God, I wish this wasn't so true.......

    But these stories people told themselves were biased by the availability of material used to construct them.  "Images of the future are shaped by the experience of the past," they wrote, turning on its head Santayana's famous lines about the importance of history:  Those who cannot remember the past are condemned to repeat it.  What people remember about the past, they suggested, is likely to warp their judgment of the future.  "We often decide that an outcome is extremely unlikely or impossible, because we are unable to imagine any chain of events that would cause it to occur.  The defect, often, is in our imagination."

-Michael Lewis, quoting a paper by Kahneman and Tversky in The Undoing Project:  A Friendship That Changed Our Minds

My business partner and I started our investment real estate company in 1982.  Interest rates, for those who were not paying attention back then, were atmospheric between 1980 and 1982.  Making sense of a real estate investment when you are borrowing money at 16%, is a difficult (not impossible, but very difficult) proposition.  Anyway, that high rate environment is what we grew up with.  Not unlike our parents, who learned to fear debt during the depression, and lived with that fear for the rest of their lives, we learned to fear variable interest rates.

"What people remember about the past, they suggested, is likely to warp their judgment of the future."

For the past twenty years, every time we were offered the choice between a variable rate or a fixed rate loan, we opted for the fixed rate.  Mind you the fixed rate variety carries the penalty of a higher interest rate, sometimes several percentage points higher.  In our minds, though, all we could do was see rates rising.  Nevermind that for the past twenty years they have, for the most part, steadily fallen.

While it is easy to rationalize and say we slept better at night having fixed rate financing, our inability to throw off our past cost us a significant number of dollars.  And we never even got a thank you note from our bankers.