Revealed Preference

Posted on January 29th, 2016

Decision making can be tricky, and nowhere is it trickier than in deciding what to do with one’s life. The challenge increases with privilege; for it is indeed privilege to have options in the first place.

Often a decision is portrayed when there really isn’t one being made. Ben Horowitz, of VC firm Andreessen Horowitz, articulates this very well. This usually takes the form of “do we want good X or great X?”. The question is tautological.

True decision making arises from alternatives with tradeoffs. And yet herein lies my main point for this post: we seem to seldom use the mental tool of tradeoffs when making decisions.

For example, as I write this post I’m occasionally gazing outside and wondering how nice it would be to pursue a life of learning and exploration, as opposed to trading my time for renumeration. For a while I was caught in this mental trap: obviously that seems splendid. But my true preference, call it “revealed preference”, becomes much clearer when presented as a choice between alternatives, where good and bad consequences are seriously considered. You can further enhance this by considering multi-step consequences, or indirect consequences as things interact, much like a chess player.

If you ask me if I want ice cream, of course I’ll say yes. Now, ask me if I want ice cream or a steak, and right now I’d probably tell you I’m in the mood for a steak. Turns out I didn’t want that ice cream as much as I thought. I truly love learning. The thought of owning my time sounds amazing. But would I want to do pure academics and nothing else for a decade? Not me, the FOMO (fear of missing out) is terrifying. That doesn’t mean I don’t still want to own my time. But it suggests a different, more calculated approach.

The next time you question whether you want something, frame it as a choice against other things. Your priorities will become very clear, your preferences…revealed.