Describe a situation where you had to make or someone close to you had to make a major financial decision

1.  Describe a situation where you had to make or someone close to you had to make a major financial decision (e.g., buying a car, a computer, taking out a loan, finding a place to live).  (2 points)


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2.  What factors influenced you in making your decision(s) about the matter?  (3 points)


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3.  How did you (or they) feel after the decision was made?  (2 points)



4.  What aspects of financial decision-making would you like to know more about?   (3 points)



decision making

Why two heads are no better than one,

 how never to regret a decision again,

protect yourself against

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hidden persuaders,

 and tell when someone is lying to you


WHEN PEOPLE HAVE an important decision to make in the workplace, they often arrange to discuss the issues with a group of well-informed and levelheaded colleagues. On the face of it, that seems a reasonable plan. After all, when you’re making up your mind, it is easy to imagine that consulting people with a variety of backgrounds and expertise could provide a more considered and balanced perspective. But are several heads really better than one? Psychologists have conducted hundreds of experiments on this issue, and their findings have surprised even the most ardent supporters of group consultations.

Perhaps the best-known strand of this work was initiated in the early 1960s by MIT graduate James Stoner, who examined the important issue of risk taking.1 It will come as no great surprise that research shows that some people like to live life on the edge, while others are more risk averse. However, Stoner wondered whether people tended to make more (or less) risky decisions when they were part of a group. To find out, he devised a simple but brilliant experiment.

In the first part of his study, Stoner asked people to play the role of a life coach. Presented with various scenarios in which someone faced a dilemma, they were asked to choose which of several options offered the best way forward. Stoner had carefully constructed the options to ensure that each represented a different level of risk. For example, one scenario was about a writer named Helen who earned her living writing cheap thrillers. Helen had recently had  an idea for a novel, but to pursue the idea she would have to put her cheap thrillers on the back burner and face a decline in income. On the positive side, the novel might be her big break, for which she could earn a large amount of money. On the downside, the novel might be a complete flop, and she would have wasted a great deal of time and effort. Participants were asked to think about Helen’s dilemma and then indicate how certain she should be that the novel was going to be a success before she gave up her regular income from the cheap thrillers.

If a participant was very conservative, they might indicate that Helen needed to be almost 100 percent certain. If the participant felt much more positive about risk, they might indicate that even a 10 percent likelihood of success was acceptable.

Stoner then placed participants in small groups of about five people each. The groups were told to discuss the scenarios and reach a consensus. His results clearly showed that the decisions made by groups tended to be far riskier than those made by individuals. Time and again, the groups would advise Helen to drop everything and start work on the novel, while individuals would urge her to stick with writing thrillers. Hundreds of further studies have shown that this effect is not so much about making riskier decisions per se but about polarization. In Stoner’s classic studies, various factors caused the group to make riskier decisions, but in other experiments groups have become more conservative than individuals alone. In short, being in a group exaggerates people’s opinions, causing them to make a more extreme decision than they would on their own. Depending on the initial inclinations of individuals in the group, the final decision can be extremely risky or extremely conservative.


This curious phenomenon has emerged in many different situations, often with worrisome consequences. Gather a group of racially prejudiced people, and they will make even more extreme decisions about racially charged issues.2 Arrange a meeting of businesspeople who are open to investing in failing projects, and they will become even more likely to throw good money after bad.3 Have aggressive teenagers hang out together, and the gang will be far more likely to act violently. Allow those with strong religious or political ideologies to spend time in one another’s company, and they will develop more extreme, and often violent, viewpoints. The effect even emerges on the Internet, with individuals who participate in discussion lists and chat rooms voicing more extreme opinions and attitudes than they normally would.

What causes this strange but highly consistent phenomenon? Teaming up with people who share your attitudes and opinions reinforces your existing beliefs in several ways. You hear new arguments and find yourself openly expressing a position that you may have only vaguely considered before. You may have been secretly harboring thoughts that you believed to be unusual, extreme, or socially unacceptable. However, when you are surrounded by other like-minded people, these secret thoughts often find a way of bubbling to the surface, which in turn encourages others to share their extreme feelings with you.

Polarization is not the only phenomenon of “groupthink” that can influence the hearts and minds of individuals when they get together.4 Other studies have shown that compared to individuals, groups tend to be more dogmatic, better able to justify irrational actions, more likely to see their actions as highly moral, and more apt to form stereotypical views of outsiders. In addition, when strong-willed people lead group discussions, they can pressure others into conforming, can encourage self-censorship, and can create an illusion of unanimity.

Two heads are not necessarily better than one. More than fifty years of research suggests that irrational thinking occurs when people try to reach decisions in groups, and this can lead to a polarization of opinions and a highly biased assessment of a situation.

