MONKEYS, GATORS, AND ELEPHANTS, OH MY!

OUR THREE BRAINS AND HOW WE SEE OPPORTUNITIES

As almost every one of our listeners knows by now, the housing market in the United States has begun to change with the deliberate increase in interest rates by the Fed. They have done that, they say, to try to get a handle on inflation and to slow down the somewhat out of control real estate price increases that have resulted from extremely low inventory coupled with extremely low mortgage interest rates. Most of the listeners of this show are connected to the real estate industries in some way as Realtors, mortgage lenders, or real estate appraisers, so your businesses are all affected by the things that affect the housing and mortgage markets. Of course, there are some appraisers who listen to the show that, like my company, also do appraisals for a variety of non-lending based needs like divorce appraisals, appraisals for estates and date of death, setting up a trust, financial planning, pre-listing valuations, and a few others. What all of those industries have also been experiencing over the years is the advancement of technology, the velocity demands of money, the increased speed at which almost all industries are able to move, and a shortage of appraisers who are willing and able to handle the volume of business that has been coming at them for a fair amount of years.

Now, I know, I always get some push back on this one, “There’s not a shortage of appraisers, Blaine! There’s just a shortage of appraisers willing to accept low fees from AMCs and the demands of….” Look, I get it! There are a variety of factors that play into the perception of an appraiser shortage and, yes, that is definitely one of the factors. However, it’s not the only factor. There is a massive inefficiency problem in that industry that many don’t want to accept because it’s them! They are the ones who can’t handle the volume in the system, so they throw the focus of the problem onto one of the other factors affecting it without ever really considering that maybe they are part of the problem. A shortage is a shortage regardless of what is causing it. If you’re the agent on a transaction, or the lender, you may not fully understand all of the inputs affecting the shortage, you just know you can’t get an appraiser out to your deal for 2 weeks, and then have to wait another week or more for the appraisal to be completed. 95% of the participants in the transaction have no control over the appraisal process, so they suffer the most from a shortage of appraisers. Appraisers can scream all they want about what might be contributing to the issue, but if you’re not one of the ones fixing the problem for the market, then you’re just one of those people contributing to the noise, not the solution.

What we’re talking about on this episode is, however, is not necessarily the interest rates, the appraiser issues, or the economy, but instead we’re going to talk about the brain and why we do the things we do. My hope is that, by understanding why we do what we do when we do it, and why we think what we think when we think it, we’ll have the opportunity to recognize when we’re making decisions based on well-worn patterns, fear, or simply distraction. So, what do these mean and why are they important? To understand them a bit better, it helps to understand how our brains work and why it does what it does.

To have a basic understanding of the brain, we have to accept that the brain’s primary directive is to keep us alive. Without life, the brain has nothing left to do and no body to give instructions to, so, in a way, we can almost think of the brain as something separate from ourselves and something with its own goals and aspirations. Its job is to keep us breathing, keep our hearts beating, help us see garbage trucks barreling toward as, help us see snakes on the trail, and so on. To give you some idea of its energy usage relative to everything else in the human body, the brain only represents about 2% of our overall body mass, yet it uses more than 20% of our oxygen and calories burned on a daily basis. The heart uses about 10% of the oxygen, the lungs use about 10%, and the kidney’s use 5%-7% of the oxygen in the body. And that, by the way, is when the body is at rest. This is called your resting metabolic rate, or RMR. The RMR is the amount of energy the body needs to stay alive. In addition to having a primary directive of keeping us alive, the brain’s secondary directive is to conserve energy when and where it can. This is part of its survival strategy. It uses three primary strategies to accomplish this.

Of the 20% of oxygen and calories burned, most of it is used doing three things: distraction, reaction, and pattern following. You might think you spend a lot of your day thinking, and yes, you might actually spend part of it doing some deep thought, but most of the time we think we’re thinking we’re actually being guided by the monkey, the gator, or the elephant. What are the monkey, the gator, and the elephant? They’re the minds within your mind and they have created most of the decisions and results you’ve gotten throughout your life. I’m going to explain each of those in more detail in a second, but I want you to understand why we’re talking about this. Once you learn how your brain works and how we tend to make decisions, it should become fairly clear how we avoid certain things, how fear guides us away from change and opportunity, and how things tend to look or sound to us based on the elephant within.

Let’s start with the monkey. If you haven’t heard the term monkey mind, it refers to the unfocused and distracted mind we all suffer from at times. The reference to monkeys is because, at times, it feels like your mind is like a monkey swinging aimlessly from tree to tree with no clear direction or purpose. It swings around up there jumping from thought to thought, idea to idea, and ending up so far away from the originating thought, idea, or task that we often forget what we even set out to do or to think about. If you’ve ever taken a class on meditation, you’ve probably heard the monkey mind reference since meditation is one of the practices that can help calm down and train the monkeys to settle down a bit over time. The monkey mind is essentially a mind within your mind and, when it gets howling and jumping from tree to tree, it’s controlling you. The brain uses distraction as a way to conserve energy from more thinking intense activities like solving math problems or writing a novel.

