YourABA: March 2014
YourABA March 2014 Masthead

Cognitive biases: The elephant in the room

No matter how rational and fair lawyers believe they are, just like all people, they have biases and blind spots that they are unaware of.

“We live in a new age of risk, uncertainty, change and a lot of stress resulting from all of that. And those stresses take a cognitive toll on people in general and on lawyers in particular,” said Larry Richard, founder and principal consultant at LawyerBrain LLC. “This cognitive toll, among other things, produces some unwitting biases, some cognitive mistakes that we are not even aware of. It’s very pervasive. It happens to all of us.”

During an American Bar Association webinar last month, legal experts discussed common cognitive biases, risks posed by the changing legal market and how to deal with these ethical issues.

Richard explained a theory that says every person has two mental operating systems working in parallel: the rational/analytical system and the intuitive/emotional system. He referred to the two systems as the rider (system 1) and the elephant (system 2).

“They both are operating, but the elephant, the emotional side of decision-making is much stronger, although much less much obvious,” he said. “Most of the time when we make a decision, we believe that it’s the rider — the rational part — that has made a decision. We refuse to even believe that we have been biased.”

“Really, emotions drive us much more than rationality even though we continue to believe that we make decisions on the basis of pure, detached, objective logic,” Richard added, concluding that this leads to unwitting bias.

He described four common cognitive biases:

  • Self-serving bias — When people claim more responsibility for successes than failures and unwittingly tilt toward themselves. The ethics risk associated with this bias is that a lawyer might begin to take on work that he is not qualified to do, but the self-serving bias leads him to believe he can handle it.

  • Commitment and consistency bias — When people simultaneously hold two conflicting cognitions and they bring their perceptions into alignment with their actions. Richard also used the phrase “in for a penny, in for a pound” to explain this bias. He said a person’s desire to be consistent can be exploited to get a bigger commitment after an initial small one. “These small little commitments that seem like nothing at the time make it psychologically much easier for you to be compelled later down the line to agree to much bigger commitments that you wouldn’t have agreed to if they were the first thing offered,” he said.

  • Reciprocity bias — When people feel a sense of obligation after they receive something. In every society, there is a cultural imperative that favors reciprocity, Richard said. “You could easily be blinded by this bias and unwittingly agree to do something that you will later regret,” he said.

  • Confirmation bias — When people have the tendency to only seek out information that conforms to their pre-existing viewpoints and ignore anything that goes against them. Just about any bad or inappropriate behavior can be psychologically justified when a lawyer wears the blinders of the confirmation bias, Richard said.

Besides these cognitive biases, lawyers are also facing ethical risks related to the changing legal market.

“Change is occurring not only in the world around us, but specifically in the legal market in ways that make it a much riskier place than it used to be,” said James W. Jones, a senior fellow for the Center for the Study of the Legal Profession at Georgetown University Law Center.

He explained that since 2008, the economic downturn and other underlying factors have led to two significant shifts in the legal market: It has gone from a seller’s market to a buyer’s market, and it has become a much more competitive market in which supply exceeds demand. As a result, lawyers face a variety of practice, regulatory and business risks.

For example, clients are now demanding new pricing models as well as the disaggregation of services (asking different firms to handle individual parts of a matter). “You have blurred lines of responsibility for decision-making, and you have serious issues as to scope of services,” Jones said, noting that all organizations involved may not be subject to the same kinds of standards.

And while new pricing models raise obvious financial risks for firms, he said they can also create serious incentives that could affect a lawyer’s professional judgment, especially under certain compensation systems.

Nancy Rapoport, professor of law at the University of Nevada’s William S. Boyd School of Law, emphasized that incentives will drive behavior and advised law firms to consider how their incentives are affecting their lawyers. For example, are they encouraging the sharing of clients or a competitive environment? Do firms tolerate bad behavior by star billers, and what kind of precedent is that setting?

“As we consider ways to deal with both the cognitive bias issues and the changes in the legal market, we have to figure out both what our culture is within a particular organization and the incentives — both big small, obvious, subtle — that trigger particular behavior,” Rapoport said.

Jones said the growing size and complexity of law firms and the influx of laterals from other firms also increases risks, as managers attempt to maintain service and quality standards across very large and dispersed organizations. And the increasing specialization of legal services, which results in ever smaller silos of practice, could lead to firm managers not understanding the risks being taken in some specialty practice areas, he noted.

Jones said integrating laterals can prove challenging, especially because they come from a different work culture, which might conflict with their new firm’s cultural expectations. “Normal behavior of one group may pose unacceptable risks from the standpoint of another group, and make no mistake that these cultural mismatches can be quite disastrous,” he said.

Rapoport said a firm’s culture should serve as a guide to new employees, signaling, for example, the proper way to record billable time or cross-sell the firm’s services. “Culture matters because all of the small signals that you might send to people about what they should be doing, if the culture is diffuse and not clear, it creates confusing incentives,” she said.

Law firms need to think about ways to “nudge” employees to do a better job, Rapoport said, adding that even small changes can create dramatically different behaviors that help firms as well as their clients.

“Business risks that firms and lawyers face pose ever more complex and challenging ethical issues, and as a result, law firms have to be more focused than ever on creating both effective ethical infrastructures as well as grounded ethical cultures,” Jones said.

The webinar, “Cognitive Biases, Blind Spots and Other Impairments of Ethical Vision: How Good Lawyers Can Go Astray,” was part of the ABA Business Law Section’s “In The Know” free continuing legal education program and moderated by Charles E. McCallum, of Healdsburg, Calif., retired of counsel to Warner Norcross & Judd LLP, Grand Rapids Mich.

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