How the Powerful Concept of Authority Bias Plays Into Real Estate Investing

How the Powerful Concept of Authority Bias Plays Into Real Estate Investing

5 min read
Andrew Syrios

Andrew Syrios has been investing in real estate for over a decade and is a partner with Stewardship Investments, LLC along with his brother Phillip and father Bill. Stewardship Investments focuses on buy and hold and particularly the BRRRR strategy—buying, rehabbing, and renting out houses and apartments throughout the Kansas City area.

Experience
Today, Andrew has over 300 properties and just under 500 units. Stewardship Properties on the whole was founded by his father Bill in 1989 and has just over 1,000 units in six states.

Stewardship Investments, LLC has been named to the Inc. 5000 list for fastest growing private companies twice (2018, 2019) and the Ingram 100 list for fastest growing companies in Kansas City (2018, 2019), as well as the Kansas City Business Journal’s Fast 50 (2018).

Andrew has been a writer for BiggerPockets on real estate and business management since 2015 and appeared on episode 121 of the BiggerPockets Podcast with his brother Phillip. He has also contributed to Think Realty Magazine, REI Club, Elite Daily, Thought Catalog, All Business, KC Source Link, The Data Driven Investor, and Alley Watch, as well as his personal blog at AndrewSyrios.com. Andrew and Phillip also have a YouTube channel focused on business and real estate.

Education
Andrew received a bachelor’s degree in Business Administration from the University of Oregon with honors and his master’s in Entrepreneurial Real Estate from the University of Missouri in Kansas City.

Accreditations
He has also obtained his CCIM designation (Certified Commercial Investment Member) and his CPM (Certified Property Manager).

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In the military, a private is obviously going to take orders from a colonel. But I think it’s safe to say that almost any random person off the street is going to take more stock in the word of a colonel than a private regardless of how accurate the content is and regardless of whether that content has anything to do with the military at all.

Argument from authority is a well known logical fallacy. The authority could be from experience, reputation, or just simply a title. But just because Socrates or Thomas Jefferson—or even Joshua Dorkin himself—said something, well, that don’t make it true. Unfortunately, our minds naturally think in ways that are packed full of logical fallacies. And one of the most obvious is the power of authority.

The Milgram Experiments

Let’s again return to Robert Cialdini’s great book Influence,ir?t=biggerpocke0a 20&l=am2&o=1&a=006124189X where he discusses the most disturbing experiment into this effect, the Milgram experiments:

“The researcher begins to explain the procedures to be followed. He says that the experiment is a study of how punishment affects learning and memory. Therefore, one participant will have the task of learning pairs of words in a long list until each pair can be recalled perfectly; this person is to be called the Learner. The other participant’s job will be to test the Learner’s memory and to deliver increasingly strong electric shocks for every mistake; this person will be designated the Teacher” (Cialdini 175).

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At first, the test starts off fine and pain is tolerable, but as each error causes a larger shock, eventually it becomes unbearable and the Learner starts begging for it to stop. However:

“…one major aspect of the experiment was not genuine. No real shock was delivered; the Learner, who repeatedly cried out in agony for mercy and release, was not a true subject but an actor who only pretended to be shocked. The actual purpose of Milgram’s study, then, had nothing to do with the effects of punishment on learning and memory. Rather it involved an entirely different question: When it is their job, how much suffering will ordinary people be willing to inflict on an entirely innocent other person?

“The answer is most unsettling… The typical Teacher was willing to deliver as much pain as was available to give. Rather than yield to the pleas of the victim, about two-thirds of the subjects in Milgram’s experiment pulled every one of the 30 shock switches in front of them and continued to engage the last switch (450 volts) until the researcher ended the experiment. More alarming still, almost none of the 40 subjects in the study quit his job as Teacher when the victim first began to demand his release, nor later when he began to beg for it, nor even later when his reaction to each shock had become, in Milgram’s words, ‘definitely an agonized scream'” (176).

