“If the important things are hard to measure, and the measurable things misleading, what kind of decision framework is left?”
This thought provoking phrase is from a new book titled Wild Problems by Russ Roberts. Roberts argues that many decisions in life can’t be made using traditional cost/benefit analysis or rational thought. “Wild problems” in Robert’s view are big decisions in life that can’t be decided by just looking at measurable data.
For example, deciding to marry, (or not) or when to start a family, (or not) demonstrates the difficulty of determining the proper path from anything measurable. As those of us married and with children can readily attest, before you embark on these important life journeys you don’t even know what questions to ask, much less what’s measurable. You are essentially making decisions in the dark.
WHY YOU DON’T KNOW WHAT’S IMPORTANT
When you attempt to add up the pros and cons of a particular decision, you’re just summarizing how these choices will make you feel. In the example above, it’s difficult for a single person to use traditional cost/benefit analysis to decide if marrying makes sense. They likely focus on measuring the wrong things and have no basis for projecting how marriage will make them feel.
Within the financial domain, many investors focus on measuring investment returns because they believe that is the most important variable. Investment returns are both measurable and comfortable. Almost everything you see on the financial news channels talks about returns.
Sure, investment returns are important, but are other things even more important? For instance, if you focus on high returns alone, you may not be able to sleep at night because of your increased level of risk. Balancing the level of risk you can stand for your overall well-being might be the best approach.
Investors usually make decisions based on a combination of the anticipated pleasure from returns and the potential pain from losses.
HOW TO ENJOY THE JOURNEY
Normal decision-making contours often concentrate on finding a single “right” answer. In reality, sometimes you might have more than one “right” choice. Ultimately, without a guide, you usually are just trying to navigate a path that moves you in a positive direction toward your long-term goals.
“Wild problems” can cause you to feel out of control since you are inevitably trying to forge a path ahead mostly in the dark.
Life is more than just a series of problems you need to solve. Life is more complex and more mysterious than that. Your life is made up of experiences and sensations that can’t readily be measured. The more you embrace the sometimes “intolerable uncertainty”, the more you can savor not knowing what comes next. Start there. Ready for a real conversation?