Frame Blindness

Frame Blindness
Today we talk about something called frame blindness in decision making. When we set out to make a decision, we set up frames. Frames are simple structures that help us in understanding a complex reality. But a major pitfall of these could be “frame blindness”.

The definition of frame blindness is setting out to solve the wrong problem because you have created a mental framework for your decision with little thought that causes you to overlook the options or lose sight of important objectives. What this means is that a person tends to see problems and solutions not from a holistic perspective, but through references and sometimes biases in his mind. This ends up making that the person unable to grasp or understand the best decision because he has already disregarded certain options in his mind. This is called frame blindness. This happens a lot when people are making decisions about their finances.

For example: A person received an inheritance in 2007 of $200,000. He approached a financial consultant to understand how best to use these funds. The consultant asked him whether he had any financial debt and he replied that he did not. On probing further, it was found that he did have debt in the form of a mortgage. This was not in his frame of reference or conscious mind as debt. The consultant advised him to pay off the mortgage of $100,000 from the total sum and to invest the remaining $100,000. He advised that he could take much more risk with this investment, as he would now be debt-free. Though, the advice was financially sound, the person could not accept it. Why? Because he had frame blindness. He had a preconceived decision in his mind about what he wanted to do which was to invest all the money in stocks and came to the consultant to affirm his decision. He was not really seeking sound financial advice, even though he thought he was. He had frame blindness and he did not realize it. He invested his money as he wanted and basically lost most of it in the economic downturn that followed due to frame blindness.

The moral of the story is to avoid frame blindness at all costs. How can we avoid frame blindness? We all have preconceived notions, boundaries, or assumptions related to any financial decision. What we need to do is to be aware of the pitfalls of frame blindness. Be open to analyzing all data and make an effort to understand all financial logic offered. Focus on your end objectives and your overall goals so that when some money comes to you, you are focusing on accomplishing your objectives with the newfound information.

So, my advice to you – Be aware of frame blindness and avoid it at all costs for prudent and holistic financial decision making. Don’t have frame blindness, period!

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