3 Steps: How to Make Life-Changing Choices You Won’t Regret
Dear Rich Lifer,
Ron Wayne tries to get by each month by stretching his Social Security check and playing video poker at a casino in Nevada.
He’s eighty-six years old, and like a lot of people these days, he’s feeling the pinch financially.
It’s somewhat ironic, however, that he of all people would feel anything approaching a pinch.
After all, he is one of the founders of Apple.
When Apple was formed on April 1, 1976, Wayne signed the legal papers along with Steve Jobs and Steve Wozniak. Jobs and Wozniak each held 45 percent of the stock, and Ron Wayne had the other 10 percent.
Twelve days later he sold his shares for $800. On an impulse, he decided to get out of the infant corporation. Personal computers? Well, they probably wouldn’t catch on, anyway…
So, Ron Wayne took the $800 sure money and got out. But if he had held on… his stock today would be worth more than $100 billion.
It’s like the saying goes: You gotta know when to hold ’em and know when to fold ’em.
Though it’s sad for Ron, we like this story because it’s relatable.
Everyone’s made a financial decision they’ve later regretted — so no one can fault Ron Wayne.
However, if you ask Ron Wayne if he regrets selling Apple, he’ll tell you:
“I’ve never regretted my decision for one moment. If I had stayed with them through the Apple corporation phase, I probably would have ended up the richest man in the cemetery.”
Whether you believe Ron or not, there’s something to be learned from his story.
And that is how to come to terms with the choices we make.
Every day you’re faced with choices like Ron that either add, maintain, or detract from the quality of your life.
Should you buy or sell that stock? Should you say yes or no to that invitation? Should you downsize and move or age in place?
This might sound absurd but freedom of choice is a problem that plagues Western society today.
I know — how can having the right to choose be so bad?
What if we told you that having too many options is leaving you broke, unhappy, and anxious?
The Paradox of Choice
That’s exactly what psychologist Barry Schwartz was saying 15 years ago in his best-selling book “The Paradox of Choice.”
Schwartz believes that many modern Americans are feeling less and less satisfied even as their freedom of choice expands.
“Having too many choices produces psychological distress,” says Schwartz.
This is counter to the ‘more choices, the better’ narrative we’ve been told.
Schwartz explains where this internal friction originates: “A majority of people want more control over the details of their lives, but a majority of people also want to simplify their lives.”
Schwartz calls this the paradox of choice. Greater choices creates greater complexity.
You don’t have to look farther than your local supermarket to find examples of the paradox of choice in your own life.
How many boxes of cereal or bottles of shampoo are on the shelf? What brand do you buy?
Likely you choose something familiar or your default brand. This is your brain simplifying the choice for you.
The desire to simplify our overly complex lives is stronger than ever now.
Have you wondered why the trend toward minimalistic design and books like “The Life-Changing Magic of Tidying Up” by Marie Kondo are so appealing all of a sudden?
Another interesting example of the paradox of choice has to do with investing.
Schwartz says, “A colleague of mine got access to investment records from Vanguard, the gigantic mutual fund company, of about a million employees and about 2,000 different workplaces. What she found is that for every 10 mutual funds the employer offered, the rate of participation went down two percent.
“You offer 50 funds — 10 percent fewer employees participate than if you only offer five. Why? Because with 50 funds to choose from, it’s so damn hard to decide which fund to choose, that you’ll just put it off till tomorrow, and then tomorrow and then tomorrow and tomorrow, and, of course, tomorrow never comes,” says Schwartz.
What’s worse, Schwartz says the decision is so hard for employees that most even pass up significant matching contributions from their employers.
“By not participating, they are passing up as much as 5,000 dollars a year from the employer, who would happily match their contribution,” says Schwartz.
What Can You Do To Make Decisions Easier?
In his book, Schwartz lays out 11 strategies to cope with the paradox of choice.
We won’t share all eleven — you’ll have to read the book — but here are three of our favorites.
Satisfice More and Maximize Less
According to Schwartz, maximizers are those who only accept the best. Satisficers, on the other hand, have learned that contrary to conventional wisdom, good enough often is. They’re willing to settle for something other than the best.
Learning to accept ‘good enough’ will simplify decision making and increase satisfaction.
For example, next time you go to a restaurant and look at a menu, stop searching once you’ve found the first item on the menu that meets your appetite.
The chances of you finding an item that’s even better is low and it won’t make much of a difference if you do anyway.
Think about the opportunity costs of opportunity costs
Most economists will tell you that opportunity cost is the benchmark against which options should be assessed.
But Schwartz argues that assessing opportunity costs has costs in itself. When you have to make decisions with trade-offs you’re typically less satisfied with your choice.
That’s because you’ll spend time thinking about the best qualities of the choice you passed on rather than enjoying the option you selected.
For example, in one experiment a group of doctors were given a case history and a choice between sending the patient to a specialist or trying one other medication first. 75% choose the medication.
Give the same choice to another group of doctors, but with the addition of a second medication option, and this time only 50% chose medication. Choosing the specialist is a way of avoiding a decision between the two medications.
When there are trade-offs, all options can begin to look unappealing.This is why satisfiers tend to be happier with their choices.
Here’s what you can do:
Unless you’re truly dissatisfied, stick with what you always buy
Don’t be tempted by ‘new and improved’
Don’t scratch unless there’s an ‘itch’
And don’t worry that if you do this, you’ll miss out on all the new things the world has to offer
Learn to Love Constraints
When you decide to follow a rule (for example, always wear a seat belt; never drink and drive), you avoid having to make a deliberate decision again and again.
Rule-following frees up time and attention which can be devoted to thinking about choices and decisions that rules don’t apply.
In the short run, thinking about these second-order decisions — decisions about when in life you will deliberate and when you will follow predetermined paths — adds a layer of complexity to your life.
But in the long run, many of your daily hassles will disappear, and you’ll find yourself with time, energy, and attention for the decisions you’ve chosen to retain.
Everything in your life is a reflection of a choice you made. If you want a different result, make a different choice.
To a richer life,
The Rich Life Roadmap Team