Flip The Value: Facing Decisions
Lost golf balls
I have a confession to make. I don’t like looking for golf balls. If you golf, you already know what I’m talking about. If you don’t, let me paint a picture.
During a round of golf, inevitably a golfer in the group will hit a ball out of bounds. Yes, oftentimes this golfer is me. What happens next has always intrigued me. The golfer who hit the errant shot will traipse in the general area their ball landed in hopes of finding it. This triggers a polite social norm from the other golfers in the group. That is, all of the other golfers will join the hopeless search until the ball is found or minutes pass and the golfer concedes their fate.
I should clarify, I’m talking about a situation where finding the ball is very unlikely and, if we DO find it, there is no hope for a shot. The golfer simply saved their ball and must drop in another area (with a penalty) and play on. We’re just looking for the ball. Four adults scavenging in the woods for 4-5 minutes for a ball that, on the high end, might cost $6.
I usually don’t share this pet peeve with fellow golfers. Ultimately I like to be a good team player and have fun with the group, so I’ll play along. After all, I realize I’m the weird one and it’s not worth me soap-boxing a point of view that I’ve developed over the years. I’ll just help look for the ball.
Free sandwiches
A handful of years ago I learned that my favorite sandwich shop was giving free sandwiches to active duty military and veterans. Since I had errands to run, I decided to swing by and grab a free sub for lunch. However, as I pulled into the parking lot, I saw the line of likeminded freeloaders extending out the front door and down the block. I estimated the line would take at least 45 minutes. No thank you. I passed on the free sub and went about my day. But why?
The simple take to this story is I was too lazy or impatient to stand in line for 45 minutes for a free sub. Fair enough. However, there is a good lesson to be learned. This is the day I learned to flip the value.
As I drove away from the sandwich shop, I thought more about why I wasn’t as diligent as those standing in line. Why am I too lazy to wait? After some thought, it hit me. I heard a voice in my head ask me the question, “If a stranger asked me to wait in line for 45 minutes for $7, would I do it?” That began to clarify things. Then I got creative. What if I was forced to stand in that line, would I pay $7 to get out of it? Taking it even further, what if I already had the sandwich, but in order to keep it I had to wait in line for 45 minutes? I realized that there were three basic parts to the decision. The sandwich, my time, and $7. I could twist it however I wanted to.
This eureka moment was incredibly satisfying. It helped me realize why I make decisions like this. Since then, these types of questions have helped me make hundreds of spending decisions. Should I spend money, spend time, spend my personal labor, or abandon what I want entirely? The answer lies in these types of questions that twist the pros and cons; what I like to call flipping the value questions. As it turns out, there are three basic ways we can flip these questions.
Mowing the lawn: 3 versions of flipping the value
As seen above, there are many ways to flip the value, but eventually I found that there are three basic types. The easiest and most common way is to exchange the “what am I paying” part for the “what am I getting” in order to arrive at a sensible answer. Here’s an example.
Level 1: flip “what I’m paying” and “what I’m getting”
Do you pay someone to mow the lawn? Professional services can cost hundreds of dollars per visit. Is it worth it? Possibly. Flipping the value can help. Let’s ask the questions.
- What am I paying? Let’s say $150
- What am I getting? A mowed lawn, time saved, wear and tear on my equipment saved, and not thinking about lawn care at all.
When deciding to pay or mow the lawn yourself, this is usually how most people decide. But geez, $150 is a lot of money! Are you sure? Let’s flip the value using the most basic level 1 version. That is, what am I getting vs what am I paying if I decide to mow it myself.
- What am I paying? Time, labor, wear and tear on my equipment
- What am I getting? Saving $150
OK, but we didn’t really learn anything here. It’s just the opposite of the questions above. However, it can better quantify your decision. Also, you may feel like saving $150 is as good as getting paid $150. If so, then you’re already on to level 2.
Level 2: flip positions with the other side of the transaction.
