I recently had to buy a new fridge as our existing, still fairly new, fridge was beyond repair. They just don’t make stuff to last anymore! It wasn’t a decision I wanted to make in the first place. The purchase process sent me into analysis overdrive. I created spreadsheets that listed different features, assigning scores and degrees of importance for each brand and model. Of course, I took my budget into account too. However, I’m not sure my spreadsheets helped at all. My emotions and brand perceptions undoubtedly clouded my rational judgment. In my case, the aesthetics sometimes took preference over the actual function of a fridge – to keep food fresh. At one point, I even settled on a fridge that did not fit the dimensions of the space in my kitchen.
It highlighted again how susceptible we are to irrationality when making decisions. Thankfully, I make investment decisions with a lot more ease than buying appliances. I’m experienced and have a thorough understanding of the field. I know methods that have been proven to work over many years, for thousands of clients, and which are backed by thorough and repeated research, will work again.
It’s also easier to help clients make life decisions than it is to make my own. It’s easier to remain objective and to reflect on their situations, without personal bias. It’s certainly much easier than having to reflect on my own decisions. This is why, at Foundation, we believe in the value of becoming our clients’ financial decision-making partners: we can offer a clear perspective that is often challenging to maintain with one’s own finances.
I’ve noticed how biased people can be when I ask for opinions - opinions that are typically based on their own limited experience. Many people will write off an entire global brand as a result of one bad experience. We’ve all heard the stories: “Don’t ever buy a Bosch because my aunt had the worst experience when her fridge door broke ten years ago.” This extrapolation of anecdotal evidence is not effective for rational decision-making, because a single user experience could be the exception to the average user experience. If you can ask 50 or 100 people you may have a better chance of obtaining useful information. This is the basics of statistics.
However, asking for referrals when choosing a hairdresser, for example, is useful. Here, you are asking for an opinion, but you can also see the evidence for yourself if your friend has had their hair cut by the same hairdresser for years. There is evidence of repeated skill over time.
Even reviews and surveys are unhelpful. You are likely to find thousands of complaints about most brands online. There are likely to be more complaints about brands with the highest sales. In addition, people are more likely to comment on their negative experiences than their positive ones. So the surveys provide skewed data.
What we’re missing when we make rare decisions like buying a fridge once a decade is accurate decision-making information and useful decision-making tools. I’m making a note to myself here about my own decision-making process. Perhaps it could help you too.
There is useful information for the basics of choosing a fridge, like the energy efficiency labelling verified by independent bodies. I should have started with the basics – the dimensions of the space, the performance qualities and energy efficiency. Had I got the basics right, it would have immediately narrowed the possibilities.
Understand what is important to you. This sets out your unique parameters.
Then rely on evidence of repeatable performance information to understand how the information fits your parameters. Avoid anecdotal evidence.
Lastly, ask someone to help you with your decision, provided they can help you remain objective and true to what is important to you.