And syndicators, fund managers,
businesses, we're all at the

mercy of economics. But not all
economics are outside forces.

Some of them are internal. And
that's what we're going through,

we're going through what has
been called behavioral economics

to go through, really the things
that drive us internally, and

shape the way we put our offers
together, most often in a

negative way. So that we can
look at those examine those,

make sure that we're not playing
victim ourselves to those

forces, make changes for the
better not only for our

investors, but also as for
ourselves, and really for the

truth in the market as a whole.
To make the world a better

place, we need to understand
what drives us and how we make

decisions. So in this video, we
are going to go through the last

three of the cognitive
behavioral elements.

There are nine cognitive
behavioral economic forces that

work inside our heads. Now,
these cognitive behavioral

forces are things that are there
in everybody, some too much more

of an extent than others, but
everybody's got them. And so the

idea is, if we can understand
what these are, we can take a

look at ourselves and our
processes. Make sure that when

we're doing an analysis, or when
we're putting a deal together,

whether it's for a fund a
syndication or a business, and

whatever that capital raise is
that the information we're

putting together is accurate,
neutral. And so we're not

driving things based on really
just faulty logic, which is what

cognitive behavioral economic
forces are. So we've already

gone through conservatism,
confirmation control. But what

we and we've gone through
representativeness, hindsight

and framing. But what we haven't
gone through yet are the final

three, which our anchoring
mental accounting, and

availability. So what are these
individual forces? And how can

we address them? So let's go
through them in turn, first,

let's move this down just a
little bit. Alright, so when

we're talking about an anchoring
bias, we're talking about

basically fixating on a on a
fixed outside outcome, fixating

on a specific outcome. Rather
than being flexible. So if you

think about it as like, well,
you think that a candy bar in my

day cost 50 cents when I was a
kid, kindergarteners cost a lot

more than that. Now, sometimes
it was 45, most of the time, it

was 50 cents, even for the king
sized bar. So we're 50 cents. So

if I think about, well, I want
to be able to buy that candy bar

for 50 cents, I'm not going to
be flexible at all about it.

That's an anchored bias, right?
So I'm anchoring to that 50

cent. Likewise, if you're
thinking about your asset, and

you've told investors, hey,
we're going to sell this at a

six cap, if it was a real estate
deal, for example, we're going

to sell it at a six cap. Or if
it's a business, well, we're

gonna, we're gonna find an
investor for it. And we're gonna

do it at, you know, five times
earnings, it's got to be five

times earnings. That's our
number. Well, what if the deal

comes in at four and a half
times earnings? Or what if

there's no and there's no buyers
at that at that particular

price. So it's all in four and a
half. It's that getting fixated

on a certain number rather than
making clear, logical, rational

decisions. That's what anchoring
is. Now anchoring happens all

the time. And it happens as part
of our communication as

syndicators fund managers,
businesses, when we talk to

investors, people start getting
anchored to the numbers that we

have, and the numbers that we
give them. And that's pure

natural, that happens all the
time. And that's why we set

things like targets, targeted
returns, you know, we make it

very clear that these are what
we think we're going to get.

It's not what necessarily is
going to happen. market forces

are out there. But internally,
we make the same sort of

decision, the same sort of ideas
themselves. Think about putting

a budget together, whether it's
for a property or for a

business, you have in your mind
a fixed price of what something

is going to cost. And so rather
than look at the market,

necessarily, we think, okay,
that's what I can get this thing

for, or that's what I can have
hire these people for. But that

may not necessarily be the case.
Even with overwhelming evidence,

we may be stuck on a specific
number, and not being able to

move on that number is going to
change the facts and assumptions

in our analysis to the detriment
of our investors and to

ourselves. That is the anchoring
cognitive balance. Now, how can

we do it, we have to just
address it, we have to ask

ourselves openly? Am I getting
stuck on any specific number is

there evidence to the contrary,
saying that this isn't really

what's there, if it's the sales
price of of either an asset or a

business or something like that?
Is that what the market is

telling me right now as the fair
market value of it, if it is,

then if the if the value is
different than what you're being

told by the value is different
than what fair market value is

being told you by the market,
it's time to pay attention to

the market, and really adjusted
numbers accordingly. Now, it

doesn't mean that you have to
sell if you don't like that

number, but you need to do the
analysis in order to make sure

that you're not getting anchored
to something that just doesn't

exist, something is not real.
All right, mental accounting is,

is thought of as an improper
grouping of wealth.

