In his book “Blink: The Power of Thinking Without Thinking,” author Malcolm Gladwell explores the power of the subconscious mind to make snap judgments and to think without thinking. Blink examines what separates great decision-makers from the poor ones.
Why do some people follow their instincts and win while others end up stumbling into error?
The great decision-makers all have a few things in common. The great decision makers aren’t those who process the most information or spend the most time deliberating, but those who have perfected the art of “thin-slicing,” filtering the very few factors that matter from an overwhelming number of variables.
In other words, great decision-makers trust their instincts. They can cut through all the noise and psychological, cultural, and environmental biases that normally inform the masses’ decision-making to draw their own conclusions.
What I was able to draw from Blink is that those who are successful decision-makers are the ones who can make instant decisions by trusting in their instincts. Our instinctive reactions often have to compete with all kinds of other interests and emotions, and sentiments.
The poor decision-makers often give in to those “other interests and emotions and sentiments.” Instead of relying on their own instincts, poor decision-makers are more comfortable relying on others.
On the other hand, the great decision-makers have taught themselves to process information very quickly and to shut out all noise, distractions, and biases.
How Do You Make Investment Decisions?
- When making investment decisions, do you go with your instincts, or are you more swayed by what’s trending on the internet or social media?
- Do you give more weight to what you’ve been conditioned throughout your life and to what everyone else is doing instead of making up your own mind?
- Do you have preconceived biases and judgments that keep you from exploring alternative investment options?
What Is Your Initial Reaction To The Following Scenario?
What if I told you about an asset segment that consistently rewards its investors with reliable cash flow along with the appreciation of the underlying asset? It’s resistant to recessions, is an ideal counter to inflation, and adds valuable diversification to any portfolio. This asset segment has been around forever and has delivered consistent above-market returns to investors, but some would consider it boring. What is this asset segment? Real estate.
Do you yawn because you don’t ever hear about these types of investments on Reddit or Twitter? You think to yourself that all your friends, family, and acquaintances are completely invested in Wall Street and crypto right now. You would rather follow the advice of Elon Musk than invest in something nobody’s talking about.
Your snap judgment is that if it’s not something your colleagues or acquaintances are investing in, you’re not interested. Wall Street, your 401(k), and Twitter are all you need for your investment advice.
Do you shut out all the market noise and internet buzz to analyze the essence of the deal? Your snap judgment is that this asset segment I just described has all the hallmarks of a successful investment.
It offers cash flow that can be used to compound returns or to create additional streams of income. Cash flow – along with the appreciation of an underlying hard asset that insulates against a complete loss of your investment – gives investors a valuable 1-2 punch for building wealth.
You don’t care what others think. Your gut tells you that this investment will be good for your portfolio.
The masses are prone to make investment decisions based on common behavioral biases and based on what everyone else is doing. That’s why bubbles keep happening and why people keep losing their shirts.
On the other hand, successful investment decision-makers have the ability to shut out all the noise and trust their instincts, and trust what’s important to them and not what’s trending on the internet or social media.
Successful investors make their own judgments. They have no problems going against the grain.
How do you make investment decisions? Do you trust the masses more, or do you trust your own instincts?
Consider shutting out the noise to discover an asset segment that may not garner much social media attention but that consistently garners the attention of savvy investors who recognize its value to a portfolio.
Trusting your instincts on this subject could open up a whole new world of investment and financial possibilities you didn’t know possible.