Monday, June 9, 2014

Informed Consent

Making decisions based on Bad Data will almost always lead you to make a bad decision.

One of the themes I harp upon in this blog, is the need for people to take responsibilities for their own actions.   We all run into difficulties in our lives, but many, if not all, of those difficulties, are the result of our own actions.

People bought over-priced mini-mansions in the 2000's and then financed them with funny-money mortgages, and then complain when it all goes South in a hurry.  It has to be someone elses fault that they couldn't buy-and-flip and make a quick hundred grand, right?

Other folks text me on their new iPhones about how hard it is to live "paycheck to paycheck" on only $150,000 a year.  After all, what with the cable bill and car lease payments, who can afford to go out to eat more than 4-5 nights a week?

People make bad choices, and then try to blame others when those choices go awry.  It is human nature.

But in other instances, people make bad choices based on bad data, and of course, these choices go awry, as any decision you make based on bad data is bound to go bad.   And in many instances, this bad data is intentionally provided (and good data intentionally hidden) in order to corral you into making a bad choice in life.

What do I mean by this?

Well, by "bad data" I mean anything from real hard numbers, to opinions and social pressures.

Let's take the timeshare seminar as a classic example.

If you go to one of these deals, they make you sit in a room for hours and listen to presentations about how great timeshares are.   You are bombarded with bad data - the idea that "buying" a week of a timeshare is a "better deal" than just paying for your vacation every year.  And if you sit there long enough, you may start to believe this.

And they do plan shills in the audience.   And before long, one of them will tap you on the shoulder and say, "Gee, this sounds like a swell deal!  My wife and I are going to buy two!  What do you think?"

And pretty soon, the whole room is abuzz with talk about how great timeshares are, and people get out their checkbooks and sign up for these nightmares, which they spend the rest of their lives paying for.

The decision was based on bad data - and the bad data was placed in front of them on purpose so that it would lead them to make that decision.  Any data to the contrary (good data) is intentionally suppressed - or if it is presented, it is ridiculed.

Now granted, if you were a skeptical person and used some common sense (as well as a calculator) you might quickly come to the conclusion that the time-share deal was a bad deal, and get up and walk out.   But then again, if you were a skeptical person, you wouldn't go to the presentation to begin with, as you wouldn't believe that you are getting a "free barbecue grill!" or a free vacation, for attending a time-share seminar.

If you were skeptical, you would have stopped believing in something-for-nothing and free ponies, a long time ago.

Few of us are that skeptical, I'm afraid.

So it is all-too-easy to make bad choices, based on bad data.   And some folks who got burned in the housing market, or are "living paycheck to paycheck" are claiming they are getting bad data as well, which to some extent they were.   But in their case, they got bad data - and then intentionally ignored the good data.

Salespeople are the source of most bad data.   They tell you sweet lies about anything, so long as it gets you to buy, buy, buy.  A car salesman will say that the new car you are looking at "makes you look sexy" and has "low depreciation."  He will say that the cost of repairs on your old car will be more than the payments on your new one!  He will say that leasing makes sense, as it "frees up your cash flow".   He will say a lot of things, most of them are outright lies.

And the same is true with the Real Estate debacle.   Real Estate agents told lies (bad data) such as "buy now, before you get priced out of the market!"   And mortgage brokers said, "this payment-optional mortgage will qualify you to buy that mini-mansion!   You can always sell the property for a huge profit later on, or refinance if rates go up!"   All lies, of course.  And people believed them and made bad decisions and ended up in trouble.

For the "I'm living paycheck-to-paycheck" person, the same is true.   They spend all their money on bling and junk and restaurant meals, and then wonder "where all the money went?"   They can't be over-spending as they are just living the "normal" life that is sold on the television, right?   It is not like they are spending extravagantly, right?    The "bad data" in this case, are the normative cues they are taking from the television and their neighbors and co-workers.

Now, there are some decisions you may make in life which are based on lack of data as well, which can be just as deadly.  And in some instances, this lack of data is simply due to your lack of interest in finding it.

For example, when I was a youth, I never gave much thought to the food I consumed or the quantities.   As far as I was concerned, beer was good, and more of it was better.  And a bag of chips with that was better still.   I was ruining my health, and not paying attention.   If I had bothered to do a little research, I would have known better.   But as time progressed, I realized these habits were killing me, and tried to learn more and get better data.   I realized what I was doing wrong, although it was hard to break old habits - which is why marketers want to get us into those habits early on.

But in some instances, the data simply isn't there.  Take smoking for example.   For my parent's generation, smoking was just something everybody did.  It is hard to explain to youngsters these days, but when I was their age, everybody smoked and if you didn't smoke, you were the oddball.   To be sure, there was some research about smoking and cancer, but this "good data" was buried under a mountain of marketing as well as bad data disclaiming cancer research as flawed (sounds like the discussion on climate change, don't it?).

Today, if you decide to smoke, you are making a bad decision and you know it, unless you live under a rock or something.

Another example is High Fructose Corn Syrup.  In the late 1970's, this junk was put into our food, as the corn lobby pushed through a law that doubled sugar prices overnight.   There was no public debate or discussion about whether this stuff was good for us, or why we might need to put import duties on sugar or whatever.   It was just done, without our consent, and overnight, every foodstuff in America had this new junk in it, and most of us didn't even know it had happened.

There was no data to be had at all.   One day you go to the store and there is new "stuff" in your food.

In the past, this sort of thing caused outrage - which is why the Food and Drug Administration was created in the first place.  The idea was, people don't have control over the contents of their own food supply, and thus there should be some standards maintained, along with a list of ingredients on each package, so that people could have "good data" from which to make a decision.

So how do you tell good data from bad data?   It is not easy to do.  But one sure way is to be suspicious of any deal that sounds too-good-to-be-true.   When someone offers you a deal or presents data that is overwhelmingly one-sided in your favor (or in favor of the deal proposed) you should automatically be skeptical.

For example, I recently signed up for NetTalk, which is a service like MagicJack, and provides unlimited phone calling in the US and Canada for $30 a year.  Now, that sounds too-good-to-be-true, as I was paying $30 a month for the same service from AT&T, only I was getting only 250 minutes a month, and only for the US!  So naturally, I was skeptical.  This is a good thing.

As it turns out, my skepticism wasn't warranted.  The service is what they said it would be, and it saves me $300 a year in phone charges, if not more.   But I researched the service online, and thought carefully before signing up.  And so far, it has worked out well. And in researching, I intentionally sought out criticisms of the service (by searching on "NetTalk sucks" or "NetTalk ripoff").  What I found was that porting phone numbers was the major problem (which I was not going to do anyway, since it was not available in my area).  But no one seemed to complain that the basic service was not as advertised.

Similarly, it pays to walk away from salesmen and people hyping products.   Buying at a "brick and mortar" store is problematic, as you will be pummeled by salesmen who will say anything to make a sale - presenting all bad data, and no good.  One joy of shopping online is that you can research a bit and get both sides of the picture.

Sadly, most of us tend to discard good data and concentrate on bad.   We really think that new car will make us look sexy, or that leasing is a good deal - because we don't want to believe harsh realities and hear that we can't have a free pony.