The price of information (and negotiating in the dark)

Money case

I have enjoyed training negotiation skills to lawyers for many years. For newly qualified lawyers, I note that there are some key differences between those coming from education, and those who come with an employment history. My purpose in this article is to identify one of the pressing issues for those (in the majority) who do not have prior careers and whose approach is broadly still academic. The point is that, for the conventional graduate, there is generally a deep resistance and aversion to making decisions on imperfect information.

A degree of phlegmatic pragmatism seems to seep into those who have had a working life before coming to the law; almost no matter what that prior work was. I should know. I have trained lawyers who were formerly (to name just a few examples); a nun, an Argentinian shepherd, a Mauritian taxi driver, a Caribbean police officer, and a Pakistani Cabinet Minister.

In formal education, how can it ever be a bad thing to try to acquire knowledge? More knowledge tends to equate to more marks in assessments. ‘Wanting to know things’ is the attitude that understandably comes with the graduate into their work. It is hard for junior lawyers to appreciate that in the real commercial world, there is a price attached to acquisition of knowledge, and that the price can sometimes be too high to pay. One of the skills of a negotiator is knowing when it is not worth finding something out, and settling a case in a degree of ignorance. It is not an easy or intuitive skill for anyone, most particularly for a recent graduate.

Colin Powell (former General, Secretary of State, and Joint Chief of Staff under George Bush), has described that in many of the military campaigns in which he took senior leadership decisions, he had a rule of thumb for decision making. The rule was that he would locate his decisions within a ’40-70%’ margin. That is to say, that he would make decisions when he had between 40% and 70% of the relevant and available data. The range is striking because it is so low. It serves as a sharp reckoner for the junior lawyer entering litigation with a desire to interview scores of witnesses and instruct a barrage of experts. Colin Powell would make life and death decisions with as little as 40% of the relevant available data.

For Colin Powell, time was the key factor. If he waited to acquire more data, the situation would move on, and the data he had would no longer describe the situation as it had then become. In order to control the cycle of decision making, it was imperative for him to act at speed. That meant sacrificing the quest for perfect intelligence. He describes ‘analysis paralysis’ – a state of affairs where a combatant state was delayed by burdensome volumes of data which would run cease to be current by the time it had been fully assessed.

For lawyers, the driver is ‘cost’ (rather than speed). The data we strive to acquire may not be worth the cost its acquisition. By the time we have spent so much money acquiring the information, there is no margin left with which to negotiate. The margins tighten so much that a form of ‘negotiation paralysis’ can set in, where no negotiation can succeed because the only way left to win is to recover costs following success at trial.

Of course, we bear a risk when proceeding in the dark. Negotiation is all about balancing risk and pricing the risk as best we can. Mistakes will inevitably be made.

I recall from my own practice, a very dull case with a remarkable twist. It was a small road traffic accident, involving two motorists colliding on an icy road. The value of the claim was low, and consequently the pre-trial preparatory work had clearly kept outlay to the bare minimum. The insurers’ outlay in non-recoverable costs was bound to exceed the value of the judgment. The motorists had filled in pro-forma questionnaires about the incident. The forms were short and had clearly restricted the opportunity for either driver to engage in much narrative. No one seemed to have met the drivers yet. With such understandably threadbare preparation, a crucial piece of evidence had not emerged.

My opponent (by chance an old university friend of mine), had the pleasure of letting me know the missing gem of information in the case – 10 minutes before trial. He told me in a particularly smug and irritating manner that his client turned out to have a rather useful occupation. ‘WHY?’ (I asked in genuine incredulity – hence the capital letters) ‘should any of us care what your client does for living when it comes to two motorists skidding on an icy road?’ He told me (with glee at his impending victory) that his client’s job was…(a drum-role would serve well here) a NATO ice-driving instructor. He was based in Norway, and trained the special forces of NATO signatories how to drive safely on ice. He was probably the best ice-driver in the world.

Early knowledge of that information might very well have saved expense and caused an early resolution of the case, which I lost predictably and emphatically.

In terms of training, I see great merit in sessions designed to really illuminate the costs of various enquiries and procedures, and giving examples of how and when good money had chased bad. Trainees and junior lawyers will need help in many cases to build confidence in making decisions which may be based on imperfect knowledge but are proportionate on cost and serve the overall aims of a client.

James Welsh

Posted by James Welsh

James has been at the forefront of communication skills training for two decades. He was awarded a Professorial Seat in 2018 for his impact in Legal Education – particularly in the field of communication. He has delivered training on persuasive communication (written and oral) nationally and internationally, and in both the legal and in the commercial sectors.