October 27, 2013

Some perceptions can be wrong

It seems that every few months some organization has a press conference releasing data indicating which state is best for retirees, which is best for young people, which is safest etc.

Over the past few months, FDi (Foreign Direct Investment) magazine, Forbes magazine and the Tax Foundation all released their rankings of what they consider the most business-friendly states. The criteria varied in each survey, and while New York fared better in the Forbes rankings than in FDi, in the Tax Foundation’s, it didn’t do so well. Actually, New York ranked 50th.

Are these surveys important and what effect can they have?

Well, many of the organizations that conduct the surveys have great reputations, and surveys by reputable organizations can create the perception that one location may be better than another for doing business.

And we all know that perceptions can be important.

The brain is the link between perception and decision making. Our brain forms our perceptions and then uses those perceptions to form our decisions. If we misjudge what is happening around us, we may make poor business decisions.

What perceptions might surveys create? For example, does the Tax Foundation survey ranking create a perception that there is a correlation between a state’s business taxes and jobs?

It might create a perception that it does.

Perhaps, but it could be inaccurate. Consider that Iowa is ranked 40th in the Tax Foundation survey but has a 4.9 percent unemployment rate. Minnesota, ranked 47th in the survey, has a 5.1 percent unemployment rate. Pretty enviable unemployment rates, wouldn’t you agree?

And what about Nevada, it ranked 3rd in the Tax Foundation survey with a 9.5 percent unemployment rate. Or Michigan, ranked 14th with a 9 percent unemployment rate.

Might that change your perception regarding a correlation between a state’s business taxes and jobs?

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