IN OLD ENGLISH, to be “ready” for something meant to be well counseled. The English King Aethelred the Unready earned his nickname because he was ill-advised. His tumultuous reign ended with invasions and revolts, including one by his son.
When we feel we have “extra” money or even just a hankering to spend, there’s a host of outside voices to counsel us. Most try to influence our actions out of self-interest—for their commercial benefit. Like a king, we always have to ask what’s behind our trusted advisors’ counsel.
We also have two hidden advisors inside of us, which is the subject of this article.
The rational regulator. In the guise of rules of thumb, or heuristics, this internal voice can give us a general direction. Guidelines like “if it costs more, it’s better quality” nudge our spending choices. Such guidelines may be helpful, but they’re also generalizations.
The gut-grabber. We all have instantaneous shortcuts that override our thinking process. Does the word “snack” immediately conjure in your mind carrot sticks or potato chips? How does such an instant thought get the inside lane, and thus the advantage, in decision-making?
Gut preferences form subtly and unconsciously over the course of a lifetime. It could be formed by an ad or jingle we liked, or a favorite uncle who shared a special snack when we were young. We then internalized their cumulative effects into unconscious habits—let’s call them “sways.”
Both of these internal advisors, heuristics and sways, serve the same purpose: They save us time and mental energy by providing a shortcut to decision-making. Thanks to their help, we can get the goods quickly and enjoy them faster.
These are not external nudges delivered by salespeople at decision time, so we trust them more. Still, following our own counsel can be like closing our eyes when driving down a seemingly familiar road. We still need to watch out for hazards.
Take the idea of going on vacation. You might immediately lean toward a cruise. Your rational regulator tells you that the meals, lodging and entertainment are bundled in one easy-peasy package. From fond memories of past cruises, your gut-grabber has visions of being on the high seas, staring at the sunset.
A definite yes? Maybe. Are there extra costs, like side excursions, factored into this low-resolution vision of a cruise? Even more important, are there deals on other vacation options that you might have overlooked because you’re so fixed on cruising?
Certainly, our personal preferences should be considered first. They endure because they’re constantly validated by experiences that we find satisfying. And yet they may not be right every time.
For example, I often get more value from more expensive goods. On the other hand, I can’t tell the difference between a $10 and $100 bottle of wine, so that heuristic doesn’t work for me when picking vino. Similarly, we’ve found hole-in-the-wall restaurants with better food than Michelin-starred ones. And we’ve paid for investment counseling that was inferior to my brilliant wife’s free analysis.
Meanwhile, my gut loves—and always calls for—a good fried snack. My doctor and the aforementioned wife, however, are now starting to outvote my gut two-to-one. I have favorite hiking trails for adventure, but I now need to seek out new paths—and healthier snacks—for the adventure to continue.
We should not let the presumed favorite automatically be the unchallenged champ. Still, it’s hard to be mindful and intentional about every choice, especially when we must question what our internal advisors have successfully recommended so many times before.
Like Aethelred, your realm and your reign are only as good as your choices. As the ruler, you can periodically call an audience of all your advisors. Reexamine what they recommend as your preferences, spending rules and default choices. Make these advisors justify their continued employment. And ask whether changing circumstances demand that they should be altered, evolved or even abolished from your privy council.
Jim is a former business litigation attorney who taught economics and humanities for 20 years. He’s the author of a three-book series on how to teach students about behavioral economics and media literacy. Jim lives in Texas with his wife and fellow HumbleDollar contributor, Jiab. They have a two-book series coming out in 2023, Behavioral Economics: A Guide for Youth in Making Choices and The Social Media Diet: A Guide for Young People to Be Smarter Online Users and Consumers. Check out Jim’s earlier articles.