What Might Have Been Is An Essential Component Of Misery

crispydoc Uncategorized 6 Comments

The title of the post comes from correspondence from Danny Kahneman to Amos Tversky regarding insights into irrational human decision-making processes. It was during their collaboration in elucidating the concept of loss aversion. Regret minimization is a related but distinct concept.

Given dual-choice gambles where a rational actor should choose the option with greater statistical odds of benefit according to pure theory, humans often deviate and make the irrational choice to forego the greater benefit because they seek to minimize regret. The bird in the hand is worth two in the bush thanks to the imagined misery of potential birdlessness.

The partnership between these psychologists created the field of behavioral finance, as detailed in The Undoing Project by Michael Lewis. In reading the book, I began to review my bucket list as if it were primarily designed to minimize regret, and it gave me a new set of insights.

One of the genuine pleasures of blogging has been the friendships that have blossomed, virtually and otherwise, with fellow physician finance bloggers. I am incredibly grateful for the advice, support and general camaraderie these friendships sustain.

For example, one friendship I've come to deeply value is with Matt Poyner, a financially independent Canadian ER doc who responded to burnout by quitting his job, selling his home, and taking his wife and four young sons on a year-long odyssey of travel and world-schooling across the globe. You can find his experiences beautifully rendered at Big Family, Small World.

Matt's a fascinating and thoughtful guy, and I've profoundly enjoyed our correspondence over the past year. Reading the Lewis book, I realized that part of what I find so compelling is that he was willing to take a chance in a way I have not, sacrificing security and the known in favor of adventure and the unknown.

His decision was obviously poly-factorial: he worked a difficult job in a very broken health system, he felt beat down, and thanks to financial independence he had the option to change his life drastically.

Yet it seems compatible that two concepts in behavioral finance, framing and regret minimization, played some important role in his family's decision-making process. Matt (and his family) had the uncanny ability to frame the anticipated the regret that foregoing that adventure would cost them and decided to pursue it as a result.

It seems almost contradictory at first glance: most examples of regret minimization in finance are taking the sure thing instead of the gamble for a greater win.

Yet when one acknowledges that decision making is not only about maximizing utility but also must account for minimizing regret, it all adds up. The prospect of never living up to that potential great unifying family travel experience was too great to resist.

It's interesting to attempt to dissect how a seemingly contrarian thinker shares the same irrational decision-making mechanisms that we do, but is simply able to frame questions in such a way that the answer leads to an unconventional decision.

Applying the lens of regret minimization helps me view his choice with a shared appreciation of our human frailties. My actions to date suggest that I cannot stomach the risk of taking my family abroad for a year because I'd regret if it turned out to be anticlimactic, if we tired of travel the way we'd tire of ice cream at every meal, if our return to community after that time might turn out to be a let down.

Matt looked at the same question and concluded the risk of inaction, the degree of regret he'd experience for not taking that chance, heavily tipped the scales in favor of a family gap year.

Neither of us could stomach the regret, and we acted accordingly, coming to entirely different yet internally rational conclusions.

Despite our brains being wired in the same way, our choices can still turn out to be weird in different ways.

Comments 6

  1. I too find it fascinating when someone swims against the current and chooses a different path faced with the same conditions a lot of us face.

    There is safety in numbers and that’s why most of us go with the flow. We have a potential greater floor of happiness but we give up the potential ceiling instead. Of course there are some that do the unconventional and fail dramatically (and often we do not hear of these cases as most people tend to publicize the successes and not the failures) so we may also be artificially biased when we hear of the the great adventures from one success story.

    1. Post
      Author

      Xrayvsn,

      Your point is well-taken that we all manifest recall bias in considering unconventional examples.

      Fortunately Matt is one salmon who did not end up on your plate or in the bear’s mouth for having failed to follow a template.

      Matt would argue that it was far less about avoiding regret than about avoiding the familiarity heuristic that keeps you doing only what you know. They did not want to be prisoners of the familiar and risk losing out on the benefits of taking a path they could not imagine.

