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

by | BiggerPockets.com

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.

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The Milgram Experiments

Let’s again return to Robert Cialdini’s great book Influence, 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).

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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 Outliers, 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.

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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!

About Author

Andrew Syrios

Andrew Syrios is a real estate investor in Kansas City and a partner in Stewardship Properties along with his brother and father. Their company owns just over 500 units in four states.

23 Comments

  1. Peter Mckernan

    Great points! I get that you do not want to be in a $3K suit, that could come off a little too much and put people in a different mindset, you should have a button up on, or a polo shirt and some slacks. The reason this sticks out to me is because a person should have professionalism to their style and be taken seriously.

    Great article! I always enjoy reading your work!

  2. tim boehm

    Great article, I have experienced this type of thinking all my life. One of the key questions one should always ask oneself is, will the speaker profit or lose because of what they are saying. I am frequently asked to look at property for prospective buyers, I don’t charge for this service, nor will I profit from it in any way. I tell people “I don’t make a dime for telling you the truth” so why would I lie?

  3. Audrey Ezeh

    Happens everyday in my line of work. There are excellent surgeons and there are really scarily bad ones but they all have a full patient load because patients see the title ‘doctor’ and assume the guy/lady is an authority in the field and must know what they are doing…totally not the case! If anyone reading ever needs to have surgery, just call up the hospital and ask to speak to an operating room staff and ask them who they will choose to operate on them or their family member if they needed surgery. Whoever they tell you is the one to go with!
    Appreciate the insights sir! I love your blog posts!

  4. Explains why customs officers are still obeying the Muslim ban order even after it was suspended, and why some have even expanded it after the suspension to include people supposedly not targeted: an Australian, an British citizen from Wales, an Egyptian, Muhammad Ali, Jr. and more.

  5. Tyler Chartrand

    that is why i quit my corporate job…no matter how much you could work on something or explain it…there was an equal chance of you being either insulted or dismissed completely if someone “above you” said so. it turns the whole culture into groupthink and servitude stifling creativity.

  6. Paul Moore

    Great stuff, Andrew. Any Cialdini quotes make for a good article.

    As a realtor at Smith Mountain Lake, in my 4th or 5th year there last decade, I had learned enough to write a book on it. Though other Realtors had far more experience than me, but many buyers came to my team because “We wrote the book” on local lakefront real estate. It paid off. In spades. People really do respect authority.

  7. Very interesting article, in fact, the logical fallacies are affecting all side of human behavior and our thinking. There is always this time when we let ourselves be influenced by these bias because simply we ignore their effects and we lose the clarity of thinking. The best way to make it through is a heightened awareness about our environment.
    Love your articles.

  8. James Perry

    I would suggest, respectfully, that Cialdini didn’t have it completely correct. The two questions posed by Cialdini are an important insight into human nature and thought, but not complete. Take for example Gladwell’s example of the pilot and copilot, if I remember correctly, there was an issue of cultural bias as well. In other words, the Korean culture instilled the idea that you are respectful to and do not cross your superiors. Even by asking the two questions posed by Cialdini, one would still be forced to fight against their upbrining, assuming that the person asking the question responded “no” to one or both of the questions.

    In my experience, and I think Gladwell even talks about this in his book Freakonomics, often people are conditioned at a young age to either question or not question the “authority” before them. For this reason (and I think there are others), I would say that a third question that should be included in Cialdini’s analysis should be: “If I assume this ‘expert’ to be of equal authority, what are the reasons for moving forward.” I believe many people don’t recognize the far-reaching implications of their own actions (or lack there of), not out of narrow-mindedness, but out of other biases (e.g., cultural, educational, conditional, etc.), which appear as authority bias. If we begin to examine our own actions from an equal-playing field mindset, it’s easier to evaluate one’s own actions and why we act. My two cents…

    • Andrew Syrios

      I definitely think culture plays a large role in this and would expect authority bias to be more of a problem in cultures such as Korea or China. I think Cialdini might have mentioned this actually, although it’s been a little while since I read the book. (For what it’s worth, he does mention that the consistency bias is worse in individualistic cultures such as the United States).

      That being said, I think it’s a matter of degree. Authority bias may be more pronounced in Korea than in the US, but I think it’s natural to humans to one degree or another and simply amplified or dulled by culture.

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