I just finished reading Malcolm Gladwell’s “Blink” and have gotten some interesting insights about how to make use of some of the understanding from the book to refine my approach towards financial freedom.

My quest towards financial freedom involves exploring many different avenues in terms of how to live within my means, to save and invest, to grow and protect my means.

As I explore different options, it becomes clearer and clearer to me what strategies are possible and the associated risks and benefits of trying them out.

What is Blink about?

Gladwell‘s book basically discusses how human beings make decisions intuitively. There is a part of our brain that works subconsciously to process information we get from situations we find ourselves in and makes decisions for us “intuitively”. What conventional wisdom used to call extra sensory perception, hunches or a feeling turns out to be part of how our brains work to make decisions quickly based on key criteria.

He calls this approach “thin-slicing” and it is part of how we evolved to make sense of the stimuli and information we get from our environment. The studies mentioned in his book cover some examples such as how a researcher could tell if a couple would split based on 20 minutes of analysing their conversations and how they interacted with one another in a lab setting. Gladwell also gave the example of the experienced fire-fighting Lieutenant who would instinctively lead his men out of dangerous situations even before he could articulate why he thought it was dangerous.

I too believe in intuition and hunches on occasion but there are limits to “thin-slicing” and making quick and accurate decisions based on a few key factors plucked out from the mass of noise and confusion that is typical for modern day life situations.

Gladwell also shares that there are limits to “thin-slicing” in that having the inaccurate assumptions and drawing the wrong conclusions from the situation can also be fatal in the case of police officers who shot and killed an unarmed man who just happened to be sitting at the front of his apartment block getting some air.

What can we learn from Blink?

Ever since I got into trading investing equities since 2003, I realised that some of my good and bad decisions on speculative punts were done intuitively. Initially, the results were okay because I was an idiot and made money in a bull stock market. However, when things turned sour especially in late 2008 during sub-prime, all the intuition was exposed as being totally shallow and without depth.

I started to learn the limits of my own trading prowess (or lack thereof) but realised that there were occasional opportunities to make “kopi” money trading on volatile moves of selected stocks I was familiar with.

I could see how in some situations, my intuition could kick in to result in a bet that turned out positive and that I could make very quick decisions on whether to buy/sell but based on a narrow focus. I.e. I only can make such decisions on certain indicators which was a signal to me and only on my list of 15 or so stocks I track.

Of course, my decisions can be wrong but I’m learning to develop this “thin-slicing” ability over time.

We can all learn about the pros and cons of what our brains already do, i.e. make sense of the mass of information, data and noise by using certain heuristics that we are not aware of and to be more conscious of it.

In my work, I’ve developed a simple matrix of criteria and weights to work backwards how I make decisions on doing a certain type of inspection. When I first started such inspections, I did almost 100% of them to learn about the process. Once I achieved a certain degree of competence, I decided to make judgements on which inspections we would do and which we would not. I realised that I actually had certain criteria working but didn’t spell them out in black and white. This helped me to put on paper what was running in my brain when I made those decisions.

How do I apply it to my journey in financial freedom?

Even as you walk along this journey towards financial freedom, have you examined how you make decisions on whether an investment opportunity is really as  good as it seems or is a thinly disguised Lehman Minibonds type of high risk investment? How do you tell if your investment advisor or financial planner is straight with you and not trying to push the highest commission product to you ostensibly for your benefit?

There is no right answer but experience and being aware of where and how our intuition can help and hinder us at the same time would be useful to learn how we make decisions, especially those that affect our journey towards financial freedom.

Do you do “thin-slicing”?

How does your intuition help or hinder you towards investing decisions?

Do women have better intuition than men?

Share with Panzer in the comments section.

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