The Decision Strategist

It’s funny how much of a role movies play in affecting our imagination. Last night I was thinking about some new projects at work and how I was excited to work on them. That I actually had work, especially exciting work, made me pretty happy with the idea of walking in to work on today.

But in my imagination I wasn’t walking in to my actual office. It was in the same spot, but it was much more high tech, much like the scene of any movie involving the government trying to stop a terrorist. There were several people who worked for me, and I walked in saying “Alright, what have you got for me?” in a very self-confident and assured manner. I was wearing a suit.

In reality, my office is shared with a co-worker, my furniture is modular, and though my computer is pretty high end, there are no write-on screens or anything like that. No one works under me and I am generally the first person in the office. I also biked to work and walked in wearing jeans with my pant legs rolled up.

So my first thought was that it is pretty funny how different my imagination of what was going to happen was from how it actually happened. But then I got to thinking on how a lot of disagreements and disappointments happen because we envision a situation one way and it turns out to be completely different. I was inevitably setting myself up for disappointment when I imagined walking in the door to my office.

I wonder if visual media, particularly movies, have affected our imaginations so that they tend to vary greatly from real life, or if human imagination has always differed greatly from reality. Indeed, that is essentially the definition of imagination. Are romantic movies responsible for encouraging our imaginations to create scenes wildly out of proportion with reality? Do the thrillers make everyone imagine a job that is more intense and exciting?

While the link between violence in media and actual violence is tentative at best, there is some pretty strong evidence that inaccurate portrayals of car driving make people more risky drivers. In other words, visual media affects, at least temporarily, the models of physics in our heads.

Consider our imagination of how a punch actually affects someone. In movies it takes a fifteen minute fight to knock someone out, but most fights are over after only a few strikes at most. I don’t have a lot of real world experience with fights, so perhaps it’s natural that my imagination would take after the movie version.

The same is true with how a car responds when you take a tight turn at high speeds. Generally it flips over, but in movies a professional driver and special effects ensure that the car screams around the corner perfectly.

On the other hand, my girlfriend thinks I have the causality backwards. Maybe our imagination influences are visual media to be more unrealistic, rather than the other way around.

Most likely it’s more of a give and take: the imagination informs the media and vice versa. But if movies inform our imaginations, maybe that explains why homeland security is so keen on movie script terrorist attacks and why economists are so bad at forecasting.

Just some food for thought. What is your perspective?

-zot

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This article in the New York Times talks about differences in intelligence and making mistakes. Intelligence is a funny thing. It’s a concept that there is no real way to measure. Perhaps because there is no real consensus on what intelligence means. Is intelligence being able to interpret geometrical shapes? Or perhaps being able to understand the concepts in a paragraph (Who’s concepts? What language and subject?)? Perhaps intelligence is being able to interpret body language to understand emotions? Maybe it’s making decisions that are least destructive to our health, in which case all smokers are less intelligent than non-smokers.

At risk of treading dangerously close to ‘everything is relative’ territory, I think it is very hard to judge intelligence. Is a drug user who robs a store not being intelligent? Does being a drug addict in the first place have anything to do with intelligence? In fact, does breaking any laws of any kind have anything to do with intelligence?

I think intelligence has little to do with your genetic gifts and more to do with how hard you work to understand things. If you tend to face unknown or confusing situations by saying ‘meh, nevermind I am not really interested’ or ‘this is too hard’ it almost certainly will be. But if you face those situations by asking what you can learn, pretty soon those situations aren’t as hard as they first seemed.

In other words, I think the human bell-curve of intelligence looks something like this:

<insert picture>

If measures of intelligence are dependent on cultural values, we can be assured that they discriminate against groups with different values. Someone who was raised with the idea of getting married and having a family over going to college is not by definition any less smart than the upper class kid who was raised to go to Harvard.

But we as a society seem to think that intelligence is an objective measure, like the length of a board or the size of a hard drive. Whether you rate someone else as intelligent probably has a lot more to do with how closely their values align with yours than it does with how much processing power they possesses. People don’t like the idea that you can’t assign a number to someones intelligence, or that that number will depend more on whether the person was raised in line with the dominant world view or not.

It’s a weird culture of fear that we have. Even those of us who are critical of what we might call ‘consumer values’ are afraid of the person who is homeless, or the person who is living in the projects. The reality is that people in substantially different walks of life probably have a lot of interesting things to say if we could just overcome our fear of crime and self-protective disdain.

Part of the problem with writing articles over multiple sessions is that you pick up in a very different place from where you left off. I hope this all makes some kind of sense.

-zot.

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When most people think of decision making, they are thinking of either business decisions like How to Compete Against Big Business or Motivating Employees and personal consumption decisions like Buying or Renting, Converting Your Car to Grease Fuel or How to Fight Advertising.

This is probably because these decisions are the easier decisions to make.

We really have no basis for how to go about making the harder decisions. Decisions about whether to leave an abusive spouse, or whether to find a new job if your old one is just ok, or what to do with your life, are much more difficult and messy.

The hardest decisions are ones between a mediocre or negative status quo and a change that would probably be positive, but requires a more negative hump to get over first.

