It’s Darwinian: Our Brains Want Us to Settle Cases (even if it’s not the best move).

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We have nothing to fear, but everything.
Sure, we’ve all heard of the magic win-win unicorn settlement that was uncovered through collaborative mediation (often capped with a joint-rendition of We Are the World).  However, even the rosiest of Neutrals will tell you that parties typically settle because they are afraid of what NOT settling might look like.

It’s no surprise to us in the land of headshrinkers.  Two cognitive psychologists (Kahneman and Tversky) won a Nobel Prize in Economics for their theory of risk analysis called Prospect Theory.  In a laymen’s nutshell, these gents showed that human beings value LOSS about TWICE AS MUCH as they value GAIN when measuring risk in a decision.

(Our future robot overlords will likely take great advantage of this glitch in our decision-making.)

The evolution of our aversion to loss.
This loss aversion is likely an evolutionary holdover.  For ancient Homo sapiens, being cautious was a much better choice than going for the gusto.  Remember, these were times when a bad case of pink eye could leave you at death’s door.

• I could take on that sabre-tooth tiger… or maybe just find an alternate path? 
• That honey looks really tasty… but falling out of that tree while being stung by a swarm of bees could mean an early demise.
• Should I fight for dominance in my group… or just sneak into her cave while the big guy is sleeping?

In caveman times… following your fear was the smart bet.

Winning is all about frame of reference.
Research has demonstrated that the two most satisfied athletes on an Olympic podium are the Gold medalist (Duh.) and the Bronze medalist (Huh?).  The Bronze winner is thinking about how close he/she came to NOT standing on the podium, while the Silver medalist is thinking about how close he/she came to winning the Gold.

WINNING a case at trial or arbitration is a natural high filled with gratitude and adulation.  Sadly, the intoxication of winning is generally a temporary condition.

LOSING a case at trial or arbitration is painful.  Moreover, it comes with long-term discomfort, like:

1. Unhappy clients.
2. Concerned and disappointed bosses/partners.  
3. A lot of money spent for no benefit. 
4. Even more money paid to the LAST PERSON you want to see getting it (the other side).
5. The terrible malaise that comes with being the loser.

Is it any wonder that 98% of cases will never see a jury? 

SETTLEMENT kills your chance of getting that winner's high, but it also removes some of the most emotionally painful outcomes off the list.  Thus, settlement kinda feels like a win (in a kissing-your-sister sort of way):

1. The clients may not be happy, but they can FEEL like they quasi-won by either: a) Enjoying a great settlement (in their eyes); b) Believing they got a better settlement than their opponents; and/or c) Basking in the avoidance of so much possible pain from a future POTENTIAL BAD LOSS.
2. Bosses and partners aren’t generally concerned or disappointed by settlement.  If the client isn’t unhappy (a purposeful double-negative) … then neither are they.
3. A lot of money was spent on legal fees, but it delivered a great settlement (or at least avoided a catastrophe).  That’s a real value.
4. Sure, a bunch of money may have been paid to the other side... BUT… in comparison to what could have been paid in a bad loss… the settlement FEELS like a win.
5. Finally (and most importantly), there is no “LOSER” name tag.  Both sides won… in a way.  So, both sides can get to sleep at night.

Should we all just gird up our loins for battle?
The lesson from this is NOT to silence your evolutionary instincts and fight every fight.  In fact, settlement is frequently the right call after a regimented and careful risk analysis.

However, we must also realize that we are all human beings walking around with human brains (most of us, anyway).  Thus, lawyers and clients are highly-vulnerable to amplifying their fears of loss (just like soldiers, waitresses, IT managers, and everyone else on the planet).

Loss will always feel much bigger than gain.  You can’t flip a switch and change that in your mind.  The only way to mitigate this predisposition is to:

1. Realize the misjudgement is there;
2. Remember this bias when making choice evaluations; and
3. Incorporate an alternative method of evaluation that is regimented and minimizes the loss aversion.  This generally involves getting opinions from people who won’t lose anything from the outcome.

By taking these steps, you are much more likely to settle a case because it’s the best course of legal action… NOT to simply scratch an evolutionary itch.

Who is the Author?

Convince,LLC and www.LitPredict.com founder Matt McCusker, MA is a nationally-known Litigation and former President of the American Society of Trial Consultants (ASTC). He has utilized his background in I/O Psychology to provide innovative solutions for legal teams and Fortune 500 corporations around the world.
Matt has served as a source for many media outlets (the Wall Street Journal, CNN, “This American Life with Ira Glass”, the Chicago Tribune, and more). He is available to teach/present about the crossroads of psychology and litigation at law schools, professional organizations and conferences.