Tag Archives: Decision-making

A paradigm of possibilities

When I was a teenager I adopted the basic stance that I wanted to try everything at least once. I quickly realized that this wasn’t really feasible, since some things would probably end up with me dead and thus unable to try more things. But it worked fairly well as a rule of thumb.

Don't die

Then I matured a bit, made a few realizations. That time isn’t a limitless resource. That certain things require opportunity or skills that can’t be instantly conjured; that you’ll never step into the same river twice. While none of this argues against trying new things, it does shift your perspective a bit: If doing one thing can prevent you from doing another, if you can’t try literally everything, then you need to start making choices.

But which choices? Can we recreate the essence of ‘try everything’ within the confines of practical reality? If we only get a certain number of picks from the buffet of experiences, it would stand to reason that we should maximize the novelty of each choice. But does this extend to trying something new over repeating a great experience of the past? For example, do we order our favorite meal at a restaurant, or one that we’ve never tried before? The latter choice will in all likelihood be less enjoyable, taste-wise, but if we ever want to try something better than what we already know we’ll have to take that risk1.

An interesting choice

Such a choice might be controversial, but not very complicated. It gets trickier when we recognize that our pool of options does not remain constant over time. In other words, some of your actions will expand your opportunities (making money, for example) while others limit you (becoming addicted to heroin, say). With this in mind, I would propose the following as a basic stance for experiencing life:

A paradigm of possibilities  –  Follow whichever course of action seems likely to allow the greatest number of novel experiences henceforth2.

To illustrate this, let’s imagine that a (superior) foreign power invades your country. Do you resist, or surrender? Dying is pretty much the ultimate loss of options, so if the only way to avoid this is surrender then that’s what our paradigm would propose. On the other hand, joining a totalitarian regime (or the Borg) might represent such a loss of options that guerrilla resistance would offer a life richer in opportunities (albeit endangered). This deliberation may seem Machiavellian and/or cowardly compared to say “make a stand for liberty”, but I wonder if it’s really any different than the underlying motivation of this nobler sounding rationale.

Before anybody brings up Barry Schwartz, let me emphasize that these possibilities are not the same thing as choices. They’re not options that we necessarily have to choose between, but rather potentialities that may unfold during your lifetime. Let’s take a concrete example: if I choose to set aside money in a retirement fund, I might end up spending my sixties traveling or writing, or working regardless. More possibilities than if I had no savings, but my default state would be to continue whatever I was doing as long as I was financially above water. Thus the added possibilities would rather manifest as the absence of forced choices than as a choice of actions suddenly forced upon me.

One final point I’d like to make is that while at first glance it would seem that never making choices would allow the most possibilities, this is not the case in practice. Sure, if you never get around to choosing a major you have every field open to you. But on the other hand you won’t have access to jobs that require specialized skills, nor to graduate studies or indeed to any of the intellectual experiences that require understanding of a specific subject. Similarly, if you never marry you may have “access” to every member of the opposite sex, but perhaps not to being a parent (not to mention that your pool of potential partners will shrink over time regardless). Your actions unlock new possibilities, and while you’re postponing a choice others pass you by. Of all the thoughts I’ve shared here, this might also be the most useful regardless of whether you buy into the unconditional commitment to curiosity or not: Remember that life is not a fixed pie of opportunities. The options you have today might not be available tomorrow, and what is available tomorrow depends in large part on your actions today.

[1] Of course not everyone would prefer this ideology, just as not everyone would prefer entrepreneurship over a stable job. But if we ascribe to the idea of ‘try everything’ then the choice seems fairly obvious.

[2] Correspondingly, Paul Graham talks about staying upwind of promising opportunities.

Opportunity cost

One Sunday each quarter, the California Academy of Sciences is free to visit.

California Academy of Sciences Rainforest

Or is it?

You don’t have to pay for admission, true. But since the event is both infrequent and well-known you’ll need to wait in line for, say, an hour and a half, even if you show up before they open the doors. How much do you make per hour (after tax)? If more than $20, one could argue that you’re losing money by standing in line instead of just paying $35 for entrance on a less crowded day.

Of course it’s not quite that simple; many people couldn’t simply work 1.5 hours more if they needed extra cash. And you might have been having fun with your friends while waiting. Though on the other hand the crowding doesn’t end once you get inside, so arguably your experience of the museum is inferior as well. But the point is that we ought not to compare expenses of time/money to doing nothing, but rather to what we could have spent it on instead.

The term used to describe this in economics is opportunity cost, as in the value of the opportunity you gave up through a given choice. And the concept is particularly important in situations like the above where the explicit cost of a choice is zero. You may have heard the phrase “There ain’t no such thing as a free lunch” from either Milton Friedman or Robert A. Heinlein, and the point is that there is an opportunity cost to everything.

The clearest example of opportunity cost might be a game show where you give up a sure reward for the chance at a larger reward. The choice to gamble isn’t free, because if you’d declined you would have gained something. And the same principle holds throughout our actual lives: Going to the movies doesn’t cost $12, but $12 plus two hours that you could have spent reading a book or learning web design. Eating dinner at Chipotle doesn’t cost $8, but $8 minus whatever you would have spent to cook at home (assuming you’re not skipping dinner). A free chair on craigslist will still cost you gas to pick up.

Of course it’s possible to get a bit carried away: I’ve heard it said that we shouldn’t ever do something if someone else can do it for less than we make per hour. Sure, specialization is a foundation of modern society, but if you only have a single skill you’d better hope that demand for it never drops. And it would be naive to imagine that we could actually calculate the precise opportunity cost of anything when the “cost” could include anything from hormonal imbalance to the respect of others. Nevertheless, I don’t think the importance of understanding opportunity cost can be overstated if you want to efficiently pursue your life goals, whatever they may be.

Thanks to Johan Larsson for engendering this post with a question about opportunity cost.

 

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