In changing jobs, usually we stick with an unhappy situation far beyond what we would be willing to enter into. Getting a new job has quite a hump, and involves a lot of time, effort, and anxiety, so we are willing to put up with a lot.

In abusive relationships, and not just romantic relationships, but friendships, teacher-student relationships, family, etc… it can seem a lot easier to put up with a negative situation than to face the hump, largely emotional in this case, of speaking to the person and breaking off the relationship (or trying to change it). With relationships there is always the hope that next time it will be better.

The cost of change looks something like this:

(don’t laugh at my poor artwork)

These are the decisions we agonize over and are completely unsure of. They are also hard to make stick because we tend to be unsure about them in the beginning, but become more unsure as the cost of the hump begins to be felt, and we may try to back out.

They are also where we need the most help.

One of my favorite thoughts from Steve Pavlina is that we should not accept situations that we’d rate as mediocre to slightly positive. If we’d rate a situation 6 or 7 out of 10, then we should change it. The problem is that we tend to get complacent with situations that are mediocre, and never get to a situation we’d rate as a 10.

The real problem though is, as always, one of information. We might rate a current job at a 6 or 7, but who’s to say that it’s not actually a 9 and we just have unrealistic hopes for what a job should be? If our relationship is a 6 or 7 is that because of the relationship or because of years seeing media telling us what it should be?

In essence, how do we really know what the limit of possibilities is if we haven’t experienced it? Would we recognize it even if we did?

It reminds me of this question:

If you could have the best sex of your life tonight, knowing that for the rest of your life you’d be comparing every night to this night, would you do it?

We have a hard enough time dealing with decisions when we are facing uncertainty about our choices. In the messy world of personal decisions that have major impacts on our material and emotional lives, the cost hump involved with making changes makes these decisions even more difficult. How do we approach them? What is the right answer? Is there even a right answer?

-zot

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Disclosure: I hold a small position in an ING bond fund (IDBOX). I’m also not a professional investor. Please don’t take my word for anything you do with your money.

I started looking at investment about six months ago when I realized I would soon achieve my goal of eliminating credit card debt. It is a bewildering world, and back in August I wrote a 2 part series about investing in a recessionary economy (and part II). This post is in a similar theme. Here’s a few basic rules I follow when deciding how to invest:

1. Don’t Buy After a Rally

First off, I never buy an asset (stocks, mutual funds, real estate) when the price has increased. There is no hard and fast rule on how much it has to have increased for me to avoid it, but basically if it’s being hyped by the media or talked about by people, I stay away.

You might miss some really strong growths in specific stocks by not buying in a rally, but it’s also possible that you’ll buy in near the top and only see the value decline substantially. It’s too much of a game for me. I haven’t bought in to tech stocks like Google and Apple for the same reason.

2. Don’t Sell After a Slump

In the same vein, don’t sell when the price drops. A lot of people see a stock’s value going down and sell hoping to avoid losses, but in effect they are locking in price decline that has already happened. Here again it seems like it’s just as likely that you will sell when the value reaches the bottom and so won’t benefit from following gains.

The Current Economic Climate

These rules can be hard to follow though. As fears of inflation (the fed cuts rates again, though read Global Economic Trends for an argument of why inflation is not related to federal interest rates as much as production capacity) mount and the dollar loses it’s value, a lot of people are shifting to gold and silver or foreign markets with their investments. But where do those of us stuck in dollar based investments turn?

I could shift out of dollars into gold or other commodities, but doing so would violate rule #1 given the meteoric rise in the price of gold

In fact, any shift out of US dollars now that dollars have declined heavily would be violating rule #2. Yet I have real fears that the economy is going to be in a substantially worse position in the coming year or more and I suspect that the value of the dollar is only going to decline further.

And if inflation is really occurring at much higher rates than reported, then the situation is worse because inflation is just eating whatever returns my investments are earning and then some.

So the real question is whether it’s better to stay in stocks, risking financial loss when the inevitable burst happens, stay in bonds with low earnings being eaten by inflation, or violate rules #1 and #2 by selling off dollars and buying something relatively more expensive in the hopes that a foreign asset or commodity won’t decline?

About a month ago I shifted my meager investments from a tech mutual fund (IDTOX) to a bond fund (IDBOX). This protects from a coming stock decline, but not from a further decline in the dollar. It’s sort of a middle position in which I’ll lose some value either way:

If stocks decline, the economy worsens and the value of the dollar further declines, I’ll lose value due to inflation

If the value of the dollar recovers, then I won’t be left with commodities I purchased at their peak.

Still, fear is a powerful emotion. If ING Direct Investment had a commodities fund, I’d be hard pressed not to violate my rules and shift into commodities to whether out the storm.

Of course, the value of my investments at the moment are only roughly $500, so it wouldn’t be a disaster in any situation.

I’d be interested in hearing from any readers who have investments or are facing similar decisions. You can flip the situation around to consider debt as well. If the fed is spurring inflation in an effort to stave off financial crisis, it makes no sense to pay more than the minimum on student loans that were consolidated at 3.5% interest (if you were lucky and graduated in 2002).

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