If groups are not the answer, what is the best way of making up your mind? According to the research, it is a question of avoiding the various errors and pitfalls that often cloud our thinking. The difficulty is that many of the techniques that underlie rational decision making involve a thorough understanding of probability and logic. However, some of these techniques can be learned in just a few moments. Take, for example, how to guard against the most common tricks used by salespeople, how to decide whether someone is lying, and how to ensure that you never, ever regret a decision again.




Let’s start with a simple question: Imagine being offered two jobs. In terms of working hours, duties, location, and career prospects, Job A is absolutely identical to Job B. In fact, the only difference between the two positions is the disparity between your salary and that of your future coworkers. In Job A your annual pay will be $50,000 and your colleagues will be earning $30,000. In Job B you will be earning $60,000 and your fellow employees will be earning $80,000. Would you be tempted by Job A or Job B? Surveys show that the majority of people choose Job A.5

Viewed in purely financial terms, the decision is completely irrational because Job B pays $10,000 more. However, if the scientific study of human nature tells us anything, it is that we are far from being rational creatures. Instead, we are social animals easily persuaded by a whole host of factors, including how we feel, how we see ourselves, and how we appear to others. Although, objectively speaking, Job B pays more than Job A, in Job A we are earning $20,000 more than our fellow employees, and the feeling of superiority evoked by the pay difference proves more than enough to compensate for the absence of the extra earnings that would come with Job B.

This subtle and often unconscious effect can also influence our buying behavior.

I can still remember the very first time I saw a salesman working in a large department store. I was eight years old and my parents had taken me to London. We had wandered into the store, and I had become mesmerized by the man enthusiastically demonstrating the latest breakthrough in kitchen-knife technology. This wonderful piece of equipment was able to do everything you could possibly want from a knife, and several things you probably didn’t want, including the ability to cut an empty cola can in half. Toward the end of the pitch, the nice man calmly informed us that the knife retailed for $20.

But then something strange happened. Right before our very eyes, he suddenly transformed into a man who could not stop himself from offering an amazing deal. Actually, the knife was going to be just $16—no, $10. And then, because we had been such a great crowd, he was prepared to sell it to us for just $6. Just when we couldn’t believe our good fortune, like the end of a carefully choreographed fireworks display, the real explosions started. He was going to give us a second identical knife for no extra cost, throw in five smaller knives for free, and put them all in a leatherette case that usually retailed for more than $20. Each amazingly generous step surprised and delighted the crowd. More important, it persuaded the majority of people, including my parents, to purchase some knives that they had had no intention of buying when they first walked into the store. Still, it was a lesson learned. When we got home, I attempted to use the wonder knife to cut through an empty cola can, and the handle fell off.

My parents and I had been fooled by a technique that researchers refer to as “that’s not all.” Without prompting, the salesperson keeps making the deal better and better until it becomes totally irresistible. Even the smallest of reductions or the tiniest of additions is effective. In one study, 40 percent of people bought a cupcake and two cookies together for 75 cents, but 73 percent put their hands in their pockets when the cost of the cupcake was advertised as 75 cents and the two cookies were suddenly added for “free.”6

In addition to examining these frequently used principles of persuasion, psychologists have also explored other more unusual, but nevertheless still highly effective, techniques. There is, for example, the so-called pique technique, in which a strange request makes people pay more attention and increases the likelihood of compliance. In one study, by Michael Santos at the University of California and his colleagues, a beggar (actually a researcher) asked passersby if they could spare a quarter or 37 cents.7 Significantly more people gave away their money when confronted with the unusual request.

Related to this is the “disrupt, then reframe” technique, in which you momentarily surprise a person to shake them out of autopilot and then present a normal request. In a series of studies, experimenters went from door to door selling pads of paper for charity.8 In one condition they stated, “They sell for $3. It’s a bargain.” In the “disrupt and then reframe” condition they said, “They sell for 300 pennies—that’s $3. It’s a bargain.” This strange, and surprising, change almost doubled sales.

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Much of the work in quick but effective techniques has focused on two principles: getting your foot in the door and the door in your face.

In the early 1960s Stanford psychologists Jonathan Freedman and Scott Fraser conducted a groundbreaking experiment in persuasion.9 The research team started by randomly telephoning more than 150 women and pretending to be from the California Consumers’ Group. The researcher asked if they would mind taking part in a survey about their use of household products for a publication called The Guide. Unlike its competitors, The Guide liked to really get to the bottom of things. So, would it be possible, asked the researcher, for a team of six men to come and spend a couple of hours rooting through their cupboards? The search was going to be thorough and would involve going into every storage area to catalog all of the soap, dishwashing liquid, cleaning fluid, and bleach that they could get their hands on. Perhaps not surprisingly, less than a quarter of the women agreed to this forensic-style search. However, this was only part of the experiment. Another group of women received a similar call, but instead of requesting access to all areas, the researcher asked if they would mind taking part in a quick telephone survey about the household products they preferred.

