patrick.net

I love reading this site. This morning I was thinking about how some of the discussions remind me of a debate from psychology. There is a great book by Robyn Dawes called House of Cards.

http://www.google.com/search?client=safari&rls=en&q=robin+dawes+house+of+cards&ie=UTF-8&oe=UTF-8
The gist of the book is a critique of psychotherapy. I won't do the book complete justice, but one idea in the book as to do with "expertise" and the accuracy of prediction. An assumption of psychotherapy is that the therapist has some understanding of human beings and the world that they utilize in therapy. Another idea is that based on this understanding of psychology and the individual in the room, they can make certain predictions and that person and what they should or shouldn't do. The problem is that humans are terrible at summarizing data and drawing conclusions.

The book lays out a number of problems with psychotherapy and human expertise.
1. People never do as well at describing human behavior or predicting human behavior as objective tests and mathematical prediction. Not even close.
2. Experts make all kinds of erroneous assertions about people and the world. They lack insight into their own mistakes and errors
3. Because of flawed human understanding, we come up with a bunch of BS "truisms" that aren't even true.
'Dawes points out, we have all been swayed by the "pop psych" view of the world--believing, for example, that self-esteem is an essential precursor to being a productive human being, that events in one's childhood affect one's fate as an adult, and that "you have to love yourself before you can love another.'

So back to real-estate. The debates about "the bottom" having arrived are really reminding me of Dawes. This is not about a feeling, an impression or a sales pitch. It isn't about 175 new jobs in this community or that. It is about complex math. I think it is about many, cumulative factors that will predict a long-term outcome. I am not an economist, but I suspect that the equation would have to include jobs, median income, interest rates, debt load by families, taxes, historical costs of housing. I am not sure what else.

To take the analogy further, crappy psychotherapeutic providers were reminding me of realtors this morning. There is good psychotherapy out there. It is science based and somewhat humble about what it can and cannot do. I am not sure about there being "good realtors". My hunch is that there are good real-estate lawyers out there.

My questions for this morning would be,
1. "What are the numbers telling us about housing?" I am more curious about places on the coasts of this country. I am from Texas and I think it is a completely different beast than either coast.

2. What are the untrue-truisms that people try to use to justify an prediction about real estate?
One that occurs to me would be that the Chinese or New Yorkers are flocking to SF Bay Area and keeping prices high.
Another might be that the FB millionaires are keeping prices high in SF Bay. My understanding is that there just aren't enough software millionaires to justify these prices.

#housing