BLINK versus THINK
A few years ago, author Malcolm Gladwell wrote a book called Blink. Perhaps you remember it. He gave a provocative discussion of the power of intuition to come up with the correct answer. The full title of the book: Blink: The Power of Thinking Without Thinking.
I believe that there are many areas of life where snap decisions are required, or at least come into play. It is within the power of the well-trained mind – emphasis on well-trained – to collect disparate information quickly and arrive at the best decision almost automatically. People who watch others with this skill are amazed.
We are faced with a lot of decisions in our lives. Some are trivial like being able to see a particular wine label on the shelf and buy the right bottle. Others are a little more complex. Among those is figuring out whether to trust people or not. Some people are good at this, others notoriously poor. Other tasks are exceedingly complex, like an ER physician doing triage on a patient in distress.
I believe that there are two completely different levels of computing that can go on in the mind. One of them – let's call it Computer #1 – is devoted to making these quick, intuitive judgments. The other computer – let’s call it Computer #2 – is specialized to do rational computations, consider facts, weigh probabilities and potential outcomes, and make a decision based upon a consideration of all those factors. Those should never be snap decisions.
Among those kinds of decisions are deciding which home to buy, what kind of mortgage to get, how much money to save for a safety net, how much to save for the kids education, how much money to put in your retirement account, what kinds of investments to put these funds in.
What should be obvious to almost everyone who has looked at the economic chaos we are in is that a lot of people have used their Computer #1 to do calculations that should have been done by Computer #2.
One thing I have learned in my 30 years in the mortgage business is that people walk into my office already having used Computer #1 to make a decision about how to finance their home. I know immediately that the solution they have come up with is a solution that will be rejected when we run everything through Computer #2. Indeed, my job is to show them how to use Computer #2. The first step in that process is usually getting them to unlearn some perceived assumptions that really doesn't apply to them.
Let me give you a small example. Fannie Mae reported earlier this year that 47 percent of people taking out a mortgage chose to pay no points. I can guarantee you that if I could take a million of those folks and get them to run their facts and goals through their Computer #2, they would choose differently if given the chance again. They would pay points and get a lower rate. Collectively they waste billions of dollars in interest for not taking a point.
So when you are faced with a decision like this, be sure to use Computer #2 to make the important calculations and to make your decision. Then run the solution through Computer #1 to validate that you are comfortable with that decision. When you use this process, you will make better decisions, save money, AND be happier with the outcome.
Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower
articles, Randy is a mortgage broker who has financed over $1 billion
in properties. He writes about home buying and real estate finance
topics for CreditBloggers.com.
The first step in that process is usually getting them to unlearn some perceived assumptions that really doesn't apply to them.
Posted by: dfo gold | December 13, 2009 at 11:48 PM