YOUR BRAIN ON REAL ESTATE | OCTOBER 2015 11489E 08-15

For one thing, Buffett admits the past year’s mistakes, right up front. His 2015 letter includes owning up to a real dud, an investment in the UK supermarket chain Tesco.

“Attentive readers will notice that Tesco,” Buffett writes of the third largest retailer in the world, “which last year appeared in the list of our largest common stock investments, is now absent.

An attentive investor, I’m embarrassed to report, would have sold Tesco shares earlier. I made a big mistake with this investment by dawdling.” Now Berkshire Hathaway shareholders aren’t barking at Buffett (he speaks live to them, direct, in his famously folksy way) over the Tesco bellyflop; Berkshire Hathaway stock topped $200,000 US per share in 2014 but the deeper psychology is worth considering for anyone dealing directly with the consumer public.

Trust is the most valuable brand attribute a financial services expert has: without it, you have nothing. But human nature being what it is, trust often bubbles up in weird and wonderful ways. That’s likely because we value trust most when we’re stressed, which many people are when they have financial business to transact.

Turns out that trust is a paradox. And the bugaboo that drives so many of us crazy, in ourselves, our significant others and (yup) our co-workers—perfectionism—is actually counterproductive in generating trust between people.

Here’s the thing: we like it when people are fallible, especially if they’re experts.

Now this type of trust isn’t what you’d call obvious at all: it’s a flat-out paradox, when you consider entire companies have been built on their ability to outperform the competition by failing less.

Fact is, human beings love seeing other human beings being human. The popularity of YouTube “fails” videos isn’t the finest expression of this phenomenon but you can’t argue with 12 million hits for a “fails” compilation. Somebody’s watching. But we’re talking about something more subtle.

Financial services experts are almost always portrayed as sober, business-attired people; their visual branding is “I won’t screw up your investment. Really, I won’t.”

PART EIGHT OF A SERIES

SPECIAL FEATURE Believe me: I have no idea what I’m talking about

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Anybody who invests a little knows Warren Buffett’s annual letters, sent to shareholders of Buffett’s astonishingly profitable Berkshire Hathaway holding company.

What most people haven’t gleaned—including EXPERT/ease, until we stumbled across an interview on the Stanford business school website—is that there’s a clear pattern in the Oracle of Omaha’s masterful letters and hugely successful live investor presentations.

uFCT.ca BELIEVE ME: I’VE NO IDEA WHAT I’M TALKING ABOUT | OCTOBER 2015 2

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We don’t want to think of our banker spilling his coffee on his tie or her new blouse, but everybody does it. And when a celebrity blunders an Oscar speech before billions of eyeballs, their popularity almost invariably ticks up. “Ahhh,” we say to ourselves, “that’s just so (fill in the blank with your favourite celebrity)!”

Psychologists have known this paradox for decades but it’s little-mentioned, especially in an era when superstar CEOs are supposed to be error-free automatons.

Wrong. Certainty of explanation persuades us less, not more.

Stanford business school researcher Zak Tormala’s work (cheekily entitled “Believe me: I have no idea what I’m talking about: the effects of source certainty on consumer involvement and persuasion”) examines “source certainty” as a barometer of how a consumer responds in believing a subject matter expert versus non-expert.

It’s entirely not what you’d think.

What Tormala has discovered is compelling. “Source certainty” stems from behavioural research which suggests attitudes held with certainty are far more resistant to change—a behaviour most of us have experienced: it’s like the neighbour down the street whose nail-hard political beliefs aren’t worth arguing with. He’s never going to change his mind.

But at an interpersonal level, when communicating with consumers, the situation is coloured by perceptions of value (“what’s in it for me?” being but one perception), power, hierarchy and the substance of the transaction itself.

Most of us wouldn’t ascribe much weight to the supermarket demo person at the end of aisle 4 because we’re really after is a snack, not a sell. That’s trivial compared to transacting a mortgage, not least because trivial is the last thing we’re feeling in a bank office, negotiating a mortgage.

Here’s Tormala:One potentially compelling prediction is that source certainty generally enhances the persuasive impact of a message. The logic (suggests) expressing certainty increases one’s perceived credibility—for example, knowledge or authority—and credibility, in turn, has a robust positive effect on persuasive outcomes.

