How You Think Is How You Spend

Our actions and thoughts translate into how our money life shapes up. Look for blind spots before you make any money decisions

- By LARISSA FERNAND, Behavioural Finance Expert

I just read Steven Pinker's latest book, When Everyone Knows That Everyone Knows. In a simplistic way, it is a book about how we think. He tackles many of life's enigmas—harmony, hypocrisy, outrage, cancelling culture—and weaves them into game theory and common knowledge.

I have picked out five aspects or narrations from which we can take a money application.

Lesson I: Actions Speak Louder Than Our Words

A defendant was on trial for murder. There was strong evidence indicating his guilt, but there was no corpse. In his closing statement, the defence attorney stated to the jury: "I have a surprise for you all. Within one minute, the person presumed dead will walk into this courtroom."

After making that bold declaration, he turned and looked towards the courtroom door. So did the judge. So did people in courtroom. There was silence in the court as all eyes were on the door.

The defence attorney eventually broke the silence with, “Apologies. I made it up. But you all looked at the door in anticipation, not disbelief.

So, clearly there is reasonable doubt as to whether anyone was killed. That itself should lead to a verdict of 'not guilty." When the jury pronounced a verdict of 'guilty, the jury foreman explained: "We all looked, but your client did not."

Learning: Actions speak louder than words. You may proclaim that you live a fairly frugal life, but money just slips through your fingers. The truth is, if you add up all your expenditure, you may realise where your blind spot is.

Lesson II: The Need For Communication

James and Charlotte enjoy each other's company and decide to meet for coffee. Being a workday, they decide to meet at 6 pm. However, James's cell phone’s battery dies before they could fix the venue. So where will they meet?

Both are aware that James frequents 'Java Joint' and Charlotte frequents 'Connection'.