When you think of corporate law, what comes to mind? Board rooms? Suits? Large piles of small print font assembled by someone in horn-rimmed glasses?
What about decision making? We often read about some of the bigger, more important decisions made by corporate leadership, but the everyday decisions that are made away from the headlines can have greater and further-reaching effects. As a result, problems and solutions to the decision-making process are critically important to corporate lawyers.
In 2013, Nobel Prize laureate in Economics and Behavioral Psychologist Daniel Kahneman launched his seminal work Thinking Fast and Slow. In it, he lays out a problem with the way our minds are programmed: we are generally not good at matching appropriate information to our decisions. Specifically, our minds use two “systems”, as Kahneman refers to it, of information interpretation and, ultimately, decision-making.
System 1 is fast. It allows us to handle information in an intuitive, an automatic, and especially, an emotional way. It is where most of our pre-conceived notions, our biases, our hunches, and our senses of intuition emanate. While it’s pretty good at everyday mental tasks (i.e. hearing an approaching car sound on the street makes you move out of the way), it’s terrible at questions requiring words that all lawyers fear: Quantitative Data and Math. Enter System 2.
If System 1 is where the split-second “go by the gut” approach of Captain Kirk lives, System 2 is the realm of the logical and detached Mr. Spock. It’s slower and more deliberate than its emotional and intuitive cousin. Thus, rather than driving decisions based on snap-judgments or first impressions, System 2 waits for the numbers to come out (i.e. allowing you to mentally multiply 237 X 841). It’s bread and butter are statistics, the scientific method, and other forms of quantitative magic.
You can probably see where this is going. One of Kahneman’s chief insights is that there are some situations for which System 1 is better suited, and others where System 2 is needed. Consequently, Kahneman posits that many, if not most, mistakes in decision-making come from drawing on the wrong system. You pick a stock based on intuition rather than looking at the company’s financial data. You assign numeric values to Shakespeare rather than simply enjoying the emotional experience forged into the Bard’s wordsmithing.
This blog explores those moments of mismatching, and attempts to unpack them. What went wrong? What went right? How can we create institutional and personal scaffolding that reinforces the correct pathways for decision-making?
Welcome to Fact Patterns.
A quick note on the author – I am a third-year law student at Fordham University in New York. While my interests these days trend primarily toward corporate law, I am always on the lookout for new and interesting issues in the law, general policy, or how either of those concepts intersect with the wider economy.