Almost everyone agreed. Three days later, they received a second call, asking if they would mind if the six-man search team investigated their cupboards. Under these circumstances, more than half of the women agreed.

In a follow-up experiment, the same team wanted to see if they could persuade people to place a very large sign proclaiming “Drive Carefully” in their front yard. Even though the sign was apparently designed to help cut speeding in the area, almost no residents agreed to display it. The researchers then approached a second group of residents and asked them to display a much smaller sign that was just three inches square, and almost everyone accepted. Two weeks later, the researchers returned and asked whether the residents would now mind replacing the small sign with the large placard. An amazing 76 percent had no objections.

These experiments demonstrate the power of the “foot in the door” technique. People are far more likely to agree to a big request if they have already agreed to a small one.

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More than forty years of research has shown that the technique works in many different situations.10 Get people to make modest donations to charity, and larger ones will follow. Get employees to agree to little changes in working conditions, and bigger ones are accepted more readily. Get them to change normal lightbulbs for low-energy ones and the likelihood of far more significant energy-efficient lifestyle changes increases.

Finally, when researchers are not getting their foot in the door, they are encouraging people to slam it in their faces. Whereas the foot in the door is about starting low and gradually working up, this technique involves beginning with an outrageous request, receiving a firm no, and then getting people to agree to a much more modest offer. Perhaps the best-known work on the principle was carried out by Robert Cialdini at Arizona State University and his colleagues.11 In his classic study, a research team posing as members of the county youth counseling program asked students whether they would mind taking a group of juvenile delinquents to the zoo for the day. They were not surprised to discover that fewer than 20 percent of the students accepted the offer of a day out with the animals.

Unperturbed, the research team adopted a different tack. This time they approached another group of people with a much larger request, asking whether, for the next two years, they would mind donating two hours of their time each week to help counsel the juvenile delinquents. Once again, their request met with widespread refusal. However, after people turned them down, the research team returned with a far more modest request. Yes, you guessed it—how would they feel about just taking the juvenile delinquents for a day out at the zoo? Under these circumstances, more than half of the students agreed.

In another example, French researchers arranged for a young woman to continuously find herself without any money in a restaurant, so she would have to ask other customers to help cover her bill.12 When she asked for just a few francs, only 10 percent of those approached offered the money. However, when she started by asking them to cover the entire bill and then moved on to requesting just a few francs, 75 percent of people reached for their money. Once again, this technique is effective in many different situations. From negotiating about house prices to working hours, salary to overdraft limits, it pays to start high.

Persuasion is all about getting your foot in the door, the door in your face, surprising people with an unusual request, and offering an endless stream of bargains. More important, research shows that these techniques can be learned in exactly forty-seven seconds. Actually, thirty seconds tops. And that includes a free set of smaller knives.


We are not the rational creatures that we like to think we are. We can easily be influenced by a variety of quick and effective techniques. Beware of people using the “that’s not all” principle, offering unprompted discounts and bargains to get you to part with your money. Likewise, be wary of those who start small and build up or start big and quickly back down to a more “reasonable” offer. Of course, it is also possible to use exactly the same techniques to influence others yourself. That’s fine, but as Obi-Wan Kenobi famously noted, your newfound Force can have a strong influence on the weak-minded, so do be careful to use it only for good.


When making a decision of minor importance, I have always found it advantageous to consider all the pros and cons. In vital matters, however … the decision should come from the unconscious, from somewhere within.


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Imagine your boss telling you that she thinks her office looks a little uncultured and asking if you would be good enough to buy an expensive-looking modern art print to liven up the walls. You put on your coat and drive to the local gallery, only to find that it has only the following four prints in stock.

How do you make up your mind? One possibility is to think about the pros and cons of each piece in terms of your boss’s personality, the company’s image, and the existing office decor. Alternatively, you could just trust your gut instinct and choose the print that “feels” right. Or you could rely on a different technique that, according to recent research, is significantly more likely to result in a good decision.

A few years ago, psychologists Ap Dijksterhuis and Zeger van Olden carried out an experiment using the same type of poster-choosing procedure.13 In their study, participants were asked to come to the lab, look at five posters, and use one of three techniques to choose the poster that they liked best. One group was asked to study each of the posters for about a minute and a half, list some key reasons why they liked or disliked each one, carefully analyze their thoughts, and then select the winning poster. A second group merely glanced at all five posters and then chose the one that they liked best. Those in the third group were quickly shown the posters, asked to spend five minutes solving difficult anagrams, briefly looked at the posters a second time, and then made their choice. After making their decisions, all of the participants rated the degree to which they liked all five posters.

