We take a look at two aspects of life which lawyers (and almost every other human) struggle with—planning fallacy and optimism bias.
This week, I took inspiration from returning to work after an extended break overseas. Getting back from any holiday can be a bit of a drag. Here’s why.
First of all, you don’t start your day with thoughts on how one might scoot up from the medieval town to the local castle. On the upside, hey there’s a lift up to my office!
The second challenge is trying to crack your own computer password at work. I can return one positive report on this—I had success on my first attempt. (Excellent start.)
Typically, the first day back from extended leave might start with a phone call to IT:
Me: “Ummm, hi… I just got back to leave. Unfortunately, I can’t remember my password. Can you reset it?”
IT (Probably eye-rolling at the 10th similar phone call that Monday morning): “Sure”.
So you manage to get through to your email vault. The next challenge is getting through the gazillion emails that you got while you were away. It’s a bit problematic if you experienced FOMO (fear of missing out) at some point and subscribed to every legal and industry email update under the sun.
To self: Now the regret is real. Oh well, at least I (or my inbox) didn’t miss out on anything. Thank you [delete] button!
Now, back to reading emails and trying to mark out the important ones. I’m sure it’ll take an hour right?
Nope, wrong. Check back later.
To the rescue: Thinking, Fast and Slow
Something that made me feel slightly better, despite not getting through as much as I wanted to that day, was having read Daniel Kahneman’s book “Thinking, Fast and Slow” while on leave. Let’s “acronym-ise” this book as TFS, like every enthused lawyer out there.
The author, Daniel Kahneman, is a Professor of Psychology at Princeton University, amongst other titles. He won the Nobel Prize in Economic Sciences in 2002 for his work on integrating insights from psychology research into economics. The groundbreaking work involved looking at human judgment and decision-making under uncertain conditions. He worked closely with Amos Tversky, a colleague, work which eventually led to the Nobel Prize.
TFS is the product of a lifetime’s worth of work, written in an accessible way for a wider audience. It debunks the (still oft-held) view that market participants are rational actors making sensible decisions. As lawyers, we can say that humans are collectively quite irrational a lot of the time.
I recommend every lawyer (and person) read this book if you haven’t already. A quick disclaimer at this point. TFS is what one bright spark I know calls “a rich, hearty book that is digestible only in little chunks”. I agree. Given that most lawyers don’t have the time for this sort of stuff, I promise to write a short form summary of what lawyers can learn from TFS. There are tons of law, lawyer and lawyering examples in TFS. Great book.
The “Outside” vs. “Inside” view
Let’s move on to why things take so long, or at least longer than we think it should. It applies to drafting a document to meet a deadline or just getting admin junk out of the way. (It also applies to why we always blow out our budgets and general problems with accurate forecasting.)
Kahneman talks about the “outside view” and the “inside view”. Taking an “outside view” means that you look at comparable situations (the reference class)—and then use it to make a prediction in your case. (Say what?)
For example, you’re looking to write a novel. You want to know how long it would take you to go from the first draft to bookshop shelf. You’d have to ask a publisher about how long it would generally take for the type of novel you were writing—then figure it out from there. This is the outside view.
Just because you’re a speedy writer isn’t a good reason to think that you’re going to finish faster than everyone else. Doing so means taking the “inside view”. It’s akin to a research paper where 80% of participants thought of themselves as being an above-average driver. In other words, it can’t be true.
Sidenote: Lawyers beware
If you belong to any profession, as with the legal profession, there is a tendency to opt for the “inside view” rather than the “outside view”.
It explains some of the suspicion that lawyers have about using big data analytics to select legal counsel based on their success rate in court, amongst other indicators. One US company that does this is Premonition (ignore the gobsmackingly tacky photoshoot). Whether big data analytics genuinely solves a problem in this context is another question. This is since most lawyers tend to select counsel they already work well with (the inside view). Finally, choosing to rely on the inside or outside view is something we don’t often even think about. On this, Kahneman states:
“The preference for the inside view sometimes carries moral overtones. I once asked my cousin, a distinguished lawyer, a question about a reference class: ‘What is the probability of the defendant winning in cases like this one?’ His sharp answer that ‘every case is unique’ was accompanied by a look that made it clear he found my question inappropriate and superficial. A proud emphasis on the uniqueness of cases is also common in medicine, in spite of recent advances in evidence-based medicine that point the other way.”
