even about the industry involved, so there is no reason for anyone to take our personal opinions seriously. It is the very fact that we can show that the positions, tactics, and strategies we recommend come out of the model’s logic and the client’s data and not out of our heads that sells the client on the independence and the credibility of the view we express. They can argue with the model’s logic—that’s a conversation we love to have—and sometimes they do, but they always know that they will have to disagree with the logic or with the data inputs derived from our expert interviews (usually with their own experts), and not with us. Logic and evidence, not anyone’s personal opinion, are the focus of our presentations, briefings, and discussions and are, in the end, the basis on which people should decide whether to try an approach contrary to their initial intuition.
No one should blindly follow a model. It is, after all, just a bundle of equations. But neither should people dismiss a model’s results out of hand just because its implications and their personal opinions differ. To repeat myself, the model’s greatest value is that it provides clients with a different way of thinking about their problems. That is an important part of the power that game theory, strategic thinking, brings to the table. Fortunately, as it turns out, clients generally find that the logic makes sense to them, and the data, after all, are theirs and can be adjusted and rerun to see how robust the findings are. So in the end, when they listen to us it is because they are sold on the integrity of the process.
Of course, not all clients “check their intuition at the door.” When they don’t follow the model’s advice, the model’s prediction for what is likely to follow in that case tends also to be accurate. They end up with an outcome that is typically a lot less favorable. In the case at hand, the board’s senior management representative was sold on the model-based advice after examining me and the results for about eight grueling hours. The board agreed to go ahead with the approach we recommended.
To communicate the message credibly, the firm’s general counsel agreed to meet with the U.S. attorney, and requested, even insisted, that the hardliners be present. Naturally, this insistence came as a surprise to the U.S. attorney. It was an even bigger surprise and a deep disappointment to the hard-liners. According to the model, they were eager to be backstabbers behind the scenes, sheltered from the light of day. They wanted to take a shot at influencing, maybe even cajoling or coercing, the U.S. attorney after he/she met privately with the firm’s general counsel. They tried to get out of attending a meeting with the general counsel, claiming scheduling conflicts. The firm’s general counsel deflated that maneuver by stipulating that he/she would meet whenever it was convenient for them. Their hopes for executing their gambit were crushed. By our surprise move, they lost that opportunity.
The general counsel conveyed the board’s (sincerely held) conviction that they had done nothing that warranted criminal charges beyond misdemeanors. The general counsel went on to argue that the firm’s agreeing to what the U.S. attorney was demanding was tantamount to giving up the affected, important part of their business. The message was that the board would not even contemplate any sort of deal that involved pleading guilty to felonies.
Of course, we knew that if push came to shove, the firm would have caved in and accepted one or more counts of the serious felony even if doing so would destroy an important part of their operations. They would have done so to bring the process to a speedy end so that they could get on with the rest of their business. They believed that even if they prevailed in court—recognizing that this is always uncertain even in the best of circumstances—the political, social, and economic costs of a prolonged trial would be unbearable. It was better to settle on a plea agreement and suffer the consequences. Remember Arthur Andersen (not the firm involved in this case). The company fought the charges against it resulting from its audits of Enron and was found guilty in court, only to have that judgment overturned by the Supreme Court after it was essentially no longer in business. Sometimes it is worse to win in court than to accept a plea agreement even when you are innocent. The judicial process may eventually come to the right answer, but too often the right answer only comes after unendurable costs have been borne by the defendant.
The model’s maneuvers, in this as in many other situations, are designed to prevent push from coming to shove. The approach recommended through the model’s logic is indeed the very kind of bluffing we were talking about in our exploration of fundamental game theory back in Game Theory 101 and 102. We knew the board would plead to more than misdemeanors if left to its own devices, but the U.S. attorney did not and could not know that.
After months of discussion, as anticipated, the U.S. attorney responded to the pressure from the board of directors and chose sides in the ongoing war. Instead of capitulating to the hard-liners within the government, the U.S. attorney berated them in the meeting we had insisted they attend. The U.S. attorney seized the chance to reinforce his/her own initial view of what constituted a just agreement. The hard-liners were made to look mean- spirited and unrealistic, even foolish in their demands. The case was settled by the defendant’s pleading guilty to several misdemeanors and one lesser felony. This was the outcome they desired and felt was just. They believed it was out of reach, and it would have been had they gone in asking for this agreement. Going in with the final result would have left them feeling compelled to make more concessions. As it was, they got an outcome vastly better than the defendant’s management or attorneys (save one) thought possible.
This case typifies the engineering process. The board of directors, the U.S. attorney, the Department of Justice hard-liners—they are, obviously, all different people, with different upbringings, personal experiences, and beliefs about the world. But they all make choices across the same dimensions of human behavior—there are, after all, only so many options to choose from. They can look for compromises; they can try to coerce people into capitulating to them; they can surrender to their adversaries; they can lock themselves into a war against their opponents; and they can bluff doing some of the above. That’s about the full array of choices of action for any problem. The key to this case was isolating the U.S. attorney; he/she was the principal driver of the outcome. What he/she thought was “right”—whether it was or was not in any absolute sense—and what he/she wanted in ego satisfaction: these were the two essentials behind engineering the settlement. The real question of this case was how those two interests could be aligned most favorably for my client.
If I were to have brought the area-specialist mentality to this engagement, then perhaps I would have read through the thousands of pages of background produced by the armies of lawyers, perhaps I would have delved into volumes of case law, and perhaps I would have ultimately produced a brilliant argument as to why my clients deserved only misdemeanors and a minor felony. (Of course, this is not what my client hired me for, and is in fact exactly what the lawyers would have produced if the matter had landed in court.) But then, in that clash over the merits, however brilliant an argument I could have produced, despite all of my efforts, it probably wouldn’t have meant a darn thing. Because, of course, the talented government attorneys on the other side could have produced just as sparkling a case for severe felonies—and that leaves so very much to chance. No, the path to favorable resolution was in doing the work to produce an accurate understanding of the lay of the land, and then finding ways to work
The process of predictioneering does not rely on the recounting of grievances (which all too often only hardens positions). If people are congregated around an impasse, well, it’s indeed unfortunate that there’s a conflict, but the very act of congregating around it suggests that the parties are in search of some dynamic that will yield an outcome—whatever it may be—to break the stasis. Predictioneering provides a complex network of decision-making channels, valves that open and close as actions are taken or passed upon. If I offer options A, B, and C, then doors D, E, and F open, and so on exponentially (again, hence the need for the trusty computer!). Suddenly, as this network routes decisions, grounds shift, positions change, and in this case a U.S. attorney is led to a place where he/she feels both validated in his/her own views and accomplished in forcing a little heavier penalty on my client than it was apparently (but not actually) initially willing to endure.
