Thursday, November 4, 2010

First impression

The other day, I was watching TV with my 4 year old son. The program was one of his favourite game shows. When one of the participants entered, my son asked me whether he will win. I did something I normally refrain from doing. I tried to predict whether the participant would win. I thought he would not and told my son so.

Later, I was replaying the whole experience and tried to understand what made me think whether the player would win. The answer was very simple and yet shocking. But before going to the answer, let us understand what one knew about the game. This is one of the game shows that my kids love to watch and hence I have also watched it very often.

My prediction was largely based on what I had seen of various participants – some won and some did not. One was trying to correlate certain “first impressions” with the player’s ability to win. And what does one see in less than half a minute? It is the body posture, the confidence – lack of it, enough of it or overconfidence, mannerisms, etc. – broadly a combination of body language and the appearance. And I knew the answer why I thought the participant would lose. His mannerisms exhibited arrogance and lack of seriousness. And I do not like arrogance.

This is what you call first impression. The mind judges through the first impression. It processes the immediately available information and jumps to a conclusion.

Well, what happened in case of the game show was quite harmless, but when decisions are taken with such biases, sometimes they may turn out to be very costly.

Wednesday, August 25, 2010

Mind blowing insurance product

Just got a call from an insurance company call centre. It was an amazing offer: They have a very attractive investment product. The investment component is also not invested in the stock market. They only invest in Government projects and will offer more than 7% p.a. compounded returns over a 25 year term. This is what they are willing to offer in writing. I inquired to the gentleman that how can they offer more than 7% p.a. when Government securities do not offer that much (net of expenses to be charged by the insurance companies). He said, that is where our company's expertise comes in.

After about 2 minutes of monologue (my question came in much later), the gentleman added another attraction. The product also gives life cover. Wow, This is now becoming too good for me to handle. Life cover coming from an insurance company. And all along I thought this call was from an investment company - how stupid of me!

I was pleasantly surprised with the offer. Such a mouth watering proposal !

Unfortunately, I was too naive to not buy this product. God only can save me now.

Tuesday, June 29, 2010

Devil's innovations

My friend and a leading financial planner Gaurav Mashruwala loves to share a joke.
Once a news reporter interviewed the Devil. After a long interview, the reporter finally asked, “What is that one thing you did that makes you proud?” The Devil tried to circumvent the question and started giving round about answers, but such questions in superlatives (best, biggest, largest, etc.) are the most favourite among the reporters. He insisted and finally the Devil replied, “The nastiest thing that I ever created is the credit card. It has the potential to ruin many families. Before the inevitable comes, they feel happy using it.”
That’s the innovation called credit cards.
Gaurav’s joke ends here. So let’s start ours.
The news channel carried a story about the Devil’s interview. There were public debates about the interview and the merits and demerits of credit cards. Someone brought out a very interesting point. They said, the Devil did not think much as those sinners who do not have credit cards are spared of the punishment.
The Devil was requested to come for another interview. He obliged. In fact, he could not resist the temptation of the publicity that television gave him.
After a few questions, the interviewer came to the point and asked the Devil (referring to the credit card answer) that the same spared those sinners who do not have a credit card. That way, it fails the test to qualify as your best idea. What do you have in such a case? The Devil’s answer was very simple, “Ever heard of tele-calling? That is for those who do not have a credit card yet.”
Well, the amount of outbound calls are done by the tele-callers is increasing by the day. Time has come for the regulators to introduce “Please call” registry instead of “Do not call” registry as the same does not work. It also involves painful steps in registration, a wait period of 45 days (I fail to understand why that should take 45 days. What do the phone companies do in the wait period? Or is it the proverbial “last chance” for the tele-marketers?). If you get a call after the wait period is over, lodging a complaint is another ordeal. You, the harassed, need to remember the steps to lodge a complaint. How some people can make life more and more difficult – is a puzzle.
The icing on the cake is the attitude of the tele-marketers. The caller thinks that he or she is doing a huge favour to you by selecting to call you. God save us from such Devilish innovations.

Thursday, May 27, 2010

Cause and effect

Jinxed mobile no suspended after 3 users die in 10 yrs
London: A jinxed Bulgarian mobile phone number—+359 888 888 888—has been suspended after three users died in the last 10 years, the last owner being gunned down outside an Indian eatery in Sofia, a media report said.
The first owner, Vladimir Grashnov, the former chief executive officer of Bulgarian mobile phone company Mobitel—which issued the number—died of cancer in 2001, aged 48. There were rumours that his cancer was caused by a trade rival using radioactive poisoning, the Daily Mail reported.
The jinxed number was then passed on to Bulgarian mafia boss Konstantin Dimitrov. He was gunned down in 2003 by an assassin in the Netherlands during a trip to inspect his 500-million-pound drug smuggling empire. Dimitrov, who died aged 31, had the mobile with him when he was shot while dining with a model.
The next person to be handed the number was businessman Konstantin Dishliev. He was also gunned down outside an Indian restaurant in Sofia in 2005.
Dishliev had been running a secret cocaine trafficking operation. He died after 130 million pounds of the drug was intercepted by the police while being smuggled from Colombia. Callers now get a recorded message saying the phone is “outside network coverage”. PTI
Report in Times of India, Mumbai edition, page 24, May 27, 2010

The above item in today’s Times of India caught my attention. I do not know why, but it just happened.
But when I read through it, I found it really very interesting. The news item brings out one interesting characteristic of human nature – finding patterns. We have been programmed to find patterns and large part of our knowledge is acquired through this mode of learning. It is instinctive to us – Pavlov exhibited this through his experiment with the dogs.
In the above example, people saw the link between the phone number and premature deaths. However, a wise person would like to question the “cause and effect” relationship – 2 out of the 3 above were involved in activities where the risk of death anyway was very high.
As investors we often make similar mistake of linking two completely unrelated events and take our investment decisions. It pays to stop before acting on such “coincidences” and ask a few questions.