NEW YORK, Aug. 12, 2009 (GLOBE NEWSWIRE) -- Oft-trusted phrases like "My gut tells me that ..." and advice like "Go with your first impression ..." can lead to bad decisions, even disasters, according to David E. Adler, behavioral expert and author of the brand new Snap Judgment: When to Trust Your Instincts, When to Ignore Them, and How to Avoid Making Big Money Mistakes (FT Press, July 2009).
He argues that seemingly "smart moves" often aren't -- because they're based on flawed snap judgments. While intuition and instinct work well for certain kinds of decisions, such as evaluating a relationship or restaurant, his work shows that sound decisions regarding numbers, money and other critical situations require deliberate thinking and layers of reasoning.
"The financial crisis is the result of collective snap judgments: Financial institutions thought chiefly about their own performance and profits and neglected to think to the next level -- about the overall health of the system," said Mr. Adler. "If they had, they would have realized their self-interested decisions weren't really in their interest."
Mr. Adler is available to discuss a continuum of instances in which seemingly right-on gut instincts just aren't. He can discuss why:
-- Coin Tosses Aren't as Fair as They Seem. Our bias is that coin
tosses are fair. But the odds are not 50/50, heads/tails.
Instead, a tossed coin has a 51 percent chance to come up on
the same side as it started when conducting a natural clip.
-- It Might Be Wise to Short Superstar CEOs. Why is it bad news
when a CEO starts to appear on talk shows, goes on book tours
and speak at forums? Why do these superstars tend to
underperform by a substantially larger margin than can be
accounted for, with dire consequences for their shareholders?
-- Horse Sense, at the Track, Is for the Birds. Gamblers are more
likely to bet on the wrong horse if given the opportunity to
physically examine it. The best bet is one based on the horse's
statistics, as these numbers give you better overall picture of
the horse than the horse's physical appearance or performance
during just one race earlier in the day.
-- Intuitive Thinking Will Give You the Wrong Math Answer. A
baseball bat and ball cost $1.10 in total. If the baseball bat
costs $1.00 more than the ball, how much does the ball cost?
If you are like most people, your immediate answer is that the
ball costs ten cents, which would be wrong. The correct answer
is that the ball costs five cents, but you probably had to pause
for a brief moment to think consciously rather that using your
immediate intuition.
-- The "Slow Lane" is Faster and Can Help You Avoid Car Accidents.
When people are stuck in a traffic jam, it always looks like
their lane is moving slower and the other lane is faster. But,
in fact, this is a misperception -- an optical illusion. This
illusion causes people to switch lanes and put themselves and
other drivers in danger. When traffic picks up in the slow
lane, the driver in the fast lane feels as if their lane is
slowing down now that multiple cars are passing by (versus the
one big clump he or she just passed), leading to more
aggravation on the road.
-- Tough Football Coaches Are Too Cautious. On a fourth down,
statistically, a football team has a 5 percent greater chance
of winning the game when going for the touchdown at the
one-yard line, but they rarely take this smart risk. Teams
prefer to think of the game as a long, drawn-out fair fight,
where the best team wins on merit rather than high-risk
gambling strategies.
To arrange a conversation with David E. Adler and/or receive a copy of Snap Judgment: When to Trust Your Instincts, When to Ignore Them, and How to Avoid Making Big Money Mistakes (http://www.snapjudgmentbook.com), please contact Itay Engelman at Sommerfield Communications, Inc. at 212-255-8386 or Itay@sommerfield.com.
About David Adler
David E. Adler is the author of Snap Judgment: When to Trust Your Instincts, When to Ignore Them, and How to Avoid Making Big Money Mistakes (FT Press, July 2009). Adler is a frequent contributor to Barron's, the contributing high-net-worth writer for Financial Planning Magazine and has written for Institutional Investor, Psychology Today, and the New Republic. He was recently awarded a grant by the CFA Institute Research Foundation to conduct a study of tax awareness in investment decision making by wealth managers. Mr. Adler was educated at Oxford University and Columbia University and holds an M.A. in economics from Columbia.