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In a Harvard Business Review article this week Dan Ariely, behavioral economist at Duke and best-selling author of Predictably Irrational, made an argument that financial planners are doing a major disservice to you and me by oversimplifying financial decisions.  He argues that we would all be better off getting comfortable with the complexity of our retirement planning and investment decisions instead of trying to simplify something that is inherently complex.  Dan is right.  But he is also wrong.  (Complicated, eh?)

To preface this: Dan Ariely is one of the most brilliant (not to mention clever and funny) decision-making researchers alive.  My own work owes an enormous debt of gratitude to the mountain of groundbreaking research he has published.   I think that Dan the behavioral economist is absolutely right—our efforts to simplify the ways in which we squirrel away our hard-earned cash rarely maximize our return.  He is also right that most mutual fund managers are often just as good at playing the stock market as your average blind chicken.

Dan the psychologist, however, is… not quite as right.  Psychologist Barry Schwartz, author of The Paradox of Choice explains that what really matters is what goals the investor really wants to achieve.  Is it the highest return on his money?  Or is it personal satisfaction?  Shockingly enough, one does not always lead to the other.

Let’s take Joe for example.  Joe is just your average, everyday figment of my imagination.  But let’s pretend that he’s a real person.  If you ask Joe what his investment goals are, he will–just like the rest of us–almost certainly give some variation of the answer “make some dough.”  But remember, Joe is a person.  What most people really want is to lead a satisfying, low stress life…not just 30 years from now, but today.   If the only thing Joe had to do was plan for his financial future, then he could and maybe should wallow in the complexity of personal finance so that he really, really understood all angles before he made his decision.

But as I mentioned above, Joe is a person.  He has many, many other decisions he must make today, tomorrow, next week and every other day until he dies.  These decisions are not just financial decisions either.  He will have to make courting and mating decisions, platonic relationship decisions, career decisions, hobby decisions, dieting decisions, parenting decisions, buying decisions…and so on.  For Joe to be completely rational in all of these areas, he must wallow in their complexity.  That means that a completely rational Joe will soon become a completely insane Joe.  (To be fair, Dan Ariely discusses this at length in his next book the Upside of Irrationality.)

Is that really all there is?  Are we forced to choose between being happy or being rational?

Oliver Wendell Holmes once said “I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity.”  I think Ollie was onto something. Simplicity without any exploration of complexity is nothing but carelessness, and it leads to dysfunctional impulsivity.

But the simplicity we find and use after wading through the vast complexities in our life is worth dying for.  It is the essence of a life well-lived, you might even call it “enlightenment.”

So, what does that really mean?  In a nutshell, it means figuring out what your Decision Pulse is for an entire category of decisions, such as your life, your career, or your business.  For example, my life Decision Pulse is Freedom.  It took me a lot of missteps within the complexity of my life to determine my Decision Pulse (I didn’t have a handy dandy assessment to turn to like you now do).  But once I determined my Life Decision Pulse—once I emerged on the other side of complexity—my decisions became much, much simpler.  I’m now able to “suffice” with confidence that I’m making a decision that is at least pointing me in the right direction…even if it isn’t the very best available option.  This applies to everything from how to budget our family’s money and where/how to live to whether or not to start my own business and how I should then structure that business.

If I were simply trying to maximize my returns—like economists think  I should—then many of my most satisfying life decisions  would look irrational.  But given that they moved me in the direction of freedom, I would argue that they were excellent decisions.   How many decisions have you made that seemed incredibly irrational, yet add a lot of satisfaction to your life?

If you’re still a little unclear, check out this short video clip.  It really helps switch on the light bulbs for  speaking audiences.

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