02 Dec 2021 On your marks, get set, bake!
I am convinced that this latest season of Great British Baking Show is the best one yet. If you are unfamiliar with the show (it’s on Netflix), each season begins with 12 amateur bakers who are tasked with 3 themed challenges per episode: a signature bake, a technical bake judged blind, and a stunning showstopper. Each week, someone is awarded the title Star Baker and one person is sent home, until the last 3 contestants compete in the finale. Two judges, Paul and Prue, get to taste each creation and (in theory) decide the winner of each episode without considering any of the previous performances.
Most American competition reality shows seem to have hyper energetic music playing in the background, adding to the cutthroat environment. In comparison, the Great British Baking Show is so heartwarming! We watch the contestants praise each other for success and offer a helping hand if a catastrophe strikes. At the finale, the contestants (and the viewers) are all so incredibly proud of all 3 finalists for being there and doing their absolute best.
The contestants this season were particularly endearing and talented. The final four contestants demonstrated immense talent repeatedly each week, with some funny blunders along the way. I do not envy the decisions Paul and Prue must make. How do you rank the finalists who each receive a coveted “Hollywood handshake” for flawless bakes? Is it fair to compare Guiseppe, who grew up with baking weekly with his father in Italy, to Chigs, who started baking during Covid lockdown in 2020? What about Jurgen, who delivered such impeccable work in the early weeks that we held him to a higher standard of judgment? Or Crystelle, who continued to deliver beautifully designed creations packed with family history and significance?
There’s a term in behavioral finance and psychology called anchoring, which is when we make decisions based on information that should have no influence on the matter at hand, often leading to irrational decisions. Anchoring occurs when we rely heavily on the first piece of information we learn – even if it is no longer relevant to the situation. Many people this year seem to think that a runner-up deserved to win if the judges truly chose the winner based on ONLY the final week. But as Jared wrote about a few weeks ago, can we really make decisions in a vacuum? What were all the factors the judges really used to declare the winner?
I polled other friends who watched this season, and the (very informal) results support my theory that anchoring played a part in the judges’ selection of the winner. They looked at the entire season in order to choose the final winner. I asked people to defend their personal preference and here are some of the responses:
- “Jurgen was held to a higher standard because he started off so strong.”
- “Chigs should win because he just learned to bake a year ago.”
- “Guiseppe learned from his father and I love knowing his family baking legacy!”
- “Crystelle improved each week more than anyone.”
- “Based off the last episode, ___ should not have won but based on the entire season, it makes sense.”
All that to say, context matters. How do you compare only the final bakes when you know the contestant’s stories and backgrounds, and remember their past baking snafus and successes? One judge specifically mentioned the winner’s very first bake as a justification for his choice in the finale. It is impossible to fully prevent any of our biases coming through, but it is possible to bring them to light, and that’s part of what we can do as financial planners.
Biases are a part of life and something that we keep in mind when working with our clients. Both the client and planner bring biases to the conversation. The strength of our relationship can be enhanced by naming those biases and incorporating them into the decision-making process. When we name something, it becomes a known instead of unknown. Biases are ever present, but are we noticing them? Do we change anything about our decision-making approach once we acknowledge our biases?
My informal poll about the show demonstrated how people chose one primary piece of information to carry them through their preference in winner – consistency throughout the season, the length of time someone has been baking, the contestant’s motivation for baking, etc. What if someone had a bake worthy of the finale in Week 1, but couldn’t keep replicating that each week? Should we compare bakers based on their length of time honing their skills? Or should everything be judged blind?
We can ask the same sorts of questions in our financial life, too. Do we keep holding on to a stock because it used to perform well? Or hold onto it because we have a family attachment to the company? Whether you answer those questions with a “yes” or “no” isn’t the point. Keeping a stock holding because you inherited it from a family member isn’t inherently a right or wrong move. Acknowledging and naming that we have an emotional attachment is helpful, though, so if our biases conflict with our stated financial goals, we can grapple with the potential impact those beliefs may have on our financial plan.
When the news reports that the market opens down 800 points, the headline is phrased in a way to create anxiety and keep people glued to the news. Then the story continues, and we realize that an 800-point decline today is very different from an 800-point decline 5, 10, 20 years ago. The starting point has changed. We are quick to put the headline in terms of a percent and realize that volatility is normal and remember that we are long-term investors.
The kicker is that sometimes our internal narratives do the same thing as the news, and it’s not as easy to spot the spin we add to our own stories. What is the lens through which we examine our financial lives? Those are some of the fun questions we explore together in the client/planner relationship. Recognizing our own biases takes courage and often requires insight from others around us. Sometimes we need to unlearn behavior. Sometimes our biases are helpful and protect us from repeating errors in judgment.
Sometimes all we need is someone else to say, “I think you’re keeping your ciabatta in the oven too long because you’re afraid of underbaking something like you did last week.” Or in our world, “You have flexibility in your financial plan for your current retirement goals – let’s take one step toward making (insert goal here) a reality.”