The Decision Strategist

This post has been rolling around in my head for a week while I tried to think of a good example for the if-then fallacy, and now Dr Housing Bubble had provided a perfect one for me.

It seems that we have a particular weakness to logical fallacies presented as if-then statements. Here’s the example I’m talking about, read it fast:

Since the market is going down, buyers now have the leverage in negotiations (True). Since there is more inventory, you have more choice (True). Therefore, you should buy a house.

It’s funny because I actually agree with the whole thing. But a second later I’m saying to myself “wait a minute…”

The trick is fairly simple: get the person to agree with your if statement. The housing market IS going down. Buyers DO have leverage. Then just make the particular then statement you’d like. “Now is a good time to buy”. It’s the if-then fallacy in action.

Most people will accept the then statement without question, since the if statement is true, then the then statement must follow. The problem is that we don’t check to make sure that the if-then relationship is correct.

Just a short example of how our subconscious decision making process can trip us up. Anyone have any stories of how they’ve fallen prey to this behavior?

-zot

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I’d like to start doing a weekly post on Sunday Mornings for strategic discussion. I’ll present the situation and what my strategy would be, and readers can leave comments and other suggestions that I will incorporate into a revision to be re-posted the next Sunday. This first discussion is how to deal with disagreements with your neighbor. Specifically, what to do when your neighbor throws raw chicken in your trash bin.

The Situation

Our porch and driveway smell like a dead animal. Which they should since some raw chicken still in their packages got thrown into our trash bin by someone. Of course, this isn’t enough to really warrant any action on our part, but suppose what was happening is that someone doesn’t like you, and they have decided to express that by doing random things that make your life considerably less pleasant.

The Goal

Get the person to stop making your life miserable. If they’ve caused significant property damage, get some kind of retribution.

The Strategy

The first step is to find out who it is that is doing these things. How to do this depends on the situation. If the events happen regularly every day while you are at work, try taking a day off and pretending to go to work before sneaking back and keeping a watch on your place. If the events happen at night, try getting up at a variety of times, or even staying up all night. If it’s really bad, maybe it’s worth investing in a camera or rigging a tripwire to a camera and an alarm so that you get a picture of who it is.

Once you know who it is, you can begin a response, either by speaking to them to trying and resolve the issue, retaliating in kind, or taking them to court. It would be a big mistake here to engage in any activity unless you are absolutely sure that you know who the culprit is. To me the response would depend on who it was, their motivation, and the damage and disruption it caused. If it is someone’s kid, I’ wouldn’t care about much except getting them to stop. If it is an adult that caused damage, I might take them to court.

Because the fighting or argument can’t continue forever, and because there are many legal ways to make someone’s life difficult, coming to a resolution so that further incidents are more unlikely seems really paramount. This could be in the form of a post-conflict discussion apologizing for whatever kicked the whole thing off, or a peace offering of some sort. Of course, nothing says they will take it, but if they do it’s a whole lot better.

Tell me your stories of dealings with neighbors and how you resolved them. If there is anything I missed, or something you would do differently, let me know and I’ll incorporate into a revision of this post.

-zot

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We are trying to get our security deposit back from the property management company for the place my girlfriend rented last year. They charged her for painting, carpet cleaning, yard work, and chimney cleaning. Just to be clear landlords cannot charge you for normal wear and tear. They can charge you for damage to the property or cleaning to make it fit to live in again. We spent days cleaning that house, and their charges are completely inexcusable.

Situation Is Bleak

The situation is in favor of the management company, since they already have the money and the charges amount to roughly $400, a tidy sum of money, but not enough to spend 100 hours arguing with them. To make matters worse, we don’t have the move in form in which you check off all the things that are wrong with the house, and they claim they never got it.

We have already called them and disputed the charges. They have decided to stand by their charges, so what is the next step?

The Goal Is Simple

We just want our (her) money back. Maybe lawyers fees. Also of increasing importance is a sense of outrage at being mistreated. This drives up the value of getting a settlement beyond it’s monetary value.

The Strategy

Our first point of action was to call them and say that we were disputing the charges and to ask them why they think it’s valid to charge us for paint and yardwork. Their response was that “the owner wanted it painted”. Sounds like normal wear and tear paint to me, but unfortunately we didn’t record the call, so it’s only hearsay.

We need to do something to level the playing field here. Of course we are looking into small claims court, but are primarily afraid that if we lost they could counter-sue for lawyers fees.

Our first step then will be to contact the Better Business Bureau. They allow you to file a complaint and can assist with mediation. If that doesn’t get us anywhere, we will entertain mediation through small claims court, and as a last step, actually suing them.

This is a classic strategy of escalating force until we get a desired response. The major benefit of not going straight to court is that it may reduce our costs. It also allows us to back out if at any time we feel that it is no longer worth it. It does miss out on the shock value that going straight to the “nuclear option” provides, but in this case we aren’t prepared to do that.

Unfortunately, the company is probably aware of our hesitance, and hopes that by dragging their feet they can get us to just give up. In this situation it would probably be better if we could just go straight to court, but we aren’t informed enough to make that choice.

One strategy to make sure this doesn’t happen again is to withhold the last months rent, or pay the difference between the deposit and the rent. This shifts the balance of power significantly in your direction because the property manager has to come to you to get the money instead of you going to them. I don’t think I would do this when renting from an owner directly if I thought they were good upstanding people, but I think I will definitely do this when renting from a property management company in the future.

If any of you have had problems with a landlord charging for wear and tear, I’d love to hear how you solved it. I was in the same situation a few years ago and just ate the costs because I was young and didn’t care much, but this time we are both much more interested in fighting it.

I’ll probably do a game theory analysis of this situation here in a couple days.

-zot

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I’ve updated my spreadsheet for buying versus renting to include information from The Simple Dollar about inflation rates The gist of the whole thing is that inflation really eats into the payments you are making and the amounts you are saving. If inflation is 4% and your mortgage rate is 6.25%, the bank is only making a 2.25% return. Yet another reason why inflation can help the average person, and why the fed usually struggles to keep inflation down. I say usually because the fed has been doing some veeery interesting things with money supply lately. Check out this post for an EXAMPLE.

I also added the assumption that income tax savings from the mortgage were being invested. This evens things out substantially, and the final net worths for each option are closer.

Anyway, here are the new spreadsheets. If you like them, please consider a small donation.

(updated to reflect information from Jon Daley).

Buy vs Rent (openoffice)

Buy vs Rent (excel)

-zot

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