McDonnell and Deeds: Are You Listening?
I decided to take a short break from reviewing Cordelia Fine's book and talk about one of the most common thinking errors we humans fall prey to: "anchoring."
This occurs when we irrationally fixate on a number. We see this happen all the time. "Sell this stock when it gets back to what I paid for it." "I will refinance if I can get the rate below 5%." "I will sell this house for $250,000 and not a penny less." And so on. Often this fixation or anchoring on numbers is a form of regret avoidance.
Which brings me to my recently purchased Virginia state safety inspection sticker. . .
I recently took my car to the local Firestone to have a small nail removed from the tire. When I later picked up my car, the attendant reminded me I needed a new safety inspection sticker on my windshield. He assured me not to worry, since the car was only a year old and there was nothing wrong with it. He did warn me though that I could get a ticket if the sticker was expired. So I dutifully paid him $16 and purchased the nice new sticker you see to the left. As I drove home from Firestone, I couldn't help but think about anchoring. Obviously, the lawmakers who determined that vehicles need to be inspected for safety reasons were anchored on the one year or twelve month time frame. But why should vehicles be inspected every twelve months?
Don't get me wrong. The requirement to have your vehicle inspected supports the worthy social purpose of keeping unsafe vehicles off the road. But shouldn’t the Commonwealth accomplish its worthwhile objectives in a way that imposes the least costs and interference on its citizens?
Vehicle inspections verify such safety features like working horns and brake lights. But data for failure rates on safety features like brake lights is readily available, and an auto manufacturer would not be able to produce a car if the brake lights had a high failure rate in the first year. It seems to me that by studying the failure rates of vehicle safety features, one could determine the optimal time between inspections. Most likely, newer cars could be inspected much less frequently than once every twelve months, and older cars might even need to be inspected more frequently.
While this may seem like a minor point, Ask.com reports there are 62 million registered vehicles in the United States. There are probably at least 1.2 million in Virginia. At $16 dollars per inspection, Virginia citizens will spend about $200 million dollars over the next ten years on state inspections. If the Commonwealth of Virginia is going to require its citizens to spend $200 million dollars, doesn't it make sense to make sure all the money is spent wisely?
If lawmakers knew the subtle influences that can sway better decision-making practices, they may have realized they had irrationally anchored on twelve months. A study could determine the optimal time between safety inspections based on a car's age. The result would likely be lower costs for consumers, and maybe even safer roads for motorists. If anyone reading this has Governor Kaine's ear (or Bob McDonnell or Creigh Deed's), could you please forward him a link to this post?
Decision-Making Best Practice #5: When making decision regarding numbers, ask your self what the rational is for picking a particular number. If you can't give a compelling reason, most likely you are anchored on that number. Try to find a way to calculate the best number.
This occurs when we irrationally fixate on a number. We see this happen all the time. "Sell this stock when it gets back to what I paid for it." "I will refinance if I can get the rate below 5%." "I will sell this house for $250,000 and not a penny less." And so on. Often this fixation or anchoring on numbers is a form of regret avoidance.
Which brings me to my recently purchased Virginia state safety inspection sticker. . .I recently took my car to the local Firestone to have a small nail removed from the tire. When I later picked up my car, the attendant reminded me I needed a new safety inspection sticker on my windshield. He assured me not to worry, since the car was only a year old and there was nothing wrong with it. He did warn me though that I could get a ticket if the sticker was expired. So I dutifully paid him $16 and purchased the nice new sticker you see to the left. As I drove home from Firestone, I couldn't help but think about anchoring. Obviously, the lawmakers who determined that vehicles need to be inspected for safety reasons were anchored on the one year or twelve month time frame. But why should vehicles be inspected every twelve months?
Don't get me wrong. The requirement to have your vehicle inspected supports the worthy social purpose of keeping unsafe vehicles off the road. But shouldn’t the Commonwealth accomplish its worthwhile objectives in a way that imposes the least costs and interference on its citizens?
Vehicle inspections verify such safety features like working horns and brake lights. But data for failure rates on safety features like brake lights is readily available, and an auto manufacturer would not be able to produce a car if the brake lights had a high failure rate in the first year. It seems to me that by studying the failure rates of vehicle safety features, one could determine the optimal time between inspections. Most likely, newer cars could be inspected much less frequently than once every twelve months, and older cars might even need to be inspected more frequently.
While this may seem like a minor point, Ask.com reports there are 62 million registered vehicles in the United States. There are probably at least 1.2 million in Virginia. At $16 dollars per inspection, Virginia citizens will spend about $200 million dollars over the next ten years on state inspections. If the Commonwealth of Virginia is going to require its citizens to spend $200 million dollars, doesn't it make sense to make sure all the money is spent wisely?
If lawmakers knew the subtle influences that can sway better decision-making practices, they may have realized they had irrationally anchored on twelve months. A study could determine the optimal time between safety inspections based on a car's age. The result would likely be lower costs for consumers, and maybe even safer roads for motorists. If anyone reading this has Governor Kaine's ear (or Bob McDonnell or Creigh Deed's), could you please forward him a link to this post?
Decision-Making Best Practice #5: When making decision regarding numbers, ask your self what the rational is for picking a particular number. If you can't give a compelling reason, most likely you are anchored on that number. Try to find a way to calculate the best number.
Labels: anchoring, Bob McDonnell, Creigh Deeds
