I'll Believe That When I See It

I'm sure that you remember this old saying from some skeptic. For most people seeing is a validation of an assertion. When they see it, they believe what their eyes tell them and the assertion becomes truth. Ah, if life were only that easy!

When you talk with policemen and lawyers about the reliability of the testimony of eye-witnesses, however, you will actually get guffaws. Psychologists concur and they will readily tell you that the brain is easily fooled by what it sees. If that were not so, all the magicians would be out of business in a hurry. I love magic, but it does require, as some brilliant person said, a suspension of disbelief. Did the elephant or the airplane really disappear, or did it just look as if it disappeared?

The plain fact of the matter is that the brain collects sensory information and we like to think that we process that information in rational ways. It's just not that simple. Here's an example. Go to the following website: http://www.patmedia.net/marklevinson/cool/cool_illusion.html and follow the directions. It's pretty cute.

It turns out that the brain is just not as reliable as we like to think it is. My point here is that when people evaluate information about things with which they are not completely familiar, I think that they can get fooled into taking some pretty irrational actions. I am just as guilty as you of this. I look back at some stock picks I have made in years of investing and I ask myself, "What could I have been thinking?" The better question is, "What was I seeing?" because my inability to see facts properly may have led me to think improperly.

It is the nature of my business that I know a lot about the financial lives of my clients. As one CPA friend said, "You know more about the clients than we do!" True enough. The nature of the fact finding that goes on when someone wants to borrow $500,000 is different than when they just want to have their tax return prepared.

The result of this is that I see the result of a lot of financial decisions made years before. Sometimes it is a rental property that has a positive cash flow and which has appreciated, reflecting the good management. But all too often I see flotsam and jetsam, the detritus of a series of poor decisions made in haphazard ways. Sometimes it is important to talk about that and I do get a chance to hear about how someone made a decision. All too often, the decision was grounded in something they saw, usually something they heard from some salesman.

Perhaps the worst ones were planted at "get rich quick" seminars. What too many of these super-salesmen have done is to perfect an act, in much the same way that David Copperfield does. They create an illusion that looks quite real, and seeing it, people get out their checkbooks.

This happens all the time in the mortgage world too. I once said, "Mortgage shoppers keep calling lenders until they find a good salesman, and then he sells them what he was trained to sell." Of course, two years later they are in my office and I'm supposed to clean things up. In most cases, these poor decisions cost the clients many thousands of dollars, occasionally tens of thousands.

So what do you do when you have to make decisions? Ideally, you should get help from someone who has these characteristics: being knowledgeable, meaning he or she is an expert in that field. More important, he or she must be trustworthy, meaning he or she puts your interests first and their income second. These experts are out there in every field and exactly ten percent of them are in the top ten percent! That's who you want to find, most easily done by referrals.

I'll finish with a story about me and a Freudian slip I once made, actually to a psychologist friend which made it even funnier. We were talking about something and I said, "I'll see that when I believe it." And the fact is that the brain does work that way. If you can get taught to believe something, you might just see things that support that belief, regardless of whether they are factual or not.

Be careful out there.