The phone line barely stretched into the closet that my eighth-grade self was squeezed into. My hand shook as I dialed her number. When she answered, I squeaked out “Hello.” She was surprised that it was me; not pleasantly so. While she was nice to me, I knew that my love was unrequited.
After a couple of minutes of uncomfortable talk, I hung up and wondered how I was ever going to face her in school. It felt bad for 10 minutes. Ten months later I would smile more confidently at her, and 10 years later, I had all but forgotten that moment.
Dan and Chip Heath in their book “Decisive’’ describe author Suzy Welch’s “10-10-10” strategy (how will you feel in 10 minutes, 10 months, 10 years?) as a tool for emotion sorting.
Our daughter was wrestling with a decision whether to enroll in a 10-week business minor program at her university or to find a job for the first 10 weeks of the summer. She was torn between having as much spending money as her friends and participating in this unique program that would help her in the future. The schedule is intensive enough so that she can’t work while taking classes. Our discussion led to the question: “Ten years from now, are you going to be happier that you had an extra couple thousand dollars or that you went through the business program?” She decided to pursue the minor while taking on extra baby-sitting jobs when she returns.
She balanced what she wanted today (more money) with what she hoped for tomorrow (a well-rounded education). This gave her perspective. She realized that she could still pick up some money if she broadened her approach from job/no job to traditional vs. nontraditional work. This reduced the stakes, changing an either/or decision into a “yes/and” decision.
We make decisions all the time. Do I move? Change jobs? Have kids? Eat out? Get my prerequisites at a junior college and transfer to a university to finish my degree? Get out of the market? Buy long-term care insurance?
Sometimes, the decisions seem overwhelming, so we avoid them. But we really need a process to make better choices. In “Decisive,” the Heaths pose: “What if we started every decision by asking some simple questions: ‘What are we giving up by making this choice? What else could we do with the same time and money?’ ”
One of our client couples have been talking for years about wanting to own another property in one of two cities that they love. Many things came into the decision — where their children lived, how easy the city was to get to, the cost of renting rather than owning, a changing real estate market. The client recognized that buying the property would mean that he would need to be in practice longer than he originally planned. As we explored the various options, we concluded where to buy the property, how to finance it, and what they were giving up by owning it. We also realized that if this turned out to be a mistake, they could get out of it with a loss that could be absorbed.
In their book, the Heaths suggest “the WRAP process for decisionmaking: Widen your options, reality-test your assumptions, attain distance before deciding, and prepare to be wrong.”
A very conservative client was so concerned about the election that she wanted to completely sell out of stocks last December. We were able to widen options by not making this an either/or decision but by reducing stock exposure. We reality-tested her assumptions and attained distance by talking through what was going right with the economy rather than focusing simply on problems. And asset allocation protected her if either she or we were wrong. This solution allowed her to capture most of the market returns since the beginning of the year.
Developing a process in which you can believe not only helps you to make better decisions, but it can make you more comfortable accepting the risk.
Spend your life wisely.
Ross Levin is the founding principal of Accredited Investors Inc. in Edina. His Gains & Losses column appears on the last Sunday of the month. His e-mail is email@example.com.