Do you consider yourself an optimistic person? When faced with a less than ideal situation, have you ever found yourself saying “Look on the bright side” or “I’m sure it will all work out in the end”? And have you ever wondered where this intrinsic optimistic outlook comes from? You may be surprised to learn that optimism is more than just an individualistic character trait; it’s an engrained human bias that tells us that good things are bound to happen to us, and that negative events are unlikely.[1] This cognitive bias that tells us that we’re destined for good outcomes is aptly called the optimism bias, and it can wreak havoc on all parts of your life, including your litigation outcomes.[2]
The optimism bias, described as one of the most widespread cognitive biases,[3] is the tendency to overestimate our likelihood of experiencing positive events and underestimate our likelihood of experiencing negative events.[4] Essentially, this bias describes the unrealistic expectation where, even though we know that negative events do occur, we assume that negative events are unlikely to happen to us. Instead, this bias makes us assume that we’re inherently destined for good outcomes, despite the actual facts of a situation.[5]
A notable example of the potential devastation of the optimism bias is an event that most of us remember well: the 2008 financial crisis. The optimism bias has been cited as a core cause of the 2008 global financial crisis.[6] At the epicenter of the economic disaster were financial analysts, investors, and leaders who all had unrealistic, optimistic expectations of their financial growth and success.[7] These unrealistic expectations eventually snowballed into risk-seeking behavior and predatory lending which eventually burst into the collapse of the global financial system, an event now known as the Great Recession[8] that devastated the global economy.[9]
While the Great Recession is an extreme example of this bias at work, the optimism bias also presents in litigation and settlement negotiations.[10]
From the very beginning of a lawsuit, legal parties can be impacted by the optimism bias through a phenomenon known as the planning fallacy. The planning fallacy, which stems from the optimism bias, is a documented overconfidence in our ability to complete tasks quickly.[11] In the legal realm, this fallacy may lead parties to assume that they can complete tasks, such as gathering discovery or drafting responsive motions, much more quickly than are able. When deadlines are pushed to their limits because of over-optimistic workload expectations, cases can be drawn out, causing lengthy delays at all stages of the litigation process. And delays like this can be terribly expensive. On average, cases that go all the way to trial can cost upwards of $50,000,[12] a number that grows larger and larger with each delayed task and each overly optimistic folly.
Further, the optimism bias can destroy otherwise productive settlement negotiations. Excess confidence resulting from the optimism bias can promote decision-making shortcuts, frame blindness and an inability to adapt to unexpected situations.[13] This can lead attorneys and clients alike to overestimate their chances of success of a positive litigation outcome, which can stall, or even destroy, pre-trial settlement negotiations because the parties are optimistic that they would do well if they took their case to court.
But this optimism is often a façade, and, unfortunately, cases don’t perform well just because you’re optimistic about them. The danger of the optimism bias is that it can give you an unrealistic picture of the facts of your case.
With Resolutn, you don’t have to rely on idealistic optimism for the outcome of your case. Resolutn provides true case confidence by streamlining the negotiation process and providing a neutral and organized platform where you can achieve straightforward results. Stop the optimism bias from convincing you that everything will probably “work out in the end”, instead choose a system where you can be confident in your results at every stage of the process.
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I’ve written similar articles about how cognitive biases disrupt litigation and how Resolutn can help you avoid these pitfalls. Take a look at our Thought Leadership Tab for these articles and for more ways Resolutn can upgrade your settlement experience.
[1] The Optimism bias: Why Do We Overestimate the Probability of Success? The Decision Lab (last accessed Dec. 3, 2022) https://thedecisionlab.com/biases/optimism-bias; Barbara Luppi & Francesco Parisi, Beyond Liability: Correcting the Optimism bias Through Tort Law, 35 Queen’s Law Journal 1 (2010).
[2] Id.
[3] Barbar Luppi, Francesco Parisi, Forgiving Overconfidence in Tort Law, UC Berkeley: Berkeley Program in Law and Economics (2009).
[4] The Decision Lab, supra note 1.
[5] Id.
[6] The Decision Lab, supra note 1; Carole Cadwalladr, Interview with Tali Sharot: The Optimism bias: Reasons to Be Cheerful, The Guardian (Dec. 31, 2011) https://www.theguardian.com/science/2012/jan/01/tali-sharot-the-optimism-bias-extract
[7] The Decision Lab, supra note 1; Cadwalladr, supra note 6; The Investopedia Team, 2008 Recession: What the Great Recession Was and What Caused It, Investopedia (last updated May 26, 2022) https://www.investopedia.com/terms/g/great-recession.asp.
[8] The Investopedia Team, supra note 7.
[9] Id.
[10] Luppi, supra note 3; Chelsea Berry, A Proposal to Study the Effect of Optimism, Overconfidence, and the Planning Fallacy on Lawyers’ Ability to Secure Favorable Results for Clients, Penn Law: Legal Scholarship Repository (Prize Winning Student Papers) (2017).
[11] Berry, supra note 10 (citing Daniel Kahneman, Thinking Fast and Slow, 263 (Farrar, Straus and Giroux) (2011).
[12] See Jeff Eberhard, Choosing Auto-Accident Litigation: What Could It Cost? Resolutn https://www.resolutn.com/choosing-auto-accident-litigation-what-could-it-cost/.
[13] Berry, supra note 10.