pistol.

So nothing in this commentary should be construed as an appeal for trial lawyers to shuck their confidence at the mediation or courthouse doors. Yet the question remains: How does an attorney find that fine line between confidence and overconfidence when counseling clients on whether to accept the other side’s final settlement number or proceed to trial instead? Perhaps that inquiry should begin with an examination of how overconfidence reveals itself for the trial lawyer.

Overconfidence bias dissected

Psychologists who have researched overconfidence bias generally group it into three camps. The first area of overconfidence is an overestimation of one’s actual performance. In litigation, this arises when trial lawyers believe they have a superlative ability for valuing cases or convincing judges and juries that their views are the correct ones. Giving great weight to prior victories increases this risk of overestimation. Of course, there is a reason why financial advisers are encouraged to share with their prospective clients, “Past performance is not indicative of future results.”

The second camp of overconfidence is an overplacement of one’s performance relative to others. Trial lawyers, with their full-throttle competitive juices, can be particularly susceptible to this type of overconfidence. “I am the better negotiator,” or, “I am better in the courtroom,” are not uncommon self-evaluations. Sometimes this overplacement is referred to as the “Lake Wobegon effect.” This is named for the fictional town of Lake Wobegon from the radio series “A Prairie Home Companion,” where, according to Garrison Keillor, “all the children are above average.” This better-than-average concept has reaches beyond Mr. Keillor’s quip: Research has borne out that many of us feel the same way about ourselves. From a famous study on overplacement of one’s own performance, it was revealed that 93% of American licensed drivers believe they are more skillful drivers than the median driver. See Svenson, (1981), “Are we all less risky and more skillful than our fellow drivers?” This is a statistical impossibility, but the overconfident brain can play tricks on us. An interesting sidenote is that overplacement bias might be an especially American trait. In that same study, only 69% of Swedes placed themselves as more skilled than the median driver. One further sidenote: Research also indicates that men are more overconfident than women. See Ehrlinger and Dunning, (2003), “How chronic self-views influence (and potentially mislead) estimates of performance”; Kay and Shipman, (2014), “The Confidence Gap” (referencing several academic studies on the overconfidence of men and the underconfidence of women).

The third area of overconfidence is an overprecision of expressing the accuracy of one’s belief. In my civil mediation practice, this is the type of overconfidence I witness the most. Past successes, strong advocacy, enthusiasm for the goal and posturing are ingredients that bake into the overprecision mix. Still, I have seen quite a few crystal balls shatter when verdicts get read.

Checking your (over)confidence

I get the challenge. In my 27 years as a trial lawyer, I attempted walking that tightrope of being confident but not overly confident. Sometimes, I lost my footing and fell off that tightrope. Since serving as a full-time mediator and arbitrator, I have gained a new perspective on the tricky balance of confidence. That perspective is aided by no longer being tethered to client advocacy. From my new perch, I offer these few ideas about self-checking overconfidence.

First, let’s say aloud the obvious: “I am a zealous advocate for my client. However, sometimes that zeal can cause me to think mostly about why my clients should win, not why they could lose.” Simply recognizing that tendency arising from strong advocacy can serve as the first check on overconfidence.

Next, it is crucial to find trusted advisers to test the merits of your confidence. Trial lawyers are notorious for workshopping their cases. But are you sharing those case details exclusively inside your own echo chamber? Or are you inviting others to challenge you on the most troublesome parts of your case and the best parts of the other side’s case?

Similarly, are you wisely using your focus groups and mock juries? In mediations, attorneys often share with me the favorable results they obtained at mock jury trials. As a litigator, I regularly used focus groups and mock juries to prepare for trial, test trial themes, learn which types of jurors to select or deselect, and consider the possible effect of certain evidence being admitted trial. Admittedly, I was always interested in the verdicts. However, I learned that those mock verdicts are better viewed as data points rather than as predictors of what will happen at trial. Yet at mediation, I sometimes hear mock outcomes mentioned with an air of confidence that surprises me. It is nearly impossible to duplicate the length, complexities and human emotions of a jury trial with a daylong abbreviated presentation made inside conference rooms. So the mock outcomes — good or bad for your side — seemingly should be tempered by this “not quite like a trial” concession. Also, are you ensuring that the other side is being represented in the mock exercise with the same or more experience, conviction and sophisticated presentation that will be advanced at the real trial?

Another factor that can amplify overprecision bias is giving too much weight to aberrational results. It’s easy enough to be affected by your most recent favorable verdict, recent verdicts that are coming from the venue where your case will be tried or the superb verdict in someone else’s case that seems to match your present case. The randomness of a jury’s composition is undeniable, and that randomness makes the reliability of the next verdict, even with similar underlying facts or venue, wobbly. In fact, it often takes many years of verdicts to know whether any one verdict was a deviation or part of a perceptible trend.

Finally, keep your own scorecard. When you make prognostications about trial results, commit your predictions to writing and tuck them away in a file. When the trial is over, input the actual result. A few correct or wrong predictions should not create the conclusion about your forecasting accuracy, but a well-kept scorecard can give insight about whether you need to rein in overprecision bias.

Confidence is a vital trait for trial lawyers. Keep it handy, but watch letting it overshadow your measured decision-making and advice giving. I am reasonably confident of these opinions. But hopefully not overly so.•

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Michael Langford is a mediator and arbitrator with The Mediation Group in Indianapolis. Opinions expressed are those of the author.