      Given the recent media blitz on “my FIRE journey was overblown so I stopped” it seems the failures are getting their moment of exposure as well, although the writing seems tinged with the schadenfreude of a takedown at times.

      Appreciate your perspective,

      CD

  2. Thinking of what might have been is unhealthy and unproductive thinking about events that never happened because it’s an alternate present time. At the same time, it’s not healthy to think too much about the past or what might happen in the future. On top of that, thinking about what might have been is unrealistic because we have a glorified and romanticized idea of “what might have been”. In reality, it could have been a lot worse.

    My point is, the only thing we should think about is our current situation now. Matt was so unhappy with his current situation that he decided to leave medicine and take his family around the world. You were burnt out and unhappy, but you found a solution to your current situation by working less.

    While both of you seem to be wired the same way, I would argue that everybody is different and everybody is in a different situation. From what I can tell, both of you made great decisions based on your respective then current situations 🙂

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      Author

      Appreciate your perspective, DMF.

      As someone born with a 40 year old soul, I don’t necessarily think time spent considering alternate outcomes is an extreme hazard to presence so much as an opportunity for gratitude and (in certain situations) a way to practice forecasting risk.

      Sam Dogen of Financial Samurai is fond of advocating you “forecast your misery” and I think there’s value to the practice.

      Perhaps I envision it less as romantic loss than the pessimistic imagination run awry.

  3. One of my degrees is in psychology. I became fascinated with social psychology, persuasion, bias, bias manipulation and game theory. Later that morphed into neuroscience when I happened to take a neuroanatomy course and realized there was a whole neuro infrastructure associated with social survival. Social psychology is to some extent about narratives and manipulation of behavior through narrative. When you hear about data analytics and elections those are the social psychologists trying to force your behavior. Facebook is social psychologists trying to force your behavior through neurologic manipulation as is twitter etc so they can profit at your expense. It’s a “phantasm reality”, based wholly in narrative and divorced from actual reality, except actual reality is also based in narrative and malleable. What it meant to be “American” in 1950 was a much different narrative than what it meant 20 years later after the baby boomers got finished mugging reality. In 1950 Americans were willing to die for the narrative. In 1970 sex and pot consumption pretense had superseded. Boomers have mugged reality ever since.

    The real deal however is who you let author your narrative and the extent you give away your the authorship to someone else. That authorship of your reality includes wives, husbands, kids, parents and employers. That authorship also includes the financial narrative which you allow to be imposed on you. Lemme see I spent half a mil getting you an MD and now you’re going to cut the soles off your shoes and learn to play the FLUTE!!!!???

    Narratives are like infections, some benign and self limiting, some virulent as hell, and some beneficial and protective like the healthy biome that exists in your gut. We are fed narratives all day every day. Global warming? Gender fluidity? Eat a healthy diet!!! What exactly is a “healthy diet?” It is not anything that is common because the entire diet is clearly defective and the narrative was promoted by medicine and the FDA all under the guidance of the grain and seed oil lobby, so diabetes and obesity is a direct result of the marketed narrative and lobbying activity of big food. As physicians we promulgate the narrative as dupes of the system. There is no natural immunity since everybody is a food “expert” so food become entirely political and yet people die and suffer terrible disability like diabetes metabolic syndrome and neuro degenerative disease and cancer and we wring our hands as if there is nothing we can do except continue to sell a defective narrative. If you come out against the narrative Bubba I guarantee you will be exterminated, so there is considerable risk in counter culture.

    Still the very best thing about America is: if you don’t let the narrative control you, it’s helpless against you. Blue pill, Red pill you actually get to decide.

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      Author

      Authorship of the narrative is the fight most burnt out docs are facing.
      Control your destiny?
      Determine your own schedule?
      Decide to be present for your family?
      Let down society?
      Subject yourself to open derision from peers?
      Fail to live up to another’s image of you?

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