By Emily Guy Birken on 28 June 2019
Toward the end of her life, my grandmother's doctor told her to
avoid a number of her favorite foods — including ice cream. Whenever my mother
found a pint of Ben & Jerry's in my grandmother's ice box, Grandma's excuse
was always the same, "Oh, the little bit I have won't hurt me!"
The thing about Grandma's excuse (that often made the vein in my
mother's forehead start to pulse) was that she would have been right about one
hot fudge sundae. A single decision to disregard her doctor's orders would not
have made a difference in her health. The problem is that small decisions have
a way of compounding, and my grandmother made her health issues worse one ice
cream cone at a time.
The buildup of small decisions can be costly, whether you're
trying to improve your health or your finances. Here's how small decisions can
create big problems.
The tyranny of small decisions
In a 1966 essay titled The Tyranny of Small Decisions,
economist Alfred Kahn describes how a well-meaning individual making a series
of small decisions can end up with an unintended and unwanted large
decision.
Kahn used the example of the Ithaca railroad to explain how
small decisions can have devastating consequences. Rail was the only consistent
mode of travel in and out of Ithaca, New York, as it could operate in any
weather. But cars, buses, and planes offered faster and more convenient service
in good weather. Travelers in and out of Ithaca consistently made the small,
individual decision to take the most convenient service when the weather was
fine. Because of these small decisions, the rail service was eventually
discontinued because there were not enough travelers to cover the costs — which
effectively made Ithaca unreachable in bad weather.
Every traveler who made the small decision to take a bus or
plane did not intend for the rail service to dry up, but the cumulative effect
of those small decisions created an enormous, negative and unintended
consequence. (See also: 6 Guilty Pleasures That Are Killing
Your Budget)
The latte factor
Though it has become something of a cliche, the latte factor is
a common example of how the tyranny of small decisions can impact your budget.
Popularized by financial expert and author David Bach, the latte factor describes
how making regular small purchases, such as a daily $4 latte, can add up to a
big payout that you don't intend to make. Make an unnecessary $4 purchase every
day, and you spend over $1,400 per year.
This is what's so insidious about the tyranny of small
decisions. Anyone who spends $1,400 on a single large purchase would at least
have something of worth to show for the hole in their budget. But spending
money a little at a time on small indulgences means you can't even point to
where your money has gone. (See also: Here's How Rich You'd Be if You
Stopped Drinking Expensive Coffee)
Easy payments and small decisions
Another important factor in how the tyranny of small decisions
can destroy a budget is the fact that we now live in a largely cashless
society. When you're making small purchase decisions using cash, the amount of
money you have in your wallet is a natural reminder of how much you have spent.
However, it can be very easy to lose track of how much you've
spent when you're using plastic to pay for everything. Each individual spending
decision you make is a little thing that won't hurt your finances. But in
aggregate, the decisions add up to a total dollar amount that you didn't intend
to spend.
Aligning your choices with your values
Travelers to Ithaca didn't realize that prioritizing convenience
on any one trip would mean the end of the rail travel they valued. Similarly,
someone who isn't paying close attention to how much they're spending won't
realize that their choices are adding up to something they do not want.
To combat this, it's important to align your choices with your
values as often as you can.
For instance, let's say one of your values is to support local
businesses. Any single trip you take to the big box store or any single item
you order from Amazon will not affect the local businesses. However, if you
find yourself stopping at Wal-Mart or ordering online all the time, then you're
prioritizing convenience over supporting local businesses.
There's nothing wrong with valuing convenience, but you need to
remember that you probably can't have both convenience and a thriving local
business district at the same time. So you'll need to make sure you make
choices that show your support for local business at least some of the time.
(See also: 4 Ways Your Money Can Support Your
Values)
Forced value alignment
Of course, it's difficult to align all your small choices with
your values because each small decision feels like it's consequence-free. With
no looming negative consequence on the horizon, it can feel a little ridiculous
to ask yourself if buying this particular cup of coffee and a muffin will help
you reach your overall financial goals. One good way to enforce value alignment
is to take away your ability to make these small choices.
For instance, the standard advice about carrying cash instead of
credit cards is part of the personal finance greatest hits list for a reason.
When you use cash, you're forced to consider your values when making small
decisions, since the resource dwindles before your eyes.
This kind of forced alignment can help defeat the tyranny of any
number of small decisions. Here are a few examples:
·
Consumers who wish to support small local businesses could
enforce that value alignment by signing up for social media updates to make
sure those businesses stay on their radar.
·
Travelers who value an underused service could commit to taking
that service rather than focusing solely on convenience.
·
Folks who would like to eat healthier or lose weight could make
sure the tub of butter pecan ice cream never makes it to their kitchen.
Don't let small decisions pile up
It may be true that the little choices you make won't hurt you,
but it can be easy to lose track of how small choices add up quickly. Rather
than making each small decision out of context, take the time to figure out
what you value and how your small choices will fit into those values. That way,
you can be a master of your small decisions, rather than ruled by their
tyranny.
No comments:
Post a Comment