By Robert Seawright, Proprietor, Above the Market
Calvin Miller says that choice is both the gift and the burden of each day. In his words, it “dams the future.” I first heard those words spoken and I assumed I had heard “damns the future,” implying that we make poor choices or are faced with impossible options, “damning” us with dreadful consequences.
How choice can damn the future is illustrated by Sophie’s Choice, a novel by William Styron (and a film by Alan J. Pakula) that considers Sophie Zawistowska, a survivor of Auschwitz whose two children, a daughter and a son, perish there. Near the end of the book, Sophie reveals that upon entering Auschwitz, she was forced to choose which of her children would continue to live and which would immediately be gassed. Sophie chose her daughter to die, a decision that would forever haunt and torment her, damning her to ultimate destruction. A “Sophie’s Choice” is thus now an idiom for the necessity of choosing between two unbearable options. Our choices can indeed damn us.
But Miller’s point was a more subtle (if less dramatic) one. In saying that choice “dams the future,” Miller means that it forecloses other possibilities to move us in a single direction which provides its own choices. Some other possible futures are thus dammed off by what we choose. The stakes can be very high when we make choices, of course, which make the act of choosing a burden. Even so, the freedom to make choices is generally a great gift, Sophie notwithstanding, one we would do well to exercise wisely.
As we all recognize, choice is the process of evaluating the merits of multiple options and selecting one or more of them, generally based upon the quality (or presumed quality) of each option’s attributes and potential outcomes. Choices can purport to provide an objectively measured selection (e.g., the shortest route between two points), a subjective conclusion (e.g., the most scenic route between two points), or a combination of the two (e.g., the fastest route between two points, which would consider distance, mode of travel, likely influences on travel speed, and the like). Choices often build on each other, such as when core belief choices influence subsequent decision-making or when the consequences of one choice impact and influence what comes after.
Accordingly, we should of course be careful to save and to invest both wisely and well. More fundamentally, we should make the core commitment to saving and saving consistently. These conclusions are simple, of course, but they aren’t easy.
On account of our behavioral and cognitive biases, we can readily struggle to make good choices. To pick an obvious example, we always have a hard time with any choice that requires that we delay gratification. We can even have difficulty because we are faced with either too few choices and too many. While more choices can improve our overall lot, we can also be paralyzed by having too many of them. For example, a study by Sheena Iyengar of Columbia University showed that too many choices actually caused a decrease in 401(k) participation. When the plan offered only two investment options, 75 percent of employees participated. But when 59 investment options were available – almost surely a better circumstance in terms of financial planning – the participation rate dropped to only 61 percent. This choice paralysis helps to explain the importance of target date funds within defined contribution plans like 401(k)s.
We have all been confronted by “analysis paralysis” at one time or another. But we need to consider that a refusal to make a decision is no less a decision than an affirmative choice. The choices in one’s 401(k) plan may seem too daunting to attempt, but a refusal to save will almost surely be much worse and a dreadful choice indeed.