Let’s get creative. Let’s switch positions with the lawn service. Thinking deeper, we can ask ourselves, “would I accept $150 to mow my yard?” Ah, there it is. That is flipping the value! Suddenly the decision becomes crystal clear.
If you wouldn’t accept $150 to mow your yard, then your answer to hiring professionals is valid. Likewise, if you would gladly accept $150 to mow your yard, then it’s time to lace up and get to it yourself.
Level 3: you already have what you want, would you pay to keep it?
This involves a little more imagination, but it can galvanize your position even further. In this scenario, you imagine you already have what you want. In this case, that means you already have a clean, manicured lawn. You haven’t paid or done anything to keep it. You just have it.
Now, what would you do or pay to keep it? Would you spend the time and labor equal to mowing your lawn to keep it? Would you pay $150 to keep it?
These three examples work because they force you to think about each part of the equation differently. It’s like an algebra equation, moving parts back and forth from one side of the equation to the other. The beauty of these thought exercises is that you can confidently go forward with your decision. Each time you pay for lawn care, you know you flipped the value and made the right call for you.
Bigger decisions
Ultimately, flipping the value means exploring the value proposition of any decision from many different viewpoints. From the few examples above, we see how this can help us make small decisions, but how does it help with larger ideas?
- Buying new vs used: You need to buy a car and have decided on the model you want. The new version costs $30,000, but there is a used option that is 3 years old with 40,000 miles on it that costs $20,000. What you’re paying vs. what you’re getting is obvious, but let’s flip the value. Using the third level of the idea, imagine you already own the new version of the car and someone offers to trade their 3 year old version with 40,000 miles, but they’ll give you $10,000 cash. If your answer to this proposition is yes, then the used car is for you. If not, then enjoy your new car.
- Investing for retirement: Imagine you’re already stretching your paycheck and saving as much as you can. However, while working with your financial planner, you learn that hitting your retirement goal will require you to save an additional $80/month. You still have some discretionary spending you enjoy each month. Restaurants, movies, etc., but you still hope to retire at a certain age. This one is less clear, but it’s still possible. Imagine you’re already on track for retirement. You already have enough saved but can’t eat out as often as you like. Again, using level 3, if someone offered you a less secure retirement for an additional 2-3 meals out per month, would you take it?
- Buying the dream home: I know you’ve scrolled through Zillow. I’ve done it too. Many of us dream of a home in the future. An upgraded family home, a vacation home, or a smaller luxury home after the nest is empty. Once we achieve the financial means to achieve this goal, it may be beneficial to flip the value.
Level 3 might help us decide on the home we want. If we already had it, would we pay to keep it? Once we decide on a home to purchase, we might use level 2 to decide if the price is right for us. If we were the sellers, would we accept the price? Finally, we can revert to level 1 to best understand exactly what we’re paying for what we’re getting.
As it turns out, sometimes there are many times in the decision process we can use these tools, but we can usually use all three each time.
Enjoy the choice
Flipping the value in any decision, regardless of the way you choose to do it, is intended to help you feel satisfied and confident in the decision itself. It can remove doubt and allow you to proceed with confidence. Likewise, it can help prevent buyer’s remorse after you take action on your decision.
Probably most valuable, it can provide peace of mind after the decision is made. I challenge my youngest with this often. When faced with the challenge of choosing between two desired options, he struggles to enjoy his choice and resist FOMO. His challenge is in letting go of the opportunity cost he spent; the alternative that he missed out on. Only when he freely gives up the cost of his decision can he fully enjoy the experience he decided on.
Once you flip the value and understand all angles of a decision, you will likely feel better about the price you have paid. Your money, your time, your labor, or your opportunity cost will suddenly feel well worth the benefit you receive. If not, you will risk wondering if you made the right call.
After all, should someone ask me to find a small white ball in the middle of the forest for $6, now I know my answer.
An MFAA advisor can help you find the value of the decisions you are making. In fact, finding an advisor is one of the decisions you can make! Run your decision through the 3 levels and if you see the value, find an MFAA advisor here.
