Mediation Day: Valuing Uncertainty (Part 2) – Outsourcing, Faith, and the Chaos Seekers
Last week: Damodaran’s uncertainty framework, denial, and heuristics/hearding. Today: outsourcing, divine intervention, confrontation, and parties who want chaos.
Outsourcing
When valuing uncertainty in an asset, outsourcing looks like relying on a banker’s or lawyer’s blessing of a given price (“no one has ever been fired for hiring Wachtell,” as the saying used to go). Similarly, relying on rating agencies (see 2008 for the AAA debt ratings problem), appraisers, or research analysts instead of doing your own research.
In litigation, outsourcing looks like the client who hires a big-name firm to avoid grappling with uncertainty themselves, or to shield themselves from board scrutiny if a case goes south. As I’ve written, an attorney in this position must walk a tightrope between zealous advocate and trusted advisor.
Attorneys thrust into this position often have a roster of trusted mediators they outsource difficult conversations to. In class cases, mediators are viewed as accepted outsourced experts ensuring that any resolution has been reached at arm’s length, which leads to the presumption of fairness for a class settlement. See Bartz.
Outsourcing also looks like a party that has retained a damages expert, presents a detailed model, then over-relies on a model built on slanted assumptions. And the newest “experts” in the room are LLMs. Clients love feeding their skewed assumptions into a prompt and treating the output as objective analysis.
I engage with the outsourced analysis. I have “battle of the experts” examples ready and I’m ready to explain why LLMs are, technically, “bullshitters.”[1] I remind the parties that they are going to bear the full brunt of the decision, not the outsourced expert, and certainly not ChatGPT. This helps bring the party back to confronting their own uncertainty.
Practitioner’s Note
You can’t hide from LLMs. Shallow HAL is here. Expect that your clients have prompted their favorite LLM with a vague, assumption-laden prompt and gotten some form of response.
Develop your own prompt, if for no other reason than to understand what your client’s “expert” is telling them. Even if they haven’t yet, be ready: expect LLM analysis at mediation, understand the technology, have a set piece ready to explain why LLMs aren’t trustworthy outsourced experts. You can start here, here, and here.
Divine Intervention
Faith. We keep feeding more data into our training models and LLMs keep “getting better,” so AGI (whatever that is) must be right around the corner. The Fed will engineer a soft landing. As Damodaran frames it: "Praying for intervention from a higher power is the oldest and most practiced risk management system of all.”
In litigation, it shows up as an undying belief that the jury will see the truth, or that an appellate court will make new law. It looks like denial, but litigants looking to divine intervention understand the world through narratives, not facts. Sometimes you’re going to be stuck in a room with Joseph Campbell. As a mediator, you better know how to communicate with someone who understands the world as a series of myths.
For these individuals, I listen to the narrative, let the litigant explain how it gives meaning to their suffering, and I show that a negotiated settlement can bring them just resolution. Like the litigant who wants to “send a message,” the litigant looking to divine intervention needs to know that a negotiated resolution still “meant something.”
Practitioner’s Note
If your client understands the world through stories, they’re going to need to get their narrative out on mediation day. For these clients, being heard by a third party is the necessary first step toward resolution. Resist the urge to cut them off when they’re repeating what you’ve already put in the brief. Give them their time. Let them be heard.
Confrontation
Damodaran advocates for accepting and grappling with uncertainty. Build your best estimate despite the uncertainty. Quantify what you don't know: distributions, ranges, scenarios. Update when new information arrives. Own the decision rather than evade it.
These mediations are the most fun. Parties that take this approach are generally experienced, with a deep understanding of the legal and factual issues at play. These mediations fly by because these parties keep me on my toes. When parties confront uncertainty, I become a brainstorming partner – surfacing additional issues, structuring the solutions.
Practitioner’s Note
Even if your client is not ready to confront the uncertainty and even if you think acknowledging uncertainty shows weakness, humor your mediator. During a mediation pre-call, in the brief, or in a sidebar, be prepared with a coherent case analysis that isn’t set in stone. One that can be adjusted as new information comes in. I’m not expecting you to be neutral. But if you present a reasoned framework to value the case, I’m more likely to work within the framework you designed than suggest you work with mine.
Beyond Damodaran: When Uncertainty Is the Point
Damodaran rightly assumes that valuing an asset requires an individual to grapple with uncertainty.
In mediation, we see a category Damodaran doesn’t need to consider: a party with no interest in valuing uncertainty. They revel in it. They want more of it. For them, the purpose is holding on to their story, not resolving it. They lust for attention. They want to inflict pain, not soothe their own. They’ve become emotionally attached to their grievances and don’t want to let go. For these individuals, uncertainty isn’t a problem to solve; it is the point.
These parties reveal themselves with non-sequitur whataboutism, spiraling over minute facts four or five times, and insatiable anger. A refusal to understand what mediation is, and what it can and cannot accomplish, surfaces early. They want to keep the mediator in the room as someone to talk at.
Practitioner’s Note
If you feel like a mediator has cut the mediation short, consider whether your client has signaled that they’re looking to increase uncertainty, not resolve it.
When confronted with parties who desire uncertainty, I politely disengage. I’m not here to feed the noise, and if the point of the litigation is more litigation (see the ongoing Musk v. Altman saga), then the parties shouldn’t be in mediation. I won’t deliver fire-and-brimstone sermons. I’m not going to give attention for attention’s sake. I put the chaos-seeker to a choice: engage, or pause and acknowledge that resolution is not their goal, at least not today. If it’s the latter, I’ll follow up after some time – and discovery, and spend, and continuances – to see if perspectives have changed.
Next week: BATNA and what trial is really good for (spoiler: it’s not for uncovering the truth).
Until then,
Monday x Morello Mediation.
None of this is legal advice. Your mileage may vary.
[1] Hicks, Humphries & Slater, ChatGPT is bullshit, 26 Ethics & Info. Tech. 38 (2024), https://doi.org/10.1007/s10676-024-09775-5.