Can Smart Appraisers Make Dumb Mistakes?
I am a smart and educated, award-winning appraiser. It is not possible for me to be irrational. Of course not. You can see that. I can see that.
A high IQ and education won’t necessarily protect you from highly irrational behavior — and it may sometimes amplify your errors. ~David Robson, in an Excerpt from The Intelligence Trap
Oh No! Who is this guy!? Doesn’t he know how smart I am? Why, even my peers have said I am smart. I pride myself on my critical thinking. Even my kids say that! What more proof do you need? Let’s get this straight: I am rational, smart, of high IQ and extremely educated, especially in my chosen field!
Recently, scientists have started to measure what things go with irrationality. There is even a name for this field of study, this measure: dysrationalia. The studies roughly parallel the studies of dyslexia and dyscalculia (difficulty in dealing with number things).
The studies of dysrationalia identify the correlation between bias and intelligence. Cognitive scientists say there are two types of thinking: 1) intuitive, automatic, fast thinking; 2) analytical, deliberative, slow thinking. On a primal level, the automatic fast thinking is what protects us quickly from danger. As a large cat-like clawed creature with long fangs appears, it is not a time to deliberate and reason out things. I jump. I jump to the conclusion to jump.
The fast thinking becomes automatic as we get older, smarter, and learn from our tribe about clawed fanged animals. We get better at jumping. And quicker.
The bias comes from when we jump, even if this particular creature is plant eater, and keeps our camp area clean of garbage leftovers. Our jump scares away the friendly pet. Bias. A wrong decision. A bad result.
Robson mentions three types of common irrational biases:
- Sunk-cost fallacy, sticking with something because of a prior decision;
- Gambler’s fallacy, “heads must come up next, after 5 tails in a row”, and;
- Anchoring, relying too much on the first piece of information offered (the “anchor”).
Results show that there is a high non-correlation between smartness (IQ, education, esteem), and bias. I.e., smarter people are just as likely to show bias as others. Darn.
In fact, intelligence can be related to a higher propensity toward bias, especially over the long run. Smart people get so used to being right and having the right answers, it becomes habit. Fast and automatic! Darn.
The real problem comes as smart people come to assume that they are less vulnerable to bias, simply because they are so educated, experienced, and intelligent.
Critical thinking competence and raw intelligence do not go together. This is why I believe any future for the appraisal profession must include this dimension. Critical thinking and awareness of our own vulnerability to such things as anchoring. Like anchoring to the known sale price prior to valuation.
Are you a critical thinker – or a very, very, critical thinker…?