To Investors: Control your own
Real Estate Analysis Limited
The popular saying of ¡§one
could be one¡¦s own worst enemy¡¨ appears to harbor some truth
with the advance of
neuroscience, genetics, and behavioral research. Perhaps a more pin-point
description could read ¡§your brain could be your own worst enemy¡¨.
Yet this article is not
about the rationality versus irrationality debate.
Besides, your humble author has come to suspect that homo sapiens (humans)
actually need both characteristic traits to survive and strive. That is, we
may not function well or at all IF we were ONLY rational (thinking,
analytical etc) or ONLY irrational (emotional, intuitive, instinctive etc)
beings. At least the world we know would be very different IF we were ONLY
either. In short, the key is how to utilize such characteristic traits to
their best possible combinations and to our advantage.
Here we are concerned with
what our brains tend to like,
prefer, want, or fall for, and at times without you knowing or being
conscious of it, and what such tendencies may bring in terms of
(self-inflicted) investment traps and tricks:
brains are easily impressed by show of strength and stamina
= in short, good looks and
body build. While this tendency is useful in helping men and women identify
potential mates from a reproductive viewpoint especially in the more distant
past, it also steers us to prefer formidable-looking institutions to smaller
outfits comes deciding in which entities to invest. And this is one of the
reasons why big corporations tend to locate themselves in the prime offices
with plush interiors, not to mention a team of well-dressed staff and high
presentable investment brochures. While certainly a big corporation could be
a good investment asset and enjoys advantages which a small company does
not, being big is in itself not a guarantee of investment (or
business-corporate) success. Proof? Compare the Fortune 500 list of the
1950s and that of today. The point here is good presentation does not
automatically equal good investment advice, business, or opportunity but our
brains sometimes cannot differentiate this.
brains are geared for simple commands and comprehensions
= not sophisticated thought processes which need to be developed and
trained. Proof? Say a new digital camera comes with a full instruction
manual and a summarized operational sheet, which one do you think most
people would read first if they ever read such notes at all? In a business
presentation, and given all things being equal, the presentation which
simplifies and summarizes the content into 3 main points generally wins over
the presentation which is lengthy and contains 12 main points. While having
more points does not imply a technically better argument, the process of
simplification and summarization can at times sieve out a seemingly trivial
point or two which prove to be vital later on. In short, asking people to be
¡¥brief¡¦ all the time harbors certain dangers, and thus self-inflicted risks.
There are times for simplicity and there are times for sophistication.
brains are geared to follow the numerous
= i.e. our brains find comfort in numbers or being in the majority (for want
of being sociable, loved, or accepted etc) even when we have been educated
to use, trained for, vigorously tested on, and proven capable of independent
thinking. Your humble author recalls a Dilbert cartoon script which depicts
a brilliant idea was thought up by Dilbert but then when his co-workers
showed up and started discussing it, the idea gradually became very much
watered down and mediocre. This in itself will not be problem if not for the
observation that the majority view in anything, including (real estate)
markets, could become totally unrealistic leading to disasters at times.
Going with the biggest,
simplest, and most numerous
may lead to investment gains in many instances thus giving an impression
that this is the proven way to invest. But is it really?
The article and/or content contained herein are for general reference only
and are not meant to substitute for proper professional advice and/or due
diligence. The author(s) and Zeppelin, including its staff, associates,
consultants, executives and the like do not accept any responsibility or
liability for losses, damages, claims and the like arising out of the use or
reference to the content contained herein.
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