at each meeting, all senior partners in major law firms, each one billing $400, $500, $600, $700, or more per hour. A typical meeting running just one workday with a dozen lawyers in attendance costs about $57,600—and that doesn’t include the vastly higher costs of preparation for that day’s discussion. Multiply that by dozens of meetings, and then two or three times more to reflect the costs of preparation, and you begin to see how quickly lawsuits become phenomenally expensive. I’ve advised on cases where my client spent tens of millions more on lawyers than they paid in settlement.
Of course, all that lawyer money is not spent without some reason. It’s generally spent for two purposes. First, the money is buying preparation to improve the prospects of victory. That is, of course, the lawyers’ job. Second, the money is spent to signal the other side that they are up against deep pockets that can endure high costs to fight the good fight. The message: “We will keep you embattled in motions, countermotions, and delays until we break the bank. We can spend more than you.” Naturally, the other side is spending tons of money with the same two purposes in mind. The two sides are playing the game called the war of attrition.1 It’s great for lawyers, and awful for everyone else.
Armies are the diplomat’s analog to the prodigious spending on lawsuits. Having more and bigger guns discourages others from picking fights with the well-armed. Deterrence works much of the time, but sometimes, just as with the deterrent threat of costly litigation, arms fail to protect the peace—and war results. Wars and litigation are inefficient ways to resolve problems. They almost never end in a decisive victory. Instead, they usually end in a negotiated settlement. Both sides find a deal they could, in principle, have arrived at without all the costs that finally brought them to the negotiating table.2
One reason that diplomats and attorneys do not avoid the huge costs of their pre-settlement minuets is that they simply don’t know bargaining theory. They’re reduced to working out the complexities of each situation on their own. Seat-of-the-pants wisdom and experience help, and some lawyers and diplomats are quite good at it, but for most, an awful lot gets overlooked, delaying settlement and rendering the resolution of disputes more costly than it needs to be.
In the dance that precedes negotiations, attorneys and diplomats tend to center their arguments on the merits of the case. Rarely do they really think through the motivations and incentives of their opponents, the people they represent, and themselves. After they form an opinion about the strengths and weaknesses of their case—which is what lawyers are trained to do—they try to impose some reality check on what their clients think, whether the clients are plaintiffs who think themselves terribly harmed or defendants who think themselves exploited. The positions the defendants (or plaintiffs) discuss among themselves in terms of money or other factors in a lawsuit reflect their judgment about the merits of the case. They know this is true for the other side as well. It is no different with international negotiations, whether they concern land for peace, the abandonment of nuclear weapons, or basic principles of governance and human rights.
When my firm advises on a lawsuit, we are always asked how much of the documentation we want to read. Presumably the attorneys hope to give us a reality check, just as they have done for their clients and with themselves. Usually the documentation we are given the opportunity to read is prodigious. There are stacks and stacks of paper. Fortunately, our answer reliably is that we really do not need to read the documents. The merits of the case don’t matter very much once negotiations begin—
How can this be? Remember the information we seek in expert interviews. None of it is about how meritorious anyone’s position is. It’s all about calculating how much they care about the result and ferreting out how much they care about getting personal credit. Business managers often care a lot about the result; lawyers often care a lot about credit that results in getting more business and building their reputations for the next suit.
In the last chapter I introduced one issue that was part of a more complex web of problems confronting a large firm embroiled in litigation with the U.S. Department of Justice. Here was the table I used to reference the scale of outcomes:
100
Multiple felony charges including several specific, severe felonies
90
Several specific, severe felony counts but no lesser felonies
80
One count of the severe felony plus several lesser felonies
75
One count of the severe felony but no other felonies
60
Multiple felony counts but none of the severe felonies
40
Multiple misdemeanor counts plus one lesser felony
25
Multiple misdemeanor counts and no felonies
0
One misdemeanor count
Now I’d like to follow the process through in this example to enable you to see how an outcome can be engineered.
The second appendix contains the information on the plea issue as obtained from the defendant’s experts, including in-house lawyers, outside lawyers, and corporate executives. Naturally, it is masked to protect anonymity. As is evident from a glance at the appendix, just on this one issue—and there were many others in this litigation— the list of interested parties was extensive. Not only did the defendant have a long list of attorneys and corporate executives with an interest in trying to shape the charges brought against the firm, so too did the community that had been affected by the firm’s actions, as well as various segments of the federal government. Far from being unusual, this is typical of a large, potentially costly, and even devastating litigation.
The long list of involved parties means the game was much more complicated than anyone could possibly keep straight in their head. Up to now you may have looked at examples and thought “I can work this out in my head,” but no one can work through this complicated a problem without the help of a computer. That is exactly where the added value comes in from having a trustworthy algorithm.
We’ve all heard stories about evil corporations defrauding people, flouting safety, addicting people to their products, avoiding taxes, polluting the environment, running sweatshops, and God knows what else. That’s what this looked like to me at first blush. The company in question, my client, was accused of having done really terrible things that prompted not only civil action but criminal complaints as well. They were accused pretty much of having destroyed a local community for profit. And yet they seemed like such nice, friendly, soft-spoken, genuinely good people. They had pictures of their children and grandchildren in their wallets. They drove modest cars, ate in normal restaurants, and watched the usual run-of-the-mill TV sitcoms and reality shows. Could the situation really have been as awful as it was portrayed? Could the cast of characters hiring my consulting firm really be the soulless monsters described in the media?
As is almost always the case, reality was a lot more nuanced and complicated than the charges suggested, and the people involved were not the satanic ogres portrayed in the local press. Terrible things had happened, but it was far from obvious that the company was responsible, culpable, or negligent or that it harbored the slightest bit
