French Fries, Credit Cards, and Debt Psychology: The Behavioral Economics of Small Decisions

The following is a guest post from David Krueger MD who is an Executive Mentor Coach. 

The Tyranny of Small Decisions

How do two French fries weigh 40 pounds?

• Putting on 40 pounds over 10 years means gaining an average of four pounds per year

• 40 pounds divided by 10 years equals 4 pounds per year

• 4 pounds divided by 12 months equals .33 (1/3) of a pound per month.

• This is approximately 1/100th of a pound per day (1/3 pound divided by 30 days)

• One pound of stored fat represents 3500 calories

• 3500 times 1/100 equals 35

• To achieve the feat of gaining 40 pounds in 10 years, all you have to do is consume an extra 35 calories every day.

• 35 calories = two regular French fries

Little things count.

Economist Alfred Kahn described how we become trapped by the series of seemingly insignificant choices that we make – the tyranny of small decisions.    And, if we were able to see ahead to the end results of those small decisions, we may chart an entirely different course.

If you are burdened by credit card debt, it probably wasn’t one huge purchase that created the problem.  More likely, it was hundreds of small decisions, all along the way.  Some were necessary, some justified, some rationalized.  “It’s just a couple of French fries” thinking.  Internal bargaining took care of others: “Just this one time” or “I’ll pay it off next month.”  Segmentation of the pleasure of the purchase from the pain of payment obviated any lingering questions.

The Nobility of Small Decisions

Consider the inverse: the nobility of small decisions. 

We recognize in parenting, from the very beginning, that we really don’t know which interactions or words will be really important, or even remembered.  Knowing that we don’t know, we have to assume that everything we do is important.  Everything matters.

Consider the very small decision of stopping for a $4 coffee each day.  Calculate how much that is per year.  With interest, how much it would be in ten years.  In twenty years.

Epictetus asked twenty centuries ago: “What is a good person?”  The one, he reflected, who achieves tranquility by having formed the habit of asking on every occasion, “What is the right thing to do now?” 

You can be held hostage by small decisions.  Or, you can be effective, achieve mastery, and freedom by small decisions. 

All you have to do in life is the next right thing.

Comments

[MyFinancialObjectives]

Wow really great post! Very insightful comment by Epictetus. Imagine what the world would be like if more people did that.

The coffee example is a powerful one. Many of us have our little buys each day, that can add up to thousands of dollars over time.

Finally great example with the french fries. I really liked this and it just goes to show that, well, I really shouldn't have eaten those extra hash browns this morning:)

[Ken]

It's one's habits that can bring success or failure. It's really about having the discipline to do what's right over what is easy. Saving a percentage of one's income is right but a lot of folks take the easy route and spend all they earn. Little practices (done right) can bring big results.

[Squirrelers]

The french fry example is a very good one. I like the logical, stepwise approach to calculating just how impactful seemingly small decisions are. Cumulatively, they add up to make a big impact.

A different way to look at it is with your career. Given the importance of one's career to earning capacity, it can viewed through this context as well. Every little meeting, every little deadline, getting in early/leaving late, etc - everything real and perceived makes an impact. Do the right thing at each juncture - or at least think in those terms, while keeping in mind the big picture. This could pay dividends in that arena too, not just in terms of controlling spending.

Good post overall, I liked it.

[Tyler]

Great post! Seems to follow Gladwells Tipping Point argument. Little things can cause big change. Life is in the details. The difference between the top 10% and the rest is very small but it makes all the difference. A job worth doing is worth doing right.

I also use the oposite of this the put little things into perspective: it's only $60 per year is it really worth the stress or the fight? Two hours per month is really only 24 hours of my time per year. Etc.

[Robert W]

See Small S..tuff matters.
Liberty, health and wealth are not stolen all at once but
one bite, cut, slice , grab, dollar at a time.
Some of us in the `Me' generation are getting our payback.
Hopefully, I can teach/show my kids the errors of my ways.

[Budgeting in the Fun Stuff]

I liked the logical breakdown and get the point. Isn't it the same reason bloggers suggest starting an emergency fund with a monthly contribution, even if it's only something like $25? Little things do add up.