After everyone had made their selection and ratings, the experimenters carried out an act of unprecedented generosity, giving them their favorite poster as a free gift for taking part in the study. Finally, just as each person left the laboratory clutching their rolled-up booty, the experimenter casually remarked that it would be good to have their telephone number, just in case there was any problem with the data storage and they needed to rerun the study.

Now, if you take part in a study and the researchers explain that they need your telephone number in case of a hard-disk failure, they are up to something. The most likely scenario is that the experiment is far from over and they intend to call you at a future date. The call may take a number of forms. Your telephone might ring in the dead of night, and a market researcher might ask if you would mind taking part in a survey about soap. Alternatively, you might get a call from an alleged long-lost friend wondering if you want to meet. Or, as happened here, one of the team might call to say hello and ask how you are getting on with your poster.

About a month after the experiment, the researchers contacted the participants and asked them how satisfied they were with their posters and how many euros they would be prepared to sell them for. When they had originally chosen their posters in the laboratory, the participants who had been asked to carefully consider the pros and cons of each print were confident that they had made the right choice. In fact, they were far more confident than those who had made their choice within moments of seeing the posters or those who had been asked to solve anagrams and then decide. However, four weeks later a very different picture emerged. The participants who had spent time solving anagrams before chosing their posters were the happiest with their choices and wanted significantly more money in order to part with their cherished print.

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You might argue that the choices made in such studies are unlike the complicated choices that people have to make in real life. In fact, the researchers have obtained the same curious effect again and again.14 Whether it is deciding which apartment to rent, which car to buy, or which stocks to invest in, people who are shown the options but then kept busy working on a difficult mental activity make better decisions than others do.

Why should this be the case? Dijksterhuis believes that just as the power of the unconscious mind can be harnessed to help people become more creative (see the “Creativity” chapter), it can also be used to encourage better decisions. When having to decide between options that differ in only one or two ways, your conscious mind is very studying the situation in a rational, levelheaded way and deciding the best course of action. However, when the going gets complex, the mind has only a limited ability to juggle a small number of facts and figures at any one time, and so the result is not so good. Instead of looking at the situation as a whole, the conscious mind tends to focus on the most obvious elements and, in doing so, can miss the bigger picture. In contrast, your unconscious mind is much better at dealing with the complex decisions that pervade many aspects of our lives. Given time, it slowly works through all of the factors and eventually reaches a more balanced decision. Dijksterhuis and Van Olden’s explanation for the effect, referred to as the “unconscious thought theory,” argues for a kind of middle ground when making complex decisions. Thinking too hard about an issue is in many ways as bad as making an instant choice. Instead, it is all a question of knowing what needs to be decided, then distracting your conscious mind and allowing your unconscious to work away on the issue. And how do you get your unconscious mind to work on a problem? Well, just as we saw in the section on boosting creativity, one technique involves keeping the conscious mind busy with a distracting but difficult task, such as solving anagrams or counting backward by threes.

Solving anagrams before making an important decision is, of course, not the only way of helping to ensure that you won’t regret the decision. In fact, according to other research, there is an even quicker way of minimizing the likelihood of regretting a decision.

Thomas Gilovich, at Cornell University, has been studying the psychology of regret for more than a decade. His findings make fascinating reading.15 Much of his work has involved asking people to look back over their lives and describe their biggest regret. About 75 percent of respondents regret not doing something, with the top three slots taken by not studying hard enough at school, not taking advantage of an important opportunity, and not spending enough time with friends and family. In contrast, only 25 percent of people regret doing something, such as making a bad career decision, marrying someone they didn’t love, or having a child at the wrong point in their lives.

It seems that part of the problem is it’s relatively easy to see the negative consequences of something that happened. You made a poor career decision, and so you were stuck in a job that you didn’t enjoy. You had kids when you were very young, and so you couldn’t go out with friends. You married the wrong person, and found that you constantly argued. The negative consequences are known, and so although the potential for regret may still be substantial, it is limited. However, the situation is completely different when it comes to things that didn’t happen. Suddenly the possible positive benefits seem almost endless. What would have happened if you had accepted that job offer, been brave enough to ask the love of your life on a date, or spent more time at school studying? Under these circumstances, you are limited only by the power of your imagination.

Gilovich’s fascinating work provides scientific support for the words of the nineteenth-century American poet John Greenleaf Whittier, who once noted, “For of all sad words of tongue or pen, the saddest are these: It might have been.” .


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Wiseman, Richard (2009-12-15). 59 Seconds: Think a Little, Change a Lot. Knopf Doubleday Publishing Group. Kindle Edition.

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