Consider this. You are offered an exotic investment product by your bank. This product is meant to protect your capital and yet give high capital appreciation. At the same time, your insurance agent who also peddles mutual funds is trying to sell you an equity fund. Assuming you invest in both, which product will you analyse in detail?

It is possible that you will spend more time on understanding the exotic product. But it is highly likely that you will do in-depth analysis on the equity fund. Why?

Corporate deliberations

Suppose a company is deliberating on a nuclear power plant and a bicycle shed. It is likely that the company may not deliberate much on the power plant. Why? For one, not all members in the committee may understand nuclear reactors. For another, others may presume that, given the high-level of understanding required, those talking about nuclear reactors know what they are doing.

This is not the case with the bicycle shed; everyone has a fair idea about this structure. So, all the committee members may want to contribute to the decision. The discussion, therefore, extends beyond its deserved time. In other words, organisations give disproportionate importance to trivial issues. This is called the Parkinson's Law of Triviality or the Bike Shed Effect.

Personal decisions

We typically behave the same way when it comes to personal decisions. You may most likely depend on the explanation given to you by the bank on the exotic product. And “invest” your time in analysing the equity fund. Why? The prefrontal cortex in our brain is the software for analytical thinking. But prefrontal cortex typically switches off when it is overburdened. And this happens when it processes complicated decisions such as analyzing exotic products or deciding whether to switch jobs.

Buying an equity fund and galvanized steel for your bike shed are relatively uncomplicated decisions that can be handled by the logical brain. And logical argument requires more time than intuitive reasoning. We, therefore, deliberate more on relatively trivial issues.

(The author is the founder of Navera Consulting. He can be reached at >enhancek@gmail.com )

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