This is the last video in our
focus on behavioral economics,

those forces that drive us as
syndicators, fund managers,

businesses raising capital,
those forces that determine

whether our underwriting is
good, or not so good. It's those

forces underneath the surface
that are helping us make

decisions, sometimes for good,
mostly for ILL. So we need to be

aware of what they are, what
they do and how they work. So in

this video, the last of our
series is going to focus on the

last three emotional biases that
take place underneath behavioral

economics.

There are six emotional biases
when it comes to behavioral

economics. In the last video, we
talked about loss aversion

endowment, and self control.
Today, we're going to focus on

the last three, which are status
quo overconfidence and regret

aversion. So these are emotional
biases that take place that are

in us all, they are emotional
biases that drive us some type

of more larger extent than
others, but they're there. And

they help us and they help us
make decisions. They make us

more efficient, but they often
can change our analysis in a way

that's less good. So by focusing
on them, and thinking about

them, and going through a list
as your underwriting, asking

yourself, if the if you're being
moved by one of these is

helpful, because it makes our
numbers more accurate, it makes

our analysis more accurate,
which helps our investors who

make more more, more money from
it. And it helps us by helping

them make more money for it. And
a lot of times, it makes us more

money at the same time to the
better our decision making is,

the better our analysis is, the
better it is for them and for

us. So it really works across
the board. And it's a useful

exercise to think about as you
go through your underwriting

process. So let's talk about
what these are. The status quo

is really just the resistance to
change.

I like to think of status quo,
the status quo bias says, Well,

I've done this this way for for
a million years. And so that's

what we're going to stick with,
I've put out offers under this

under this rule for, you know,
since the beginning, and that's

what we're going to stick with,
I always raise money with my

friends and family. And I never
put an advertisement out,

because that's when that's what
we're going to stick with. I

always go to my one investor who
always invests, you know, 50% of

all the capital I need to raise,
and that's what we're gonna

stick with, we're not going to
diversify more, I always buy

multifamily properties. And
that's what we're going to stick

with, well, that all well may be
well and good. And that may be

something that you still want to
do. But it is also a status quo

bias. It's also a resistance to
change. Now, this is extremely

normal. We all have this, this
tendency to want to stick to

what's known, rather than
venturing forth into the

unknown, when it's more risky.
It feels riskier in order to do

that. But sometimes status quo
can also cause problems by

relying on that one key
investor, what happens when that

one key investor drops out and
isn't going to be investing

anymore? When that one asset
type that we've been focused on

suddenly changes in the markets
view? And then we suddenly left

without anything to syndicate
anymore, because nobody would

invest with us anymore. What do
we do? And how do we adapt to

change when you're trying stuck
in status quo? Because

obviously, you can't, right? The
whole idea of adapting to change

is you got to change. So and
then that has to unstick us from

the status quo bias. That's the
status quo bias. So when you're

underwriting or when you're
picking new projects, just think

Why are you stuck there? You
know, which maybe you should

open it up just a little bit or
think about things opening up

just a little bit and kind of
test yourself, see if it makes

sense might, it may not and if
it doesn't, that's great, but at

least you went through the
thought process of, well, maybe

what would happen if I did x, or
opened it up or thought a little

bit more broadly about things.
Number two is the

overconfidence. This is the
belief in Superior.

bility to profit

From economic data now this one
certainly is there. I mean,

everybody who's comes most of my
clients come from a more salesy

background or a development
background. Those two fields

oftentimes have overconfidence
as a relates to it, it's how

they get the job done. Because
the things that they have to do

to sell or to develop are
challenging and weighty. And if

you didn't have a lot of
confidence, it'd be really hard

to do it. So a lot of people do
suffer from this overconfidence

and that's okay to a point. It's
okay as long as you're not doing

what is the natural fallout from
this, which is understating or

under? Let's call it under
estimating losses risks and

overestimating profits and
benefits right, that's what can

happen if we've got too much.
Too much overconfidence is that

we're overestimating, right?
It's that we don't want to do

that we don't want to we need to
make sure that our analysis is

our complete, accurate and
neutral, right. And so that's,

that's the big risk of
overconfidence. overconfidence

in itself is very helpful. It's
that over, overstate

overestimating underestimating
issue that comes up. That's the

problem. So that's the
overconfidence problem. Now, the

last one is regret aversion.
Now, this is similar to loss

aversion, but it's seeking. To
avoid negative outcomes. Only

only seeking to avoid negative
outcomes. So whereas loss

aversion is you want to avoid
the whole loss, this is just

you're trying to seek a negative
outcome. This can be holding on

to a position too long, or
avoiding markets. This happens

quite a bit, avoiding markets
with sharp gains and losses,

because you start thinking,
okay, maybe that maybe I will

have be seen as I came in too
late, or I exited too early. So

that's the regretted version
that you would gret you're the

decision that you made about
that one particular thing. I

think that might be the key is
that avoiding markets or assets

or something that have those
sharp, sharp gains and losses,

thinking, well, maybe investors
are going to think that I'm

going, I got in too late or I
got in too early. That is regret

aversion. So my name is Tilden
Moschetti. Now I am a

syndication attorney with the
Moschetti syndication Law Group.

I help specifically real estate
developers, real estate,

syndicators, real estate fund
managers, fund managers of other

asset classes, private equity
funds, businesses, all of them,

I help them to raise capital and
stay in compliance with the

rules of the SEC and state
government. So under the SEC,

we're talking about Regulation D
rule 506 B, and 506. Seat and

for the states is making sure
that they are notified that we

are doing offerings underneath
those regulations under

Regulation D. So that's what my
my law practice does. What also

the other hat I wear as as a
syndicator, and fund manager

myself. So as that I've been
exposed to a lot of the problems

that you face every day. So with
my legal hat on, I certainly see

a huge panoply of problems that
can happen and opportunities as

a lawyer with things that happen
and risks and I can analyze, and

I do analyze for how that
happens and help my clients with

that help explain conflicts help
minimize and mitigate risks and

conflicts and all those things
explain terms and craft language

in order to protect them, but
also as a syndicator and fund

manager myself. I've also been
in your shoes, so I know the

pressures that you feel at the
same time of these behavioral

economic forces. I felt the
pressure of needing to raise

funds from investors. I've had
investors sitting across from

me, and I've pitched them I've
talked to them about the

investment and why they should
buy, I've been looking for

assets, I look for assets to buy
as well, just like you do in

order to make sure that I can
have something to offer them so

that I can make money. I've had
to make decisions on when to

waive contingencies on deals and
when to put my own money at

risk. So those same forces that
happen, what that offers is a

very broad view. So that's what
we help clients with is to help

you ultimately be successful
with your capital raising

offering because not only am I
an excellent lawyer, but I also

have been in your shoes doing
exactly what you're doing as

well. And we can offer advice
and consultation in order to

help make you successful. So
give my office a call if we can

help put your offering together
under Regulation D rule 506 B,

rule 506 C, and we'll also help
you as a client work through the

issues that you experience as a
syndicator from somebody who's

been there and done it
themselves.