On a jog last week, I was listening to a Freakonomics podcast by Stephen J. Dubner, co-author of the bestselling book with the same title. The podcast was called “How to Make a Bad Decision” and featured Toby Moskowitz, an economist at Yale, who recently co-wrote a paper called “Decision-Making Under the Gambler’s Fallacy” in which he and his co-authors explore how the sequencing of decision-making affects the choices we ultimately make.
In the podcast, Moskowitz explains the so-called gambler’s fallacy: “People have this notion that randomness is alternating. And that’s not true.” He uses the example of flipping a coin 10 times. In theory, you have a 50/50 chance of flipping tails each time (so five tails in 10 coin flips), but in reality, you could just as easily flip 10 tails in a row. But people naturally have a difficult time accepting this truth, and it’s this same psychology that gets people into trouble in Vegas…thinking they can play the odds and win.
Moskowitz goes on to explain how the gambler’s fallacy can sway our better judgment. “There’s all kinds of possible areas where the sequence of events shouldn’t matter, but our brains think they should, and it causes us to make poor decisions.”
Overriding human logic
Think about a home-plate umpire calling balls and strikes. Moskowitz analyzed data from Major League Baseball…he used a tremendous sample-size consisting of over 12,000 games. What he discovered was startling. “If I see two pitches on the corners, one happened to be preceded by a strike call, and one that didn’t — the one preceded by a strike call, the next pitch will less likely be called a strike about three-and-a-half percent of the time.” Moskowitz found. “Now if I increase that further, if the last two pitches were called a strike, then that same pitch will less likely be called a strike 5.5 percent.”
What does this all have to do with continuing care retirement communities (CCRCs, also called life plan communities)? Well, another obstacle to unbiased decision-making discussed by Dubner and Moskowitz in the podcast is a concept called sequential contrast effects. In the simplest terms, it means that your feelings about something depend on what you saw just prior. As an example, Moskowitz observes that if you read a great book last week, the book you read this week won’t seem as great, even if it is really, really good.
But here’s an important point about this phenomenon: The more time that passes between events, the less impact it has.
Now, let’s consider this in terms of senior living decisions…
If you are in management or sales for a CCRC: How can these human decision-making fallacies impact prospective residents’ opinion of your CCRC? Consider a prospect who is visiting two or three communities in one day or over a weekend. If you have the ability to influence the order in which seniors visit your community, do you think you’d prefer your CCRC be first on the itinerary? Second? Last? If you believe that your community truly stands out from the competition, what are some ways that you could work to get prospects to explore your community before they look at others? Do you think it would make a difference? You may say no, but research suggests that it might.
Or, if you are a senior who is considering various CCRCs: How do you think the order of your visits impacts your ultimate decision? Are you truly considering all of the factors, or are you succumbing to sequential contrast effects? It’s something to be aware of so you can try to keep your mind open as you visit and learn about each community.
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