Optimal Foraging Theory and Litigation risk
How optimal foraging theory might help us see litigation risk in a fresh light.
(Photo by Jonathan Ridley on Unsplash)
Optimal foraging theory predicts that wild animals will search for food as efficiently as possible. They use up calories searching for food, so they need to be sure of finding at least as many calories as they use while roaming around. So you might think their task is to maximise their calorie intake.
But it isn’t quite as simple as that. They also have to balance the risk of predation - getting eaten by a predator. If you are a small rabbit frolicking in a field of clover, the longer you spend in the field the more you eat, but also the more likely you are to get eaten by a fox or a bird of prey.
Really what animals optimise for is to minimise the risk of death: get enough calories to stay alive, while minimising the time they spend in the open. This behaviour is perfectly rational, and has been honed by evolution over millenia, and the theory correctly predicts what scientists observe.
People, on the other hand, can display completely the opposite behaviour when faced with potentially ruinous litigation.
Consider a dispute for £1m, and each side has racked up £250k of costs, with another £100k of costs to get to trial. Let’s say there is an offer on the table which exceeds the expected value of going to trial. If you aren’t sure what I mean by expected value, see this post. Even when presented with an offer which, mathematically, is better than going to trial, people still sometimes go to trial.
Because going to trial offers the only possibility of getting their entire claim paid, and getting back all their costs. This may be a very slim possibility, but nevertheless it is there. Rather than minimising the risk of ruin, they are maximising their probability of 100% recovery.
“Maximising” is gramatically the correct word here, but it is misleading. If they take the offer on the table, the probability of recovering everything that they feel they are owed is 0%. Going to trial might increase this to some very small non-zero number, so by going to trial you are “maximising” your probability of a full recovery, but that probability could still be very low.
This is rather like an animal expending calories in pursuit of the slim chance of finding some enormous source of food, a feast to last them all year. This behaviour is not predicted by optimal foraging theory.
Why do I comment on this? I just think it is useful to see things from fresh angles. If you are taking some action which appears to be completely the opposite of what millenia of evolution would have you do, maybe it is worth thinking twice about that.