Adapted from “You Need to Know What You Want,” first published in the Negotiation newsletter.
Do you really know what you want out of life? Most of us don’t, according to Timothy D. Wilson and Daniel T. Gilbert, psychology professors at the University of Virginia and Harvard University, respectively. The impact bias describes the common, systematic failure to predict what will make us truly happy. Wilson and Gilbert note that people dramatically overestimate how positive and negative events—from winning the lottery to suffering an amputation—will change their lives.
Vanderbilt University Law School professor Chris Guthrie and Cornell University business professor David Sally have offered a fascinating application of this affective forecasting research to negotiation. The models on which negotiation research are founded, Guthrie and Sally point out, are based on the assumption that negotiators know what they want; yet, most negotiators enter into talks without a realistic awareness of what outcome will make them happy.
Consider the case of a plaintiff who is eager to go to trial, anticipating a large financial award and the joy of beating the other side. Meanwhile, her lawyer may well understand that obtaining a smaller amount of money through a settlement is likely to bring his client greater value than the uncertain payoff of a trial. The lawyer also knows from experience that the satisfaction of winning will be short-lived.
Guthrie and Sally argue that, rather than simply following the client’s preferred path, the lawyer should steer her toward maximizing her long-term happiness. Because most people tend to be risk averse when it comes to gains, for instance, the lawyer might frame the out-of-court settlement as a guaranteed win. The lawyer might also encourage his client to take a cooling-off period to think about an offer. Why? Because the “cognitive load” associated with the heat of the moment is known to reduce the accuracy of affective forecasts.