We Are Our Own Enemy

Anchoring is a cognitive bias

People tend to relate further thinking to the first thing they hear in a conversation about anything. Why do you suppose there is a suggested retail price on cars? All future negotiation relates to that number. You essentially negotiate against yourself.

Anchoring is a powerful tool once you understand how it works.

For a life insurance professional, should I deal with the size of the problem first or the premium? If you have a $2,000,000 tax problem in your estate, and I start there, you will instinctively relate the premium to that number. $40,000 is not that big.

If I instead start with the premium of $40,000, you relate to the $0 you are paying now so $40,000 seems quite large.

Anchoring is a powerful obstacle until you understand how it works

Many problems are unsolved because people relate to the wrong baseline.

Not every baseline is a number. Procedures and standards frequently get in the way. We’ve always done it that way is a flag.

Most consultants spend time examining anything where someone says, “We’ve always done it that way.” Old procedures based on old standards are usually capable of improvement

Standards should change or you cannot measure

Which standard should apply? A 20-year-old standard can’t work for us and absent an appropriate one at 50, we cannot decide if we are good, bad or terrible at something.  How we used to do it is irrelevant.

Where to begin?

If you are thinking about improving a process in your business or community, are you doing maintenance to the old system or are you considering what could and should be?

If you had it to do from the beginning would you create the system you have? Even patched.

How likely is it that public education is exactly right? How about the tax system? Or medicare? Maybe your office is the wrong size or shape, or populated with people that are there only because they have always been there. Maybe your personal budget has some “always done it” items.

If you patch a dysfunctional system

How likely is patching to be the solution? If anything it just makes it harder to correct in the future. If your business’s computer system is a stack of duplexed IBM 370s, you will be forced to fix it sooner or later. They will break eventually and parts are scarce. They are enormously inefficient in the meantime.

Sometimes you must just do it.

Voltaire had it right.

“Better is the enemy of good”

Better is usually a stopgap.  Always consider the cost to get to good. It may be cheaper.

Then think about it again.

Good is the enemy of great.   James C. Collins

Collins wrote a book about it. You might want to think through the right solution. If it is an area that is not urgently required, you might prefer going for great instead of better. Certainly good instead of better.

Delegate some of the parts so you don’t retreat to your baseline.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  don@moneyfyi.com  866-285-7772

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