🎶Blue Items Tying Up The Brain
Why we hold bad deals, ignore good tech, and blame the spreadsheet.
Take a moment and do this brief exercise with me.
Slowly scan your surroundings from right to left. As you look through the room, I want you to take note of every blue item in the room. Make a list, use mnemonics, try to remember every. single. blue. item that you see. Ten seconds.
Okay? Go.
10-9-8-7-6-5-4-3-2-1
Excellent. You’ve now scanned your environment, making a mental list of each blue item.
Now that you’ve got a mental list of every blue item, I want you to tell me:
What red items did you see?
This is a common exercise used by therapists, psychiatrists, and coaches to explain how mental illness — and specifically depression — works. Not because those who are stuck in the throes of depression are incapable of noticing joy, but because their mind has been trained to look for pain. They’re stuck with the “blues” (forgive me for the pun, I couldn’t resist).
Rewind 16 years. I’m sitting in a back row stadium seat at my university finance class. We had just learned about financial modeling, something I’d done before and was, frankly, a little bored by. As the professor started to wrap up, I’d already started tuning him out. Boy, was I wrong to.
“Who’s read The Psychology of Investing? No one? I hope you at least brought the book with you. It’s assigned reading for next class. Be prepared to discuss it.”
That book changed everything.
It was the first time I heard of behavioral finance — and it was love at first sight.
Psychology? Mixed with financials!? Could there be a better match made in heaven!
(And yes, I still have the book!)
One of the first ideas that hooked me was the disposition effect.
According to The Decision Lab:
The disposition effect describes our tendency to sell winning investments too early while holding onto losing investments for too long. This behavior is driven by a combination of loss aversion and the hope of potential gains, even at the expense of long-term profitability. This bias can lead to suboptimal investment decisions, reducing overall returns and increasing exposure to risk.
Translation: people hate taking losses. So we don’t. We hang on. We wait.
Even when it costs us.
This phenomenon also goes by other names. I wrote about one of them in a previous post:
1. Prospect theory and loss aversion
Daniel Kahneman and Amos Tversky invented the idea of prospect theory, which Wikipedia defines below.
Based on results from controlled studies, [prospect theory] describes how individuals assess their loss and gain perspectives in an asymmetric manner (see loss aversion). For example, for some individuals, the pain from losing $1,000 could only be compensated by the pleasure of earning $2,000. Thus, contrary to the expected utility theory (which models the decision that perfectly rational agents would make), prospect theory aims to describe the actual behavior of people.
In general, we avoid loss like the plague.
As discussed in The Psychology of Investing, one method to reduce the pain from loss is by following the crowd. Misery loves company.
That concept — hanging onto the wrong thing because it feels safer than letting go — shows up everywhere. We teach it to finance students. And we live it every day in commercial real estate.
As I was talking with my father-in-law last week (he’s a psychiatrist, so yes, he would bring up the blue item test), it occurred to me:
Real estate firms are trained to scan for the blue.
Not because we’re pessimistic. But because we’re programmed.
Many of us in the proptech industry lament the fact that we’ve historically been slow to adopt new technology. CRE is often lumped in with healthcare, which — no offense to my colleagues in healthcare — is not a compliment.
We work in a slow, illiquid industry, where getting it wrong — on an acquisition, an asset management decision, a marketing strategy, etc. — doesn’t just cost money. It costs time. Years, in some cases. That makes the downside feel larger. Risk-aversion isn’t a flaw in this business; it’s baked into the business model.
We have a higher asymmetric response to risk than other, more liquid industries.
So of course we move slowly. We have to.
When your asset is illiquid, your time horizon is long, and your downside is measured in millions — of dollars and hours — loss aversion isn’t irrational. It’s protective. It’s smart.
But it’s not the only reason real estate moves at a glacial pace when it comes to tech.
Some of it’s just structural. CRE is famously fragmented — dozens of property types, legacy systems duct-taped together, and incentive structures that don’t always reward innovation. If you’re the asset manager but not the operator, why gamble your bonus on rolling out new tech your team won’t use?
And some of it’s cultural. We’re copycats by nature. Nobody wants to be first — but everybody wants to be second.
That’s starting to shift. Slowly. Crowdfunding, SPACs (old news but quietly making a comeback), REITs (very mature at this point), tokenization (still on the horizon?) — they’re all chipping away at the old definitions of ownership. Liquidity is creeping in at the edges, which means pressure is mounting from those who expect software to be part of the stack.
So maybe it’s not a question of should we change, but when.
If CRE’s reluctance to adopt new tech is just prudent caution in an illiquid market — fair enough.
But if we’re still scanning for blue because that’s what we’ve always done?
As Adam Grant would say, that’s worth rethinking.
Would love your take.
What if risk-avoidance used to be strategy — and now it’s just reflex?
Let me know. I’m all ears, and still clutching my dog-eared copy of The Psychology of Investing.
🧠 If this got you thinking, there’s more where it came from.
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Jen’s Reading Corner
Another slight obsession I have is with language. A colleague recently introduced the book Cultish to me… and I’m brainstorming my next catchphrase for you all.
Kidding! Mostly…
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