Why Do We Make Such Bad Real Estate Choices?

Leonard Mlodinow wrote that “we expect things to happen for good, understandable reasons.  But our clear visions of inevitability are often only illusions.”    

Before you read this blog,  just a couple of words of warning:  If you are a wine expert  or if you have a wine cellar with thousands of dollars of wine purchases, do not read this blog or watch the video linked to it.  It is Friday   

Click On Image To Link To Video

and you and I have better things to do than fight.  I don’t know many people who enjoy being questioned about the purchases they have made, and Leonard Mlodinow does that.   

The short video humorously explains how we are influenced in our wine tasting ability by the expectations that we have.  Whether it is the expectation of price, or as he points out in his book The Drunkard’s Walk, the expectation of smell, our ability to “taste” the flavors of the wine have more to do with our expectations than with our taste buds.   

Forget that Stephen Hawking had this to say about Leonard:  

“In The Drunkard’s Walk Leonard Mlodinow provides readers with a wonderfully readable guide to how the mathematical laws of randomness affect our lives. With insight he shows how the hallmarks of chance are apparent in the course of events all around us. The understanding of randomness has brought about profound changes in the way we view our surroundings, and our universe. I am pleased that Leonard has skillfully explained this important branch of mathematics.”   

No, the real qualification of Leonard is that he wrote for the TV series “MacGyver.”   

 MacGyver was the TV series where the hero could find a piece of duct tape, a pin and some random materials and create the most advanced piece of weaponry to escape the crisis he was facing.  You could watch that show and anticipate, in fact you could know, that MacGyver was going to do something awesome.   

Expectations shape how we make our decisions and the importance in understanding this is huge for architecture, urban planning, political policy and many other areas.  But let’s focus for a little on architecture and urban planning.  How good are we at anticipating the future?  If we are good at future anticipation, we will be good at our planning.  If our ability to anticipate the future is bad, our ability to make decisions will be “random.”   

In his book The Black Swan Nassim Taleb points out how poorly humans are at predicting the future especially when it comes to complicated systems.  Mlodinow, in recognizing that humans are poor at making complicated decisions said, “I wrote this book in the belief that we can reorganize our thinking in the face of uncertainty.  We can improve our skill at decision making and tame some of the biases that lead us to make poor judgements and poor choices.”   

I designed a large house for a young couple several years ago that was centered around a racket ball court.  The husband explained to me that he loved playing with his friends and thought it would be great if his friends came over and played at his house.  Then after playing, he could socialize with his friends while still being at home with his wife and their young child and the baby they were expecting.  A couple of years later the racket ball court was a dust collector.  

Another young couple were planning their first house and they had millions to spend.  So the kitchen had to have the equipment that was in their favorite restaurant.  We spent hours measuring, ordering and equipping that kitchen.  One year later I asked how they were enjoying the home.  The wife responded, “Do you know how much time it takes to make that equipment look presentable when someone is coming over?”  The house went up for sale shortly thereafter and the marriage was saved.  

It is one thing to be fooled by our anticipations with a bottle of wine.  But when it comes to real estate and urban planning, we have to live with our bad choices as individuals and as a community.  The science of choice is advancing rapidly today and giving us greater insights into how we as humans make good choices and where we make bad choices.  I wish we were all MacGyvers and could find a piece of duct tape and a pin and fix the problems we face, because we are in a mess in real estate and planning in 2010.  We are not, however, MacGyvers; but we can begin to understand how expectations are extremely dangerous as the decisions we make get more complex.

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