(noun, etymology Dutch from ‘boedel’: estate, possession, inheritance, stock.). 1. Crowd, pack, lot, as in ‘the whole boodle.’ 2. a. Counterfeit money b. Money acquired or spent illegally or improperly, particularly when used in bribery for political purposes. 3. Slang for money in general.

Your Own Personal Google

Posted on: Jul. 12, 2011  |  By: Ronnie Kahn  |  Category: Boodle-cise, General
Reach out and search faith
Your own personal Google
Someone to hear your pursuit
Someone who cares
Feeling unknown and you’re all alone
Flesh and bone by algorithm
Lift up the receiver, I’ll make you a believer
Take second best, put my engine to the test
Things on your chest that we need to confess
I will deliver you know, I’m a forgiver
Reach out and touch screen
With apologies to Depeche Mode

Who do you feel like when making a financial decision?  I would venture to guess that most of us feel like Homer Simpson at the Springfield Nuclear Power plant.  Nuclear power plant operators, air traffic controllers, and firefighter’s come to mind when thinking about critical mistakes that are made during decision making and, of course, no one does it better than Homer.  When it comes to human error and money, most of us hope we have insulated ourselves from the disaster of being Icarus with wings made out of dollar bills that will burn when we get too close to the sun.

When making a decision, each of us is our own personal search engine.  We search for things that come to mind.  We may then select the most common thing or we may get all kinds of noise that really is not the true target that will help with our answer.  Try your own personal search exercise.  What are the ways you go about looking for answers?  Your first choice may be to just use your own head and not try and find the answer out there in the world of knowledge.  So you seek out something similar that you have previously come across and see if it matches.  Let’s say you needed to know what the state capitol of South Carolina is.  You retrieve a bunch of cities that you remember to be capitols and see if one of them happens to be in South Carolina.  If that doesn’t work, you may think of cities you remember hearing about in that state and select the one that seems to fit the capitol tag.  Of course, it might help if you could pick it off of a list.  Otherwise, you might have to take the time to research this online or consult an encyclopedia and so on.  This process is similar to how a computer might go about it in the sense that you would throw a bunch of stuff from your knowledge memory hard drive into your working memory and then play with what you’ve got to then see if you can get the answer.

Now let’s try this with a financial question such as should I buy a car or lease a car?  What comes to mind first?  You might think leasing is the way to go since you don’t have enough money for a down payment and in order to buy a car you need a lot more money in the beginning than a lease.  Also, you remember that you saw a lease special for the car that you like.  If that doesn’t exactly help, you will look to what others do.  Well, your brother leases through his business and you think your best friend does as well so if it’s good enough for them than it is probably just as good for you.  Let’s look for more rules.  Business owners usually lease and I am a business owner too.  This is what business owners do.  The last source you would most likely tap is to analyze what knowledge is needed to make a decision.

Economists would say that the decision to lease or buy a car would be based on the costs involved and the satisfaction and advantages derived from the decision.  For consumers though, a large part of the decision is about who you think you are as a person.  If you see yourself as the type of person who would drive this particular type of car then that might be uppermost in your decision process.  If you cannot afford to buy that car but only lease it, than that might steer your choice rather than the value to cost angle.

Again, when your search is first started you look for rules and patterns that apply.  For some, the rule can be based on what you can afford first.  For some, it might be that you always buy Hondas.  For others it might be about identity.  Knowing the type of person that you are, what type of car should you have and does leasing or buying tap into that?  If the type of person that you think you are involves a new car every two or three years than leasing a car matches that identity.

As you can see there are numerous problems with rule searches.  You might match the wrong rule to the situation.  Oppositely, you might have a good rule but the wrong situation.  If you are sure that you are handicapped because you have only one eye but, then again, you are in the kingdom of the blind….  You might only remember the last rule you used and forget a better one.  There may be a bunch of rules that apply and you choose a weak one to base your decision on.

Many of us are taught that personal mistakes lead to personal growth.  We have to make the mistakes in order to get better the next time.  While this makes sense and learning is adapting, this does not mean that you should avoid doing a thorough search and plan in the first place.  Most of us want to take the easy road especially in a world where demands are constantly being made on our time.  We do not have the time to explore and experiment.  Most of us like to try our hand at assembling something, such as a child’s toy or computer cabinet, and then consult the directions afterward if we need to.  Of course, the problem with this approach is when you start out doing some irreversible damage.  With thinking along these lines, we tend to end up trying to work our way out of a fix rather than avoid it in the first place.  In finance, this means taking on too much risk and figuring someone else will bail you out if you get hurt.  Far too much of this happened in the mortgage home loan industry that triggered the financial meltdown.  The point would be that while you cannot predict all scenarios you can design one that puts you in the best position to succeed.

Many mistakes that are made are usually placed in the human error department.  Rather than just quickly slapping on this label, think first about the search.  Structure your search to widen the scope and depth.  Then, don’t just use your working memory, go down to the knowledge hard drive.  In the knowledge area watch out for falling into traps where your bias affects the way you see the problem.   Also, it is very difficult to tease what a cause and effect relationship really is so that you may be making an assumption about what happened before will happen again but it was for other unknown reasons.  We also take abnormal events and assume they happen regularly.  There are numerous traps such as these that in recent years behavioral economists have pointed to.  Lastly, human error should not be a scapegoat so that you avoid changing design flaws that can play to your own strengths while steering clear of your own weaknesses.

Watch out for bad search strategies.  What comes to mind quickly is like putting that search to the top of the list and then failing to dig deeper.  What seems like a similar problem, doing what we do most often, or inferring things while ignoring others, will lead to errors that can have better outcomes and consequences.

Try understanding your search process like a flow chart.  What do you do first to try and make a decision.  If that doesn’t work, then what do you do next, and so on?  Here is an exercise to catch bad searches that can lead to decision errors:

  • Is your search just looking for matching similar situations and those situations are not really the same?
  • Is your search just using what most frequently comes to mind?
  • Is your search just about social cues, such as going along with what others are doing who may not really be in your own specific situation or stampede effects such as mania or panics where everyone is joining in or bailing out?
  • Are you inferring relationships and connections to build your decision but the inferences are based on common misperceptions?
  • Are you thinking about things that are in your recent memory but have forgotten to tap into more applicable events and situations?
  • Are you using search rules without trying to get to your knowledge base?
  • Are your search rules based on faulty cause and effect, overconfidence of your abilities, mistaking chance occurrences for common ones, frames or labels that reflect  or confirm a biased perspective, good rules for the wrong situation, or wrong rule application?
  • Is your search based more on who you think you are as a person than a reasoned plan?
  • Is your search based more on fear of consequences rather than risk assessment or satisficing, meaning making a decision that is acceptable rather than optimal?
  • Are your choices avoiding taking the effort needed to look deeper, or assuming one thing from another, such as this person is rich so she must be smart as well?
  • Are you not matching your choices to your values and sense of purpose?

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