Now, where I see this happen all
the time, is you talk to

somebody, and you think they are
thinking of two kinds of one

kind of asset and they're
lumping it together. Let's say

it is a business that's
generating a decent profit, but

it's not generating a lot of
profit. Some business managers

have the tendency to add the
value of their company on top of

what their, their profits are,
when they comes to budgeting for

new items. For example, if I, if
a company A has $1 million in

profit, they may be thinking,
Okay, well, our company is worth

five times our earnings. So
that's $5 million. So really,

it's $6 million dollars, that we
have to spend, we can use that

$5 million as a credit account.
But you can't because it's

actually just a it's paper
money, it doesn't exist, it's

only there on paper until it's
sold, it doesn't exactly exist.

And so when you think about
mental accounting, it's okay to

expense, you know, to incurring
expenses like that, but Don't

lump in the groupings of them
just just because you can. So

some people, for example, the
common one for investors from

the investor side is somebody
may want to take this great

vacation, right? And so they
think, oh, okay, I'm gonna take

this great vacation, it costs a
lot of money, but I make a lot

of money and soil is good, but
they're not counting in the cost

of their any liabilities that
they may have. So they're not

doing a real grouping of what
their actual income is, as it

relates to the cost of the the
of the vacation. So that's

mental accounting. Now, how do
we do? How do we take care of

this? Is really look at those
line items very specifically,

are you counting things in a way
that's a little bit different?

If an account wouldn't
accountant say that? Well, yes,

you've done this right? Or would
the accountant say, Oh, this

looks a little off, I don't
think the accounts are set up

quite right, in order to do XYZ.
Now, you still can make those

decisions, but you got to know
that you're making those

decisions, right. So that is
mental accounting. Now last is

actually is a very common bias.
And it is a it's a bias which

can also work pretty well to
your to your favor if you're

doing a 506 C offering, and
that's the availability bias.

And so that's where we place
more value on info easily

gathered, oops.

So this is where we place more
value on something that's easily

gathered. So where this may come
from is a bias where we start

seeing a heavy amount of
advertising for example, you see

a lot of advertising for this
product, it's the same product

you see it over and over again.
Now if you're putting it

syndication together a fund
together, maybe you Have seen

ads and you see the same people
over and over again. Right. So

you may find yourself putting
overwhelming, leaning overly

whelming, to putting them in a
higher category than what they

naturally would be. Now, this
can also skew as your investor's

point of view as well. If your
investors start seeing ad after

ad after ad after ad, when
you're doing a 506. C, they may

naturally rank you higher,
because you're everywhere, which

really, you're just advertising
very specifically to them. It's

the whole idea behind
retargeting and why you would do

that, because it raises that
level of importance, because the

value that you do it now for you
as a sponsor, and as fund

manager, and not on the dark
side of manipulating based on

ads. This is also important for
you to realize by basing your

decisions that you make and the
information that you gather, not

on just the prevalence of
advertising, or just on the

prevalence of how easy it is
that property manager that

you're thinking of hiring that
has billboards, all of all up

and down Main Street, doesn't
mean they're a better a better

property manager at all. It
means that they've got more of a

budget to spend on advertising.
So some people think about REITs

this way, right? So that reads
is everywhere? Well, that

doesn't necessarily mean that
they're making good profits or

that they're good REIT. So
really look at how are you

ranking things in your own mind,
are you placing more value on

specific information than that,
then is really out there just

because it's easy. So my name is
Tilden Moschetti. I am a

syndication attorney with the
Moschetti syndication Law Group.

reason that we're putting these
together is because you're

syndicating or putting a fund
together a business. And I also

do the same thing for myself. So
I wear two hats. I wear a hat as

an attorney. And I also wear the
hat as a syndicator. myself. So

I thought it would be a useful
activity to go through the same

kind of underwriting details
that I have to check myself

with. And I'm sure you do, too,
to make sure that I'm not

falling victim to these biases,
which could throw off my

numbers, because some of these I
certainly do quite a bit. Right.

I mean, everybody does anchoring
to some extent when we're

talking to investors, but we
also anchor things about what

value should be in our own
hands. We all do have an idea

about what the how we should
group sets of money or how we

should think about those in that
mental accounting game. And then

we also play victim to the
availability bias, where we

place values on things a little
bit differently. It's not really

a rational decision on how we
necessarily place that

availability. That the
credibility of that information,

we fall victim to that
availability bias. So again,

Tilden Moschetti, that's me. I
am a syndication attorney with

the Moschetti syndication Law
Group. And if we can help you

put your syndication or
fundraise together, or your help

raise money for your capital by
giving you not only the legal

documents that are necessary,
but also all of the information

that I have as an experienced
syndicator myself, we would be

happy to talk with you. Give us
a call today.