Plane crashes, overconfidence, and buying houses
More from How We Decide.
In 1978, a plane ran out of fuel. The captain was too busy trying to figure out why the landing gear light didn’t go on. He ignored the fuel gauge and his staff who mentioned that fuel was running low. Ten people were killed. There was nothing wrong with the landing gear except the indicator light.
By the 1980s, flight simulators got more realistic and training got better for pilots. But the bigger jump in airline safety came with CRM, Cockpit Resource Management. This system was developed by NASA. Pilots (and later surgeons) were shown to make mistakes based on their “God-like certainty” and would fail to listen to the opinions of those around them. This led to airplane crashes and surgeons operating on the wrong side of the patient. Certainty, it seems, is not as certain as it seems.
In 1984, Philip Tetlock of University of California at Berkeley studied 284 people who made their living “commenting or offering advice on political and economic trends.” He asked them to predict future events like elections and government affairs. The experts were right less than 33 percent of the time, which is less than random. The most famous pundits tended to be the least accurate. Why? Tetlock blames it on certainty. These pundits recognized patterns, but ignored the emotional signals that said there was something wrong.
Back to the brain.
Knowledge is learned by practice and experience that is internalized by the dopamine system. We remember things and patterns of things, rationally. Once the pattern is learned, the rational part of our thinking will kick in when we sense something like what we know. Our emotional brain will kick in when something is not right in that pattern. Using both facilities, learned knowledge and emotional awareness, leads to the best decisions.
In the case of pundits, the more certain their knowledge, the stronger the tendency to ignore the gut response that says something is wrong. The book Blink, gives the example of experts who bought an expensive fake for a museum and another expert recognizing the fake at a glance; the second expert “just knew it.”
When someone really knows something, their emotional brain will react to minute changes in the expected pattern. How We Decide starts with a story about a radar technician who couldn’t say why he “knew” that the blip was a rocket, not an ally’s plane. He just knew that he was immediately frightened by it. After careful study, the difference in the pattern of dots was discovered, so that future techs could learn it with their rational brains.
What’s this got to do with real estate?
Rational knowledge that works best for buyers is self-awareness in terms of how they live in a house. Know the daily patterns of your lives. The most self-aware buyers “just know” when the house is laid out right, for them, or not. They can see past the seller’s things and how the seller is using the space. This can be achieved by mental practice of noticing what works and doesn’t work where you live now. Overconfidence, in the form of mental rigidity, comes in when a buyer gets stuck on a single layout that is supposed to work, but doesn’t. This is the “dream house” trap that values looks over function.
My most successful buyers know that a house will work, or not. If it works, then they can decide if they like it, and if the price is good enough.
Did you “just know” that your house was right for you? What are the cues you’d share with buyers about how to separate rational and emotional thinking when buying?