I have personally seen how the inside view can take over and colour a practitioner’s view of their client’s case, i.e. “it’s a winning case”. Going to court in itself forces practitioners to take an outside view, despite an initial reluctance to cede ground. Given the large number of cases that judges hear, which exceed the purview of most practitioners, a case is stress-tested in a neutral forum where the judge takes the view of an “outsider” to each side. Gradually, sensible practitioners will come to a more reasoned view of their prospects. I never recognised this aspect before, but after TFS it makes great sense.
Planning Fallacy
So, on a rather ironic note, let’s get back on topic.
When it comes to deadlines, timelines—and all sorts of other lines that we shouldn’t cross—it seems like we’re always getting it wrong. At least, I’m always irked at how long it takes to do something. Then, learning from the past (not), I proceed to set unrealistic deadlines for a task list stretching 2 kilometres long.
Why do we do it?
Again, TFS to the rescue. Kahneman and Amos have coined the word “planning fallacy” to explain why we do this. The planning fallacy is about our tendency to underestimate how long it takes to finish a project, task or other “misc.” despite knowing the actual time that similar projects, tasks or misc. have taken in the past.
I used to work with a partner who said “you know that timeframe we gave ourselves? Let’s double it”. He realised that it would take a lot longer to get something done than we expected.
A lot has been written and is still being written about the planning fallacy. I won’t go into extensive detail of why the planning fallacy happens. Let’s take the surface view for now. Some of the factors that lead to the planning fallacy include:
(1) The optimism bias: Essentially, overconfidence about our abilities. It’s a hard-wired aspect of being human and makes us feel better about ourselves.
(2) Ignoring the baseline: We tend to build idealistic plans. These plans reflect our wishes and desires (i.e. the best rather than worse, or worst-case scenario).
(3) Coordination neglect: We fail to think about how long it takes to put different moving parts together. Especially tricky when coordinating people.
(4) That “P” word: Yup, procrastination. We know what’s good for us, but we put it off. It doesn’t help that we have plenty of distraction coming from our digital devices. This is a 21st-century layer on top of our natural instinct to follow the path of least resistance.
The reality of the planning fallacy results in the following situations that Kahneman describes:
“When forecasting the outcomes of risky projects, executives too easily fall victim to the planning fallacy. In its grip, they make decisions based on delusional optimism rather than on a rational weighting of gains, losses, and probabilities. They overestimate benefits and underestimate costs. They spin scenarios of success while overlooking the potential for mistakes and miscalculations. As a result, they pursue initiatives that are unlikely to come in on budget or on time or to deliver the expected returns—or even to be completed.
In this view, people often (but not always) take on risky projects because they are overly optimistic about the odds they face…. It probably contributes to an explanation of why people litigate, why they start wars, and why they open small businesses.”
[Had to add emphasis there.]
Eeeeelp! So what do we do?
Disclaimer: These aren’t solutions that I’ve come up with myself. There are much smarter people out there doing the research. In a nutshell, this is what they’ve suggested.
- Acquire a habit of taking the outside, not inside view
- Add a % figure (e.g. 40%) to your initial time / budget estimate
- Use algorithms to reduce human biases and fiddling
- Get rid of distractions.
In TFS, Kahneman isn’t 100% optimistic about humans fully combating the planning fallacy and optimism bias. Other researchers mirror this view and note their personal struggles, despite some having spent decades researching the topic.
Kahneman himself notes one humorous example where he was part of a team writing a high school curriculum on judgment and decision-making. At the start, they discovered with some shock that most book projects took approximately 7-10 years and not the idealised 1-2 years to complete. Furthermore, there was a 40% chance of failure, i.e. not completing the project at all. He says:
“I can best describe our state as a form of lethargy—an unwillingness to think about what had happened. So we carried on. There was no further attempt at rational planning for the rest of the time I spent as a member of the team—a particularly troubling omission for a team dedicated to teaching rationality. I hope I am wiser today, and I have acquired a habit of looking for the outside view. But it will never be the natural thing to do.”
No, it won’t be the natural thing to do—but at least you can now tell your friends about it.
Sources / More reading:
- Daniel Kahneman, “Thinking, Fast and Slow” (2011)