Suggestion, Anchoring, and the Adjustment Heuristic

I've recently been reading (listening on audio!) through Daniel Kahneman's "Thinking Fast and Slow" and one idea struck me that I haven't been able to get out of my head:  Anchoring and the Adjustment Heuristic.  Here is the Wikipedia definition:

Anchoring or focalism is a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the "anchor") when making decisions.

Kahneman and Amos Tverskey Kahneman goes over numerous examples of this bias; one involved asking study participants if Gandhi was 144 years old when he died.  While this question is obviously absurd, as 144 years is longer than anyone can live, it sets an "anchor" from which the participants "adjust" from.  Participants adjust down from 144 to reach their answer. 

In another example, real estate agents were given sufficient information to assess the value of a house.  Within this information was the list price.  Some agents were provided information with a very high list price while others were given a very low list price.  The ones given the high list price produced a significantly higher value of the home than did those who were given the low list price. 

Trips Over Gifts

My wife and I have an agreement:  If at all possible, we don't buy each other gifts for birthdays or holidays, but instead use that money towards experiences.  This agreement forces us to use our imaginations to come up with something fun to do for special occasions and compels us to step outside of our comfort zones to try new adventures.  I'm not saying we haven't ever bought each other something, but the idea is that an experience, if at all possible, takes precedence over material goods.  And they don't have to be huge, expensive experiences - just something thoughtful.  A nice night downtown or a   A few of my favorites have been:

-Hot air balloon ride in Asheville, NC. 
-Great American Beer Fest in Denver and offseason stay in Vail
-Deep Sea Fishing in San Diego

Each of these coincided with a trip that we already had planned.  With sites like Groupon and LivingSocial, these types of experiences can fit within a budget.  I'm not going to try to tell you that they are cheap, because they aren't, but they also don't need to break the bank.  There are many activities that can be enjoyed for much less than a gift would ever cost. 

Review: "Getting There" - Gillian Zoe Segal

"Getting There" may be my favorite book of 2015.  Gillian Zoe Segal does a fantastic job compiling anecdotal stories of successful people from all walks of life.  The book is structured such that each story is approximately 2-4 pages long, with some biographical information on the subject.  Each section concludes with lessons, or "pearls", as Segal puts it, that the subject has picked up throughout their journey.  Segal's background as a photographer is obvious with a beautiful portrait of each subject at the beginning of the respective chapter.  The book in itself is a piece of art. 

Her compilation spans the globe and covers subjects from all ends of the spectrum, from Wendy Kopp, founder of Teach for America, to Laird Hamilton, big wave surfer; from Nitin Nohria, Harvard Business School Dean, to Michael Bloomberg, former New York Mayor and founder of Bloomberg L.P.; and from investor Warren Buffett to Sam Adams brewer/founder, Jim Koch.  Anderson Cooper shares his journey in journalism and discusses the sacrifices he made along the way to becoming a CNN news anchor and host of his own show.  John Paul Dejoria discusses surviving off of 99 cent chips and chicken wings and a trucker's special breakfast, while living in his car and hustling his hair products.

Shyp in Chicago!

Last night, I was fortunate enough to attend a "fireside chat" at the General Assembly in Chicago with Kevin Gibbons, CEO and Co-founder of Shyp, and Antonio Gracias, CEO of Valor Equity Partners and board member on Tesla.  Mr. Gracias moderated the discussion and had some very interesting questions Mr. Gibbons. 

In case you are unfamiliar, Shyp is a company designed to make shipping easier and "frictionless".  You simply download the app, take a picture of the item you intend to ship with a pick up address, and a Shyp courier swings by (usually within 20 minutes) to pick up your package, wrap it, package it, and send it. 

Lessons of an Investing Addict Part 3: Margin

Using "margin" means borrowing money from your broker to purchase more stock than you could afford using only your available cash.  Think of it like a credit card that you can only use to buy stock.  In this case, there can be a tremendous upside to taking the risk of utilizing margin, but there is also a significant downside if the investment goes against you - even more of a downside than just the interest you pay on the borrowed money.

The Federal Government (Regulation T) allows you to borrow up to 50% of the initial purchase price of a position, called "initial margin".  Beyond that requirement, brokerages require a minimum equity maintenance to be kept to minimize potential losses to you and to them.  These minimum maintenance requirements can vary. 

Review: "Zen and the Art of Motorcycle Maintenance" - Robert M. Pirsig

In one line, I'd summarize my thoughts on this book as, "Not worth my time" . . . or, more like, "What was that?"  I definitely stepped outside my comfort zone on this one, as I usually gravitate towards finance, investing, and social psychology books.  However, Zen showed up on a number of "must read" lists, so I figured I'd give it a shot. 

The author of this book, Robert M. Pirsig, is much smarter than I'll ever be - I'll admit it.  I struggled to follow some of the complex, abstract, and esoteric concepts described within and felt that a passing grade in an introductory course of Greek philosophy should be a pre-requisite to turning the first page.