In other words: we’d expect greater persuasion by stronger rather than weak arguments when engagement is strong as well, that is, when source authority and source certainty are both high—the consumer is focusing on the source.Nope: that prediction’s entirely off the mark.

Turns out that trust is a paradox. And the bugaboo that drives so many of us crazy, in ourselves, our significant others and (yup) our co-workers—perfectionism—is actually counterproductive in generating trust between people.

Here’s the thing: we like it when people are fallible, especially if they’re experts.

Now this type of trust isn’t what you’d call obvious at all: it’s a flat-out paradox, when you consider entire companies have been built on their ability to outperform the competition by failing less.

Why? Because that’s not what human beings do. We invert the relationship between source certainty and source authority and prefer to believe people who know more about something when they undersell what they know.

And the reverse is true: we believe non-experts more strongly when they’re more demonstrative and engaged in what they’re telling us. (Passion and enthusiasm carry far more weight for many transactions than confidence in a person’s competence.)The importance of this paradox in relating to consumers and sales couldn’t be more clear.

Most of us have experienced the high-pressure close and couldn’t wait to get back to our cars afterwards. It’s an awful feeling.

So too is the earnest salesperson’s story of how the product or service on offer has changed lives. Even if it has, don’t say so: Tormala predicts it’ll blow your sales prospect right out of the water.

Here’s why.

We invert our expectations when a weak source expresses a strong opinion versus when a strong source expresses an uncertain opinion. Tormala’s work suggests that this is because people report greater involvement and more favourable attitudes when source authority and source certainty were out of whack.

Classic example? Tormala cites restaurant reviews. When a gourmet reviewer glows unconditionally about a restaurant’s incredible cuisine, we’re far less likely to believe him or her than if the review details two or three less-than-perfect experiences in the otherwise stellar meal.

It’s almost a “too good to be true” scenario, isn’t it? Or worse: we think it’s a calculated “sell.”

Tormala suggests the behaviour’s even more interesting than that: source authority and source certainty don’t reinforce each other. “Whether it’s a person without established authority in a given domain expressing very high certainty, or a person with clearly established authority in a domain expressing low certainty,” Tormala says, “the inconsistency is surprising. It draws people in. And as long as the arguments in a message are reasonably strong, being drawn in leads to more persuasion.”

BELIEVE ME: I’VE NO IDEA WHAT I’M TALKING ABOUT | OCTOBER 2015 31549E 10-15

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We invert our expectations when a weak source expresses a strong opinion versus when a strong source expresses an uncertain opinion.

Tormala’s work suggests that this is because people report greater involvement and more favourable attitudes when source authority and source certainty were out of whack.

Classic example? Tormala cites restaurant reviews. When a gourmet reviewer glows unconditionally about a restaurant’s incredible cuisine, we’re far less likely to believe him or her than if the review details two or three less-than-perfect experiences in the otherwise stellar meal.

It’s almost a “too good to be true” scenario, isn’t it? Or worse: we think it’s a calculated “sell.”

Just because you’re behind a desk with a fancy title doesn’t mean I believe what you’re telling me. In fact, the bigger the trappings of authority, the less compelling the persuasion, is Tormala’s message.

It’s an inverse relationship.

All of which means that one of Warren Buffett’s delightful traits—humility in the face of a screw-up—is exceptionally good business practice and a remarkably good argument for underselling not just your product or service but yourself as well.

Mistakes are forgiven the more relatable the personality.

Bottom line? Attitude, is everything. Make your mistakes transparent, show you’ve learned from them, share the story judiciously and humbly—and your clients will find you far more persuasive than the perfectionist you.

Be your flawed, imperfect self.Well, that’s a relief, isn’t it? p

BELIEVE ME: I’VE NO IDEA WHAT I’M TALKING ABOUT | OCTOBER 2015 41549E 10-15

PART EIGHTOF A SERIES

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Mistakes are forgiven the more relatable the personality.

Bottom line? Attitude, is everything. Make your mistakes transparent, show you’ve learned from them, share the story judiciously and humbly—and your clients will find you far more persuasive than the perfectionist you.