A Sample of One
Hughism: Most people take a sample of one.
I once knew an older gentleman who had been fairly successful in real estate. He had bought apartment buildings over the years, leveraged them well, used the rents to pay down the mortgage and now had a large income stream every month that surpassed his needs by a considerable amount.
The excess he put in a safe in his office until he had enough for his next down payment. I am not kidding. He put it in his safe. At any given time, he might have had $25-30,000 in the safe. Earning NO interest whatsoever.
I recommended he put the excess cash in laddered CD’s so he could have the safety of the bank plus relative liquidity. He said no.
Why?
It seems his father had his life savings in bank CD’s and lost everything…in 1933. Thus, this guy had told himself that because of this experience, he was never going to trust a bank with his cash.
Never mind FDIC insurance, never mind the Great Depression. None of that mattered to him.
Based on a sample of exactly one.
While this is admittedly an extreme example, the same thing happens all the time.
A customer comes in your store and writes a check for $12; it bounces. The bank charges you $10 for the trouble and worst case, you never see this guy again. Thus, you put up a sign saying NO CHECKS and offend other customers and lose sales. Over $22.
A teenager comes into your shop and slips a candy bar in his knapsack; you see him as he runs away. Now you have instituted a NO knapsack policy, requiring customers to check their bags at the door. Over a candy bar.
I sell a lot on eBay. In any given year, some 40-70% of my income comes from eBay. I have performed thousands of transactions over the years. I have been stiffed by customers maybe 4 times, for a total loss of less than $50. All the fees of which I have been reimbursed by eBay when I filed non-payer bidder. So I am out zero cash, right?
This is why I laugh when I see warnings like this in an auction listing.
You MUST pay me within 5 days or I will leave you negative feedback. These prices are NOT negotiable, do not ask. I only take PayPal, so don’t ask for anything else. I ship every Tuesday and Thursday, so pay quick to get in the next shipment. If you don’t want to pay extra for the insurance then I am not responsible if your item gets lost in the mail. Thanks for looking and Good Luck Bidding!
When you read this, do you feel like the seller is hoping you have a great experience? I don’t. I think the seller is convinced I am a thief who is going to try to wheedle them down on price and then make a false insurance claim. Then they tell me “Good Luck Bidding!” More like, Good Luck Buying.
More than likely, this seller once had a check from a customer bounce, so they went to a NO CHECK policy. Then they heard that their friend Joe had heard about a fake money order someone on eBay got ripped off with, so now NO money orders either. Now they only take PayPal, leaving huge amounts of money on the table and scaring potential bidders off.
The sample of one. Most people make decisions based upon it.
It is why customers do not come back.
It is why bad decisions get made.
Can you think of any more examples where bad decisions are made based on radically insufficient data?