When wealth manager and behavioral finance expert Shari Greco Reiches wants to help her clients understand their own decision making processes, she gives them this brain teaser: If a bat and a ball cost $1.10, and the bat costs $1 more than the ball, how much does a ball cost?
Most people, Reiches says, arrive quickly at the same, incorrect answer. Their gut reaction is to say that the ball costs 10 cents. But if this were the case, that would mean the bat costs $1.10, and purchasing them together would cost $1.20 instead of $1.10.
The correct answer is that the ball costs 5 cents, meaning the bat costs $1.05.
The goal of this exercise is to show her clients that if they can get tripped up by trusting their instincts with a simple brain teaser, they are just as likely to make rash decisions when it comes to