Cover image for Smart money decisions : why you do what you do with money (and how to change for the better)
Title:
Smart money decisions : why you do what you do with money (and how to change for the better)
Author:
Bazerman, Max H.
Personal Author:
Publication Information:
New York : John Wiley & Sons, [1999]

©1999
Physical Description:
xvi, 238 pages : 24 cm
Language:
English
ISBN:
9780471296119
Format :
Book

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Summary

Summary

Praise for Smart Money Decisions

"If you need to negotiate anything . . . from a pay increase to buying or selling a house-this book covers all the bases. [Bazerman] has taught, tested, and proven his theories with thousands of executives and MBA students."-Donald P. Jacobs, Dean, J. L. Kellogg Graduate School of Management, Northwestern University

"Max Bazerman provides a fascinating, easy-to-understand look at how we make money decisions and offers sound advice that will help you increase your net worth."-Roger E. Stricker, PhD, Vice President, Intellectual Property, Lucent Technologies

"By holding a mirror up to our faces, Max Bazerman allows us to see all those dumb money mistakes each of us had no idea we were making."-Bill Bresnan, Financial Talk Show Host/Author

When it comes to money matters, even the smartest of us make some pretty dumb decisions. This groundbreaking book gives you the necessary tools to think through financial issues practically and avoid costly blunders.

A renowned expert in the field of decision-making and negotiation, Max Bazerman illustrates both how and why we make the decisions we do. He provides the essential understanding you need to identify your own approach to finances, recognize any inherent problems in your reasoning, and determine ways to overcome them. Packed with sound advice and expert recommendations, Smart Money Decisions is essential reading for anyone who has made the same mistake twice.


Author Notes

Max H. Bazerman, PhD, is the J. Jay Gerber Distinguished Professor of Dispute Resolution and Organizations at the J. L. Kellogg Graduate School of Management at Northwestern University.


Reviews 1

Booklist Review

Contemporary guides to financial planning and money management are now apparently obliged to consider the psychological aspects of personal fiscal behavior. The frequent result, however, often consists of New Age mantras or confusing psychobabble. Bazerman, on the other hand, grounds his guide in the behavioral aspects of decision making. He is a professor at Northwestern's Kellogg School of Management and author of Judgment in Managerial Decision-Making (1998) and Negotiating Rationally (1992). He begins here with a fascinating illustration of how otherwise sensible individuals can make foolish decisions. Students in Bazerman's class are offered the opportunity to bid on a $20 bill; but given his unusual ground rules, they end up paying anywhere from $20 to $70 for it. He explains this behavior and goes on to identify the "top ten money mistakes." He shows them at work in decisions to buy a home, a car, insurance, and mutual funds, and in deciding whether to accept a job offer and how to manage one's time. Bazerman's unique perspectives make this an exceptional book. --David Rouse


Table of Contents

Chapter 1 Do I Hear $5 for a $100 Bill?p. 1
A Framework for Avoiding Money Mistakesp. 5
Top 10 Money Mistakesp. 8
Chapter 2 Falling in Love with One Rather Than Three, and Other Common House-Buying Mistakesp. 13
Falling in Love with Three Rather Than Onep. 15
Setting Limits--Based on Knowing Your Alternativep. 16
Bargain Huntingp. 18
Anchoring on the Listing Pricep. 20
Where Do Listing Prices Come From?p. 23
The Agent: Trusted Advisor or Parasitic Intermediary?p. 25
Advicep. 28
Chapter 3 I Got the Car for Less Than Invoicep. 29
Who Has the Power?p. 33
The Good Cop, Bad Cop Routinep. 36
50-50 Splitsp. 36
Vivid Scaresp. 37
Optimistic Illusionsp. 38
Preparation Advice for Henry--and for Youp. 39
Advicep. 43
Chapter 4 Vivid Scaresp. 45
Title Insurancep. 49
Sounds Good, but Where's the Payoff?p. 53
Vivid Makes Lividp. 54
When and How to Buy Insurancep. 58
Advicep. 59
Chapter 5 Time's Up: How Much Is Your Time Worth?p. 61
What's Your Time Worth?p. 63
Managing Deadlinesp. 66
Intertemporal Choices: Save It for Laterp. 68
Advicep. 70
Chapter 6 Have I Got a Mutual Fund for You!p. 71
Everyone's an Expertp. 73
Mutual Respectp. 74
The Psychology of Buying Active Fundsp. 78
Too Good to Be True?p. 87
Advicep. 90
Chapter 7 Which Job Offer Should I Accept? Negotiating with Yourself and Losingp. 91
Split Personality?p. 93
Timing Is Everythingp. 95
Starving Artist or Corporate Sell-Out?p. 96
The Retirement Dilemmap. 97
Which Self Should Win?p. 98
Decision Theoryp. 100
Negotiation Researchp. 101
Advicep. 103
Chapter 8 What's Fair and Why Do You Care?p. 105
Fairness Triumphant: Why We Sometimes Sacrifice Economic Considerations for Fair Outcomesp. 108
The Effects of Framing: Why Our Sense of Fairness Is Affected by How the Story Is Toldp. 110
Keeping Up with the Joneses: Equality Derived from Social Comparisonp. 113
The Role of Emotions in Fairness Decisionsp. 115
Conclusionp. 117
Advicep. 118
Chapter 9 Putting Yourself in the Other Guy's Shoesp. 119
A Quiz on the Winner's Cursep. 122
Real-World Marketsp. 125
Solving the Winner's Cursep. 127
Conclusionp. 129
Advicep. 130
Chapter 10 Knowing When to Quitp. 131
Somewhere over the Rainbowp. 134
The Fork in the Roadp. 135
Risky Businessp. 136
Why Do We Escalate?p. 138
Competitive Irrationality: When Is a Winner a Loser?p. 141
Advicep. 142
Chapter 11 Playing to Winp. 145
Calling All Competitorsp. 148
Beating the Other Party Hurts All Partiesp. 152
Conclusionp. 157
Advicep. 159
Chapter 12 The Mythical Fixed Piep. 161
Slicing Up the Piep. 163
The Competitive Spiritp. 164
Expanding the Piep. 165
These Buds Are for Youp. 168
Bellying Up to the Bargaining Tablep. 169
Is the Stein Half Empty or Half Full?p. 173
How Do You Solve the Mythical Fixed Pie?p. 174
Advicep. 175
Chapter 13 Going, Going, Gonep. 177
What Makes It an Auction?p. 180
Why Do People and Companies Lose in Auctions?p. 183
Escalation of Commitment in Auctionsp. 186
Conclusionp. 189
Advicep. 190
Chapter 14 How Much Is It Worth to You?p. 191
Ownership Effects: Finders Keepersp. 193
What a Rip-Off!p. 194
What's Your Reference Point?p. 196
Compiling Losses and Gainsp. 199
Egocentrism and Valuation of Worthp. 201
Advicep. 204
Chapter 15 Avoiding Money Mistakes in the Futurep. 205
Fool's Goldp. 205
You Only Need Onep. 207
A Note on Uncertaintyp. 211
Final Wordp. 212
Endnotesp. 215
About the Authorp. 229
Indexp. 231