Decision Making

[Griff]

When I need to make a big decision I usually crank out some kind of rubric, which includes will I be more free when the time comes to deal with the consequences, is it a good fit for me on a spiritual level, will it it impact my family positively, etc.. Anyway, I can see some folks close to me are about to make an enormous financial mistake, which will put more stress on an already stressed out family. Do any of you have a good decision making process and a way they could discover it before these guys really screw their lives up?

[Clodfobble]

Specifically with finances, the right decision can usually be made if all the numbers are really understood. The most common mistake is people just really, really don't GET how interest stacks up. Is there any way you can show them exact figures of how things will look if they go their way, versus a better option (which doesn't necessarily have to be presented as "your way" )?

A book my mother-in-law gave us when we got married which was a real eye-opener for us was called The Complete Financial Guide for Young Couples. It's written by a pastor, but the influence that has is merely that every few pages there's a quote from the Bible on money. For the most part it's just a regular financial book, just sort of glazed with some stuff aimed to appeal to religious people. The thing that makes it great is it is chock full of real examples--"this is how much money you'd have after X years with Plan A, and Plan B, and Plan C," and such.

It changed our outlook completely, anyway, so maybe it could help your friend, if they wouldn't be too turned off by the Biblical inserts.

[Griff]

They're not big on Jesus but your idea of showing them the interest accrued might work. Maybe I should send someone they don't know the figures, he could paste them in an anonymous e-mail...

[hot_pastrami]

I have a pretty basic decision-making process when it comes to money... when a potential spending is expensive (which is, of course, a relative term), if there is any doubt present in my mind, I force myself to walk away from it. After a time passes and the decision has marinaded a little, I ususally figure out the best course of action, and sometimes I go back and make the purchase. Many times I've been relieved that I didn't purchase impulsively, though.

Your milage may vary, but it's a pretty effective regret-avoidance measure for me.

What is the scale of this mistake? Are they considering buying a brand-new car despite being in financial distress? A new house? Something else entirely?

[hot_pastrami]

Originally posted by Griff
They're not big on Jesus but your idea of showing them the interest accrued might work. Maybe I should send someone they don't know the figures, he could paste them in an anonymous e-mail...

Many people, for whatever reason, are blind to the accrued interest problem. They only see the monthly payment, and if it's a payment they can meet, they think they've got a good deal, regardless of the term of the loan or the interest rate.

Many car salesmen, when they're talking numbers, won't even bring up the price of the car or the interest rate, they'll just ask the buyer what they want the monthly payment to be, and work around that. Sure, those numbers will be on the paperwork, but they're delightfully easy to ignore. It's sad.

[Griff]

House. It's been sitting on the market a while, a while longer wouldn't hurt anything. She just got a huge salary increase and he's a small fish at the same place. Rumors have flown about this places long term prospects being shakey and neither of them would make this kind of money right away elsewhere.

[elSicomoro]

Depending on the time I have to make the decision, I try to think of as many possible problems and benefits as I can, weigh them and go from there.

We'll use Mónica (my car) as an example...hopefully you'll be able to understand this, b/c I'm trying to simulate how my brain works:

--The car has a blown head gasket.
--Tags and inspections are due by 3/31.
--$900-1200 to fix.
--It's a '94 Escort with 88,000 miles on it.
--My mom babied the shit out of it for 9 years, and I did the same for a year.
--The car is in very good shape otherwise.
--We could stand to keep it...Rho's car isn't in the best of shape.
--If I sell it for scrap, I might get $500 tops.
--The car is worth $1500.
--If the engine head is cracked, it's fucked.
--Jim says he can probably find me a decent used car.
--My parents can give me money to fix the car in late March.

So, I weigh them appropriately, and here's what comes out of all that mess:

--My parents can give me money to fix the car in late March.
--The car is in very good shape otherwise.
--We could stand to keep it...Rho's car isn't in the best of shape.

I really didn't spend a whole lot of time deciding...maybe a couple of hours total. Though I probably thought about fixing my car more than I thought about leaving St. Louis.

[xoxoxoBruce]

I work with a woman that had a gambling addiction that put her finances in ruin. Bad credit, loan sharks bleeding her and a general mess. When she had kicked the gambling habit, I tried to help her get out of the vicious loan shark cycle. It seemed to be working, sort of, for about six months. Then she came to me again because she was being evicted and 3 months behind in everything. I got her going again, but I got more involved this time. The key to success was making her write everything down. Somehow the whole picture was never clear until she could look at it laid out on paper. That way, things can’t be pushed out of the equation until they are settled. Bottom line, write EVERYTHING down.

[jaguar]

For big stuff (non financial) I tend to go through a complicated process of weighing up the pros and cons, weighting then and seeing what the result is, ignoring the whole process and going with what my gut tells me, in that order.

[xoxoxoBruce]

I have a feeling your gut weighed the pros and cons, even if it came up with a different answer.
The head (at least the big one) bases it's decision on what you should want.
The gut bases it's decision on what you really do want.

[jaguar]

my own theory is it's my gut's way of rationalising what I want to do, when yu're weighing the odds, it's amazing how often you agree with yourself. Does make me feel marginally better (of course buying that was rational, that wasn't an impulse purchase, of course not)

[wolf]

I usually do a tarot reading ... working with a not-so-neutral stimulus like that, and paying attention to my interpretation of the cards and the layout often helps me to clarify what my issues really are.

Oh, and I am really pretty good at seeing the future too ...

(extrapolating consequences for people too clueless to see them themselves is part of my job)

[Lamplighter]

Wolf's tarot-reading post seems a good take-off for this...

David Brooks has finally written a rather intellectual editorial
... he's not talking about Fox News.

NY Times
DAVID BROOKS
Published: March 21, 2013

Forecasting Fox

In 2006, Philip E. Tetlock published a landmark book called “Expert Political Judgment.”<snip>.

His subsequent work helped prompt people at one of the government’s most creative agencies,
the Intelligence Advanced Research Projects Agency, to hold a forecasting tournament
to see if competition could spur better predictions.
<snip>
Five teams entered the tournament, from places like M.I.T., Michigan and Maryland.
Tetlock and his wife, the decision scientist Barbara Mellers, helped form a Penn/Berkeley team,
which bested the competition and surpassed the benchmarks by 60 percent in Year 1.

How did they make such accurate predictions?
In the first place, they identified better forecasters.
It turns out you can give people tests that usefully measure
how open-minded they are. <snip>

In the second year of the tournament, Tetlock and collaborators
skimmed off the top 2 percent of forecasters across experimental conditions,
identifying 60 top performers and randomly assigning them into five teams of 12 each.
These “super forecasters” also delivered a far-above-average performance in Year 2.
Apparently, forecasting skill cannot only be taught, it can be replicated.
<snip>

Although a somewhat different methodological approach was used,
it looks to me much like a modified "Delphi" method.

I once used the Delphi mehto to gather consensus on a public health policy
that was not being resolved by usual means and staff meetings.
It made me a believer because Delphi neutralized the "self-appointed experts" who tended to dominate/intimidate discussions.

[footfootfoot]

You should change your handle from Lamplighter to Lazarus.

[Lamplighter]

Part of my enjoyment of The Cellar is in the old postings, and sometimes resurrection follows.