Heuristics and their role when we have to make a decision

A heuristic is a simple rule or set of rules for making acceptable decisions from partial information or in a limited time span. People use heuristics all the time (See my post of Sept. 9, 2008: economics of information explains why we rely on heuristics; March 15, 2009: the affect heuristic, where preconceived value-judgments interfere with our assessment of costs and benefits.).

A rule of thumb means to many people the same thing as a heuristic – a rough guide to behavior or a decision. Many benchmark norms evolve into general decision criteria, such as one lawyer for each non-lawyer being about right. When I searched my accumulated 6,700 posts, I found many instances where I used “rule of thumb” (See my post of Sept. 13, 2005: 5% of external spend goes to vendors other than law firms; Aug. 24, 2005: three-quarters of law firms bill monthly for each matter; March 28, 2005: one lawyer and one paralegal at a firm per matter; July 16, 2005: 1-2 major firms per billion of revenue; Dec. 22, 2005: a billion dollar M&A deal requires a full-time lawyer; Feb. 9, 2006: one specialist for every two generalist lawyers; March 10, 2006: perhaps five hours inside for every 20 outside on a matter; Feb. 11, 2007: three primary firms per in-house lawyer; Nov. 20, 2007: global law department if it has 10+ locations outside HQ country; June 22, 2008: work 60 hours to charge clients 40; Feb. 7, 2009: e-discovery costs; Aug. 18, 2009: questionable rule of thumb on make-buy: the inside cost should be one-third of the outside cost; Sept. 22, 2009 #2: for panel selections approach no more firms than twice the number you expect to end up with; Jan. 20, 2010: for presentations by law firms – 1/3rd talk, 2/3rd answer questions; March 24, 2010: fees paid to law firms that might justify an internal hire; April 20, 2010: number of people needed to train for process improvements; May 12, 2010: reduction in supervisory time as experience grows; and Jan. 11, 2011: inside counsel are far too costly in relation to outside counsel.).