Can Smart Appraisers Make Dumb Mistakes?
- Bias. It’s Easier to Blame the Messenger - April 20, 2022
- Hocus Pocus Magic Focus? - March 24, 2022
- Opinion, Estimate, or Prediction? - September 8, 2021
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…?
Think.
George Dell, GeorgeDell.com, The Analogue Blog or Valuemetrics.info is not affiliated with David Robson and did not receive any financial remuneration for linking to his Amazon page.
The question really is can a smart educator make a dumb mistake ?
The real challenge George is to getting the powers to be within the appraisal profession (Government, etc.) to think at all. Pick your poison, values are at +/- all time highs, but with appraisal waivers we are at recent all time lows for independent checks and balances. The state of North Dakota has a one year appraisal waiver. The appraisal threshold was raised from $250,000 to $400,000. Congress holds a future of appraising hearings, but no true appraisers are on the panel.
Seek the truth and when its known, judge others by their actions (me 09/20/2019).
No one cares when times are good. They will come knocking when it turns!
Interesting philosophical discussion George. You are correct of course.
It got me thinking and asking myself though, “Why does TAF insist on a college degree in a profession that is not so complex that non-degreed cannot excel in it?”
Based on the above article an inference is made that ‘too much’ intelligence may hinder objectivity? Or, at least be a sign of predisposition toward diminished objectivity.
Sadly, I think it’s one of those discussions that is interesting in a classroom, but not likely to change practices or perceptions.
PS When will you be teaching regression in L.A./ OC area next?
Sort of makes you wonder. Who’s lobbying the TAF? Signs point to the already heavily subsidised collegiate community seeking an additional customer base. Well, it looked good on paper at least.
I searched for college lobbying of appraisal organizations and that’s really tough research. Found a great Miller post instead. Boy, that dude can sure call it ahead of time. Amazing.
https://realestateindustrialcomplex.com/topic/policies-culture-appraisal-institute-place-information/
“Learning about key governmental, organizational and institutional actions and what they mean to appraisers.”
This may be the best appraisal satire photo I’ve ever viewed. Genius!
No need to wonder. They list them. Note: ‘Sponsors’ and advisors (TAFAC) have been redefined over the years. TAFAC (Advisors) are as follows: http://tafapp.advsolhosting.net/imis/TAF/TAFAC_List_of_Members.as
To get the full picture though, Corporate Partners and sponsors and any other groups need to be checked separately.
The Appraisal Foundation Advisory Committee (TAFAC) presumably has the greatest potential for input. AGA is NOT a member of TAFAC, though we maintain cordial relationships with several organizations that are.
This is primarily because of a prohibition from criticizing the Foundations activities (expressed as undermining The Foundation) that we do not feel we can morally agree to. There are many actions and issues of TAF they in our opinion require criticism as well as change.
Having a precondition for TAFAC membership that one may not disagree energetically, or that one is subjectively & vaguely constrained from “undermining” TAF is unacceptable to AGA.
AGA continues to support the First Amendment to the Constitution of the United States as well as due process in all things. We do not believe that a private corporation should be the never-ending arbiter of all things having to do with appraisal principles and practices required under USPAP and federal (FIRREA) legislation. To have this reinterpreted by a private corporation every two years, and then further reinterpreted on an individual state level for enforcement is counter-intuitive, and non-productive.
The very system originally created to develop USPAP is now the single leading cause of USPAP provisions being undermined both nationally and on a state by state basis.
From Baggs links above. Appraiserfest! Go to his links – Jonathan Millers sites. Great info.