This stood out because it was an anomaly.
If we get 40 applications for property development funding in any one period for money from our huge network of property business angels, be it a week or a month, the stats are usually the same in terms of percentages.
About a third will fail for various reasons (poor credit history, insufficient information to complete, refusal to pay a final survey fee…that sort of thing...)
A third will have made a decent application and will get a survey and then will procrastinate and the final third will be successful in that they do everything on time when asked and get an offer relatively quickly.
That offer for proerty development funding might be from a lender who will fund all or 80% of the amount requested…we then go on to find an investor or JV partner who will fund the balance...and bingo…deal done.
Usually when terms are offered, the borrower draws down the money as soon as they can. So in 40 applications for property development funding we would expect 13 or 14 to close pretty quickly.
This time though, we had 13 offers of funding and one close.
That meant that 12 were sitting on the fence…. and that’s unusual.
That led me to question why.
I looked at the previous periods and the figures were ok. Roughly a third had closed…except for…guess what? The same period last year!
This was not an individual thing, this was seasonal.
I had to ask myself. Were crowds of human mindset affected by the end of year, by Christmas and the “holiday season” or was it something else?
Hours later I stumbled across an online article about successful morning people and how they create routines to make decision making simple.
The article stood out at me for one thing. It said that “…many successful people limit their decision making by automating some of their daily choices e.g always dressing the same way…”
I dress the same way every day…have done for years.
The article went on to say that “…to limit procrastination and make the most of your morning minimise decision fatigue by limiting your choices….”
This led me to think "Could the people who had applied for property development funding in November and December be suffering from this thing...decision fatigue?"
This, decision fatigue, apparently, is a real thing; I even found another article online about it, which says “In decision-making and psychology, decision fatigue refers to the deteriorating quality of decisions made by an individual after a long session on decision-making. It is now understood as one of the causes of irrational trade-offs in decision-making.”
There is a paradox here in that people consciously like choice and seem to want more of it and will often fight for more choice, yet at the same time people find that making too many choices can be psychologically aversive.
A person who is mentally depleted becomes reluctant to make a choice at all - or if pushed, could make a very poor choice.
Decision fatigue can lead a lot of people to avoid decisions entirely; it’s a psychological phenomenon called “decision avoidance”.
Researchers found that people who have more choices to make at the end of a “decision making period” were often less willing to decide at all.
Could it be that the end of a calendar year was simply, unconsciously, accepted as the end of a “decision-making period”? Was it therefore easier to simply make no decision at all rather than make a decision that could be deferred until a new decision-making period known as the New Year?
Interestingly, there was a slight upswing in excepted offers for property development funding in January, February and March last year. Could the same thing happen this year?
I mooted this idea off my greatest supporter and harshest critic…my wife. Who immediately restores balance into any of my theories!
Her response was “…don’t get ahead of yourself…it’s Christmas…too many things to think about and easier to delay something like that until the New Year…besides, it’s an expensive time of year’.
All very well, I thought to myself, but we are looking to give people property development money not take it from them.
Maybe she has a point?
I think I might take a look at the stats of the people who endure and make the decision when everyone else is delaying theirs.
Maybe that’s one of the strengths of uncommon thinking, contrarian thinking?
After all, if 90% of a crowd make one decision simply due to the tie of year and 10% make another, does that not make the 90% a herd? Is this an example of herd mentality in action?
Or does my wife really have a valid point?
Ray McLennan
Raising Angel Finance