“Maybe I’ll stream something.”
This single sentence of internal dialogue is a prelude to 15 or 20 minutes of high anxiety.
My family subscribes to at least five streaming services. When I want to watch a TV show or movie, I can choose from perhaps 40,000 selections.[1]
I turn on Apple TV and scroll through the possibilities.
I consult The New York Times. Each month it publishes columns titled “The 50 Best Movies on Netflix Right Now,” “The Best Movies and Shows on Hulu Right Now,” “The Best Movies on Amazon Prime Video Right Now,” and “The 50 Best TV Shows and Movies to Watch on Disney+ Right Now.”
Indecision compounds. What if I click wrong? What if I spend the next 2 hours of my life watching something worse than one of the other 39,999 possibilities?
I turn off Apple TV, get off the couch, and take our dog for a walk. I think about a passage from one of my favorite books, The Paradox of Choice: Why More is Less by psychologist Barry Schwartz. (This book has been influential in personal finance and corporate retirement-plan design.)
“Anytime you make a decision, and it doesn’t turn out well or you find an alternative that would have turned out better,” Schwartz writes. “you’re a candidate for regret.”[2]
Maximizers and Satisficers
Schwartz distinguishes between “maximizers” and “satisficers.” As Schwartz explains, “maximizers need to be assured that every purchase or decision was the best that could be made.”
He continues. “To satisfice is to settle for something that is good enough and not worry about the possibility that there might be something better.”
In The Paradox of Choice, Schwartz includes questionnaires that allow us to sort ourselves.
I’m in the middle. I have maximizer tendencies. But I’ve found that these tendencies cause more pain than peace. I try to put myself in situations that force me to act as a satisficer. If I want ice cream, I go to the creamery that serves vanilla and chocolate. Throw me into a streaming media bazaar of 40,000 choices, and I walk the dog.
The Satisficers’ investment plan
As an investment analyst at Morningstar in the 1990s, I learned that a only small percentage of mutual funds outperform the stock market in a given year. The maximizer would try to identify those few. I discovered that a low-cost, broad market index fund would outperform at least half its competitors. Not bad, not great, but good enough.
And I understood that over time this annual advantage would compound. In the past 15 years, according to Standard and Poor’s, 87.98% of all large-cap U.S. stock funds fell short of the S&P 500 Index–a good, if overstated, proxy for the performance of low-cost S&P 500 Index Funds.
Long before I’d read Schwartz’ book, I unknowingly used these insights to implement the satisficers’ playbook in my investment portfolio. Since the late-1990s, my satisficer portfolio has included (mostly) four funds: a broad U.S. stock market index fund (similar to an S&P 500 Index fund), a broad non-U.S. stock index fund, a U.S. bond index fund, and a money market fund that we use to pay the bills.
These funds won’t maximize our returns. But they “satisfice” our need for an investment portfolio that, fingers-crossed, can help us meet our needs.
A. Clarke
[1] This figure strikes me as high, but according to JustWatch.com, Amazon Prime alone has 26,300+ movies and 2,300+ TV shows. At Netflix, the figures are 5,000+ movies and 2,500+ TV shows.
[2] Schwartz, Barry, 2004. The Paradox of Choice: Why More is Less. Harper Collins, New York, p. 147.