What Swine Flu Hysteria Tells Us About Cognitive Contracting Errors

The tremendous fear and publicity right now about swine flu is out of proportion with the actual number of deaths (however sad these individual cases may be).  Apparently, during the 1990s approximately 36,000 people died each year due to the flu in the United States.  So the current number of deaths, which is in the low hundreds, pales in comparison. All of this hullabaloo makes me think about the nature of human cognition, and how it can lead us to not focus on the most important issues at hand (there is a great post on these issues here). To take a different approach in contracting, review our Q&A wizard and easy to understand legal explanations in our comprehensive sales agreement, comprehensive purchase agreement, and our other key contracts.  In particular, we employ cognitive fallacies like “Contrast,” which makes us perceive an event as being more important or less important, not based on its merits, but based on contrasting the event with what we see occurring around it.  Viewing reports about the horrific 1918 worldwide flu pandemic, for instance, triggers this Contrast problem.

Another problem is “Self Confirmation,” where we ignore data that does not support our fear, and only embrace data that does back our contentions. A good example would be the failure to think about the greater number of people who die from normal flu outbreaks instead of the swine flu.

Finally, we often engage in “Confirmity,” meaning that we go along with what everyone else is concerned about, following along with the mass hysteria as part of the chain reaction.  Listening to nonstop reports about swine flu is certainly causing this confirmity error.

All 3 of these cognitive errors happen all the time when we contract.  Let’s consider a few examples:

Contrast: We might not care about focusing on the riskiest contract terms, like the goods/services description, and instead focus on less risky terms, like limitation of liability, because in all of your past deals you focused on less risky terms each time.

Self Confirmation: In this vein, we might only think about what kinds of damages the other side might sue us for, so we again only hone in on limiting our liability, even though a dispute is much more likely to occur over whether or not the goods and services met expectations (which can be prevented through an excellent goods/services description in the contract).

Confirmity: Moreover, we might be focusing on the contract’s limitation of liability clause because we were trained to do so.  We are simply following along with how more senior negotiators handle agreements, and, matching their approach, we fail to focus on other issues of greater importance.

Try looking for Contrast, Self Confirmation and Confirmity in your daily life.

Do you see it happening?

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