Moving on to the gator brain, sometimes also referred to as lizard brain or the reptilian portion of the brain. The gator brain is that million-year-old, deeply embedded part of our gray matter that is responsible for what is often referred to as the 5 F’s: fighting, fleeing, freezing, feeding, and, well, fornication. The gator brain is useful, for sure, since its job is to highlight things that might hurt or kill us. It’s the fight, flight, or freeze part of the brain that keeps us from crossing the street in busy traffic or hanging out in a dangerous part of town after dark. It’s the part of the brain that alerts us to the saber-toothed tiger lurking on the ledge up ahead. The gator brain allows us to react fairly quickly in a survival situation instead of having to rationalize and analyze the situation before making a decision. When you’re driving your car down a back road and see an approaching intersection, along with a car speeding toward you from the intersecting road, you don’t go into rational analysis mode and start calculating the assumed speed of the approaching car relative to your speed to approximate the exact moment a collision may occur. No, your gator brain kicks in and tells you either to step on it to beat the approaching car through the intersection, or to brake at the intersection and let the car pass to avoid the collision. It’s all very emotional and primal, with a little bit of patterning thrown in for good measure.

What is patterning? Patterning is the elephant portion of our brains. Why do we refer to this part of the brain as the elephant? Likely because of the old story of how elephant trainers train elephants to stay in one location. The story is that the trainer begins by using a heavy, painful chain around the elephant’s ankle for some period of time to keep it tied up. Over time, the elephant’s brain associates the trainer, the tree, and the painful chain with the fact that it can’t move when it’s tied up. At some point, the trainer can supposedly tie a piece of light string around the elephant’s ankle to keep it from running away because of the well-worn patterns now developed in the elephant’s brain. It’s called conditioning and humans are just as susceptible to conditioning as are the elephants. In fact, following these well-worn patterns created by conditioning is one of the brain’s most useful energy conserving strategies. Human beings consistently choose to follow patterns rather than generate new thoughts, new interpretations, or new ways of doing things. Not only do we consistently follow well-worn patterns in our brains, we’re constantly seeking patterns from our environments to help us make sense of the world.

To be clear, the three different brains we’ve talked about so far, the monkey, the gator, and the elephant, are not all bad. They help us survive and make decisions moment to moment and, depending on which one is the most well-honed and primed, hopefully good decisions. Patterns, for example, can help us predict the future based on things that have happened in the past. It’s how we learn not to touch the stove when it’s on. It’s how we learn to stop at a stop sign. Patterns help us conserve energy because they help us make rapid decisions based on what we already know, as opposed to having to weigh all the options and do a bunch of calculations. In the case of patterning in a survival situation, speed trumps accuracy. We don’t have to guess perfectly when the speeding car might hit us, we just have to make a quick decision to get out of the way. In fact, our brains are wired to sacrifice accuracy for speed because it helps us conserve time, energy, and brain power that may be needed for something else downstream.

The downside of how our brains use patterns to make sense of the world is that our patterns are like tethers that constantly pull us back to the known, the familiar, and the safe. Many of the patterns that are now hard wired in our brains were created by the gator brain, meaning they developed out of a fear, flee, or fight response and now they’ve become what keeps us from taking some chances or risks in life.

To get an idea of how we use patterns over analyzing data, take a moment to say the months of the year in the order you learned them. January, February, March, April, May, and so on. Now try to say all 12 months of the year, but this time in alphabetical order. Go ahead, I’ll wait… This little example shows how our brains value patterns over the data. And, although patterns help us learn and recall things, not to mention the patterns help us make sense of the world, we tend to see patterns more than we see data, so we tend to make decisions based more on our past than what might be right in front of our nose.

And that, my friends, is why we’re talking about these three brains we all have. We’re prone to distraction, to making decisions based in fear, flight, and food, and we are always looking for recognizable patterns that might help us make better decisions. But what happens when you look around and everything you see looks different from what you’re used to? What happens when the landscape has changed, and you can’t locate the pattern? Or, worse, you see what you think is a recognizable pattern based on past information and experience, so you make choices that reflect old thinking. When our brains are trying to make sense of the world it will often make us see things that aren’t really there. Will Rogers said it best when he said, “It’s not what you don’t know that hurts you, but what you do know that just ain’t so.”

Patterns are very hard to change. Have you ever rearranged a dresser drawer, a silverware drawer, or bought a new keyboard for your computer that was slightly different from you previous one? Once our brains get used to a pattern, it wants to keep finding that familiar pattern. When it can’t find the pattern, we start getting frustrated, annoyed, angry. The tether is being tugged back toward the familiar, which is what the brain craves. Our patterns are essentially who we are. We’ve spent our whole lives feeding and nurturing our patterns, which is why they can be really tough to break. Patterns are so hard to break, in fact, that most people won’t break a pattern even when the benefit to doing so is blatantly obvious. Canadian economist, John Kenneth Galbraith, once said, “Faced with the choice of changing one’s mind and (or) proving there is no need to do so, almost everybody gets busy on the proof.” What he’s saying is that faced with the option to change what you believe about something based on new information and evidence or putting all your energy into proving you don’t need to do any thinking, most people will gather lots of proof about why they don’t have to change or do any real thinking.

The world around us is changing, and at a fairly rapid pace my friends. We’re faced daily with those changes and how we’re going to respond to them. Will we react with our gator brain and respond based on fear, seeing all change as a threat? Will we stand there as if our ankles are shackled by a big heavy chain like an elephant? Will we look to our past to try and make sense of the changes taking place and then try to make decisions from past data? Or will we actually think on the changes happening all around at the risk of burning excess brain calories? I’m not telling you that you need to do anything. This episode was simply about bringing an awareness to how our brains work to make sense of the world and make good decisions. It’s about examining your thinking as if it’s a completely different you doing the thinking about the thinking. It’s about becoming a detached observer of your thoughts and thinking patterns to see and feel where they’re coming from. Are they coming from a place of seeking comfort and familiarity? Are they coming from a place of fear around change? Or did you get so distracted by the monkey mind that you just now realized you’ve been listening but haven’t heard anything I’ve said up to now?

Until next week, my friends, I’m out…