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Assumptions Cost You Big Money and the Science behind That

 

Big mistakes cost you big money. At least, this is how it works with me.

Making the mistake of not looking after our finances cost me £100,000 worth of consumer debt. (Shameful, I know. What gets me most is that even today, if I mention this to people I know they look at me as if were a lioness on the streets of Manchester and say: ‘But how did you get in so much debt?’)

Making the mistake of buying shares because I thought biopharma is safe and liked the name of the company cost me several thousand.

This is only the immediately money related mistakes.

How about making the mistake of fancying myself in love and over-looking the fact that guy was in his mid-twenties, already an alcoholic, slept with anything that moves and frankly, cared very little about me.  Now this was a big mistake; huge! This cost me sleepless nights, obsession, low self-esteem and many wasted opportunities.

I bet that you can add to my list quite a few points. If I were you, I’d write my ‘top five mistakes’ list.

Now examine the list carefully.

Can you spot what all these mistakes have in common? Apart from costing you big money, that is.

Let me help a bit here. Most big mistakes come from the wrong assumptions you’ve made.

Not looking after our finances cost me big money because of the assumption that life is separate from money. Okay, we all know different around here now.

I bought worthless shares and this cost me big money because I had assumed that it is all about luck; for that matter, at the time I also assumed that gambling is all about luck. This is simply not the case.

I fell for a drunk who didn’t love me – and wasted seven years of my life – because I assumed that I have the power to change that. Young people can be naïve like that.

Assumptions can be, and very often are, wrong and misleading.

Wrong assumptions is what costs you big money; making a mistake is just a by-product.

At the same time, psychology tells us that assumptions are inevitable. In fact, assumptions are what makes our lives possible.

The science behind assumptions is about the complexity of our world and the need to reduce it. In his book ‘Influence’, Robert Cialdini explains how we – and many animals – act using ‘trigger features’. These ‘trigger features’ usually relate to a very tiny aspect of reality.

In our everyday lives we call ‘trigger features’ assumptions.

You need examples may be?

What do you think of someone when you hear them speak with an Eastern European accent?

Now, you may be a more sophisticated person and say that you don’t make assumptions of status.

This is not my experience at all.

You know that I’m a full professor in a well-respected business school; in a university that currently ranks 40-42 in the world.

Some of you may have caught on to the fact that I’m responsible for five academic departments (this is close to 100 people academic and support staff) and I have a budget. It is not an overly generous one but still, it is a budget that allows me to do things.

What you don’t know is that most people hearing my accented English tend to assume one of the following:

  • I don’t know enough English (people can start talking to me very slowly and/or very loudly);
  • I don’t work.
  • I do manual work.
  • I can’t be that important (this is an interesting one and plays only in certain situations).

A week ago, I took twenty academics from the units I’m responsible for to the Lake District. You see, the pressure to publish is very strong in academe today; the problem is that there are few mentorship arrangements to enable people to write potentially influential research articles and books.

Last year, I started taking colleagues to ‘writing retreats’. We book in a hotel in the Lake District and do creative things.

Last year I was put in the worst room in the hotel. I’m not even joking; colleagues will pop in to have a look and wonder what’s wrong.

I knew what it is: the hotel management made an assumption. You see, having a clearly Eastern European name, being a woman and being the contact for the group immediately makes me un-important. They didn’t realise that I’m the one paying the bill – and a fairly decent bill at that.

This year we went to a different hotel. Management made the same assumption and I spent a night in a very dingy, dusty room. Don’t believe me?

This was my view:

cost you big money

And this is the view that the rest of the group had:

cost you big money

They moved me the next day because a colleague asked to see the manager and explained that it is bad for business to annoy the person who is paying the bill and who’ll be deciding whether this large group will be coming next year.

I won’t lie to you: I was very cross about that. It is so obviously wrong and bad for business.

Still, I’ll have to confess that I’m as guilty about making assumptions as anyone.

Finally…

What I’m saying, I suppose, is that assumptions cost you big money and there is a very good, scientific reason for that – using assumptions that we tend not to question is a way to simplify the complex world we live in and allow ourselves space to decide and act.

Assumptions are costly irrespective of whether you are making them or are victim of them. Yes, we are all – individually and collectively – that shallow. I overheard a heavily tattooed guy at the Soo Bahk Do retreat in South Korea telling a youngster that he will never work if he gets a tattoo, for example. How many rotund public and motivational speakers you can name?

Examples abound.

We’ll always make assumptions. If we don’t want these to cost us really big, we need to be aware of the main ones and examine the rest.

I know I’ve started doing this.

How about you?

Have you been on the receiving end of misguided assumptions? Or have you made mistakes because of wrong assumptions?

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