As human beings, we use mental shortcuts to make our lives easier to navigate. These shortcuts, known as heuristics, allow us to function without constantly stopping to size up every situation before making a decision about what to do next. In an emergency, mental shortcuts may save our life. But on a daily basis, they may cause us to jump to an inaccurate conclusion about a person or situation.
As part of the Leadership Cincinnati program on Inclusion last week, I participated in a variety of experiences designed to stimulate discussion about religious, racial, sexual and socioeconomic differences that exist within the greater Cincinnati area. Friday night, I had dinner with 18 women at the Anna Louise Inn, across from the Taft Museum downtown.
One of the women was professionally dressed in a grey pinstripe suit, with a pearl necklace and earrings, and I assumed she was one of the program directors. Later in the evening, I learned she was one of the participants in the Off the Street program, an outreach for women involved in prostitution. In her former life, she was a soccer mom in Anderson living in a big house with her husband and three kids. Then she had surgery, became addicted to her prescription pain medication, and forged a prescription for more. She was convicted and sent to prison, where she became addicted to heroin. When she was released from prison, she resorted to prostitution to support her addiction. She’s now working to remain free of drugs and rebuild her life.
It’s easy to rush to judgment when life experience encourages us to create mental shortcuts to deal with new people and situations.
In our work as financial planners and investment advisors, we help people overcome mental shortcuts when they read the news, and see drops or jumps in stocks or bonds as a ‘clear’ indication of what is to come. Financial markets have many layers of complexity. One piece of news – a health care bill or announcement about US policy in Syria – is not the only force acting on individuals’ decisions to buy or sell investments.
Heuristics make our lives easier to navigate, but when we oversimplify situations, we may find ourselves acting on the wrong conclusions.