And what was the explanation for this callousness?

“Miligram is sure he knows the answer. It has to do, he says, with a deep-seated sense of duty to authority. According to Milgram, the real culprit in the experiment was his subjects’ inability to defy the wishes of the boss, the lab-coated researcher who urged and, if necessary, directed the subjects to perform their duties, despite the emotional and physical mayhem they were causing” (178).

build-relationships

This experiment has been run multiple times since, to the same effect. This sort of blind obedience to authority goes a long way to explain why normal people would follow the orders of the likes of Stalin or Hitler (along with propaganda and fear, of course). But boiled down, it really tells us just how much stock people put into the concept of authority.

Indeed, in Malcolm Gladwell’s book Outliersir?t=biggerpocke0a 20&l=am2&o=1&a=0316017930, he notes how plane crashes were more common when an inexperienced pilot was flying and the experienced captain was navigating. After digging into it, it was discovered that the reason was that experienced captains had no compunction with calling out mistakes made by rookies whereas the reverse wasn’t true. Thus when an experienced pilot made a mistake, it often went uncorrected and that sometimes lead to a crash.

Not a word need be spoken for the power of authority to run its course.

Defending Against the Authority Bias

The best defense, like with most things, is simply being aware of it and mindful of it. To quote Cialdini again,

“One protective tactic we use against authority status it to remove its elements of surprise. Because we typically misperceive the profound impact of authority (and its symbols) on our actions, we become insufficiently cautious about its presence in compliance situations. A fundamental form of defense against this problem, therefore, is a heightened awareness of authority power” (191).

Just telling yourself “hey, just because this guy has a fancy title doesn’t mean what he’s saying is true” can help a great deal.

Cialdini recommends posing two questions to ourselves: 1) “Is this authority truly an expert?” and 2) “How truthful can we expect this expert to be?” (192).

Once you take a step back to evaluate both the veracity as well as motives of a supposed expert or authority, much of our natural authority bias evaporates.

single-multi-apartment

Related: How to Become a Better Landlord By Honing Your Influence & Persuasion Powers

Authority and Real Estate Investment

With all things involving influence, we must keep ethical business practices at the top of our minds. Trying to pass yourself off as an authority to sell overpriced junk to unsuspecting customers is sleazy and dishonest and will get you a terrible reputation in a hurry. And indeed, a negative reputation can act with the opposite effect where people won’t listen to you no matter how valuable your insight is. After all, just imagine the reaction if Stephen Glass or Sabrina Erdely tried to get back into journalism. Would anyone care to read what they wrote, no matter the quality?

Always remember that, as Will Rogers said, “It takes a lifetime to build a good reputation, but you can lose it in a minute.”

That being said, you don’t just want to become an authority on real estate investment through education and experience; you want to display that authority to the world. This can be through simple things such as getting a nice website, owning quality business cards, and dressing well when meeting with lenders and the like. (Although I should note that you don’t want to dress too nicely when meeting with sellers; it can come off salesman-ish. Remember, you want to connect with them on a friendly and relatively casual level.)

It’s also a good idea to speak authoritatively and highlight your experience. For example, when talking to sellers, mention other deals you’ve done to 1) establish your experience and assure them you can close and 2) set yourself up as an authority on pricing and anchor a price in their minds.

If you are going to make a pitch to a banker or private lender, put together a prospectus on previous deals you’ve done. And don’t just throw something together—make it look really impressive. Use your experience and the quality of your materials to highlight your authority. Don’t brag about your accomplishments, but make sure to note your authority on the subject. These subtle things can go a long way.

Because after all, who would do business with an amateur when you can do business with an authority, even if some of it is just a matter of perception?

Have you ever fallen prey to authority bias—or used it to your benefit?

Let me know your thoughts with a comment!

Argument from authority is a well known logical fallacy. Just because Socrates—or even Joshua Dorkin himself—said something, well, that don't make it true.