The Long and The Short Of It

Episode 210 - Opportunity Cost

Transcript:

Pete: Hey, Jen.

Jen: Hey, Pete.

Pete: So as we sit here again, across the room from one another in real life...

Jen: I know, in person.

Pete: I feel like this is going to be the next ten episodes of us saying the same thing.

Jen: Because we still can't believe it.

Pete: We still can't. It's my last full day here in New York City.

Jen: No!

Pete: No! And I've been thinking about opportunity costs as it relates to this particular trip, but also opportunity costs I feel like are something that I know you're going to have some good insight into based on your life but also the work you do with the artists that you coach.

Jen: Yeah, opportunity costs. This is The Long and The Short Of It.

Pete: So I'm sure we've touched on opportunity costs at various times over the two hundred plus episode journey. However, it's been, I guess, particularly top of mind for me in the last two weeks. I've been away from home. I've been on a little work trip to Chicago and New York, as most people know at this point. And I've been thinking a lot about, "What's the opportunity cost of coming on a trip like this, on a work trip?"

Jen: Yeah.

Pete: And I know many, many people around the world, listening to this podcast, whatever, have gone on work trips before or have gone on holidays before or have decided to take one direction instead of another direction before, and I guess I'm noodling and curious about the impact of doing that is, I guess, the opportunity cost. Like, "What's it costing me to be away from home," is kind of the thing I've been noodling on. And I've gotten to a particular point...like Tracey and I just got married, and so like I really like my life at home. And I'm thinking more on this work trip than I have in any other work trip in the past about, "Huh. What does it take in the future for it to be worth me spending time traveling to the other side of the world? Because the cost of doing so is, I miss out on quality time with Tracey or catching up with my family and friends or whatever that is." So I'm just particularly curious about this whole idea of opportunity cost at the moment, and I can see so many parallels to recent episodes we did about choosing paths and making decisions. And I don't think we actually touched on when you make one decision, what you're actually also doing is not making this other decision.

Jen: Yeah.

Pete: So, enlighten me.

Jen: I don't know if I can enlighten you. But the thing that's coming up for me, as we grabbed our coffee this morning on the walk over here to the studio, we were kind of talking about the seeds that you had planted in the two weeks on this trip. And you won't know for quite some time, what those are going to turn into. So there's the opportunity cost of being here, the opportunities you're "missing" at home. And then if you hadn't come, there's the cost of the seeds that you've planted.

Pete: Yeah.

Jen: And you won't know for a while.

Pete: Ah, yeah.

Jen: So, it's actually making me think about this from a different angle. Like I'm pretty sure in the past, we've talked about facing your fear when you're making decisions and stacking your priorities in an order that makes sense for you. But I don't know if, in relationship to opportunity costs, we've connected the dot between that and detachment and like letting go of the things that are out of your control but holding on to the things that are. Because like in the case of this trip...

Pete: Yes.

Jen: ...you kind of know what you're missing at home.

Pete: Yes.

Jen: Right?

Pete: Yeah.

Jen: So you come here, you go to Chicago, you meet some cool people. We talked about this on a previous episode, you intentionally left room for serendipity...

Pete: Right.

Jen: ...on this trip. So you could do things spur of the moment and just like randomly say yes to experiences, which you've done. And you can't control what that's going to be, but you can control going home at night to your wife.

Pete: Right. Yeah. Oh, super interesting. In this example...I'm wondering if this applies to a lot of other examples, I think it might. It feels like the opportunity cost is immediate and known. Like you said, I know what a two week block looks like at home for me, so I know what I'm missing. That is immediate. I can think of that. Versus the...I don't know if it's the payoff, but I'll use that word for now. The payoff of investing time and energy and coming to the other side of the world to make a bunch of great connections and leave room for serendipity, it's kind of delayed and unknown.

Jen: Right.

Pete: Like you said, the seeds we've been planting, the meetings that I've had and we've had, the result of such meetings might not be anything until six months, one month, two weeks, it might not be anything at all. So it's totally unknown and totally delayed, which maybe is why I'm like grappling with, "All I see is the opportunity costs."

Jen: Right.

Pete: Because I can't see, at this moment, there's nothing tangible in terms of the payoff. And that, I feel like, has to be a metaphor for a lot of other things, surely.

Jen: Yes. Well, and also, this particular trip, the intention behind this particular trip is not one you have had before or executed before...

Pete: Mmm-hmm.

Jen: ...like the leave room for serendipity, come to America, have meetings with some people you've never met but had like a connection point with. So next time you decide to do a two week trip to America that has a similar intention, you'll have a better sense of what the opportunity costs are, because you will have had some experience and data to back it up.

Pete: Right. And perhaps some [American accent] data on what...I just said [American accent] data, wow.

Jen: Welcome.

Pete: Wow, I'm definitely in America right now. I just said [American accent] data. Sorry, all my Australian listeners...[Australian accent] data.

Jen: Sometimes I say [Australian accent] data.

Pete: Really?

Jen: Yeah, I flip sometimes.

Pete: Well, apparently I do too. I'll also have some data on the possible things that can come from it.

Jen: Right.

Pete: The possible outcomes, the possible payoffs, which at this point feel a little unknown. I mean, I have some inclination of what might happen, because I had some great meetings and some great conversations and we agreed to catch up again in two weeks time. So like, I know that there are things that may happen, I can see what that looks like. But yeah, it does feel a little bit intangible. And so now I'm just like, how does this apply to decision-making? I feel like this has to apply to decision-making where we don't make decisions out of fear, because we can see the real tangible known opportunity cost of committing to something, like, "That means we're going to miss out on this." But what we can't see is, "What might the payoff be?"

Jen: Right.

Pete: And so, we don't make a decision out of fear. I mean, I think of myself when I was grappling with this idea of quitting a job.

Jen: Mmm-hmm.

Pete: I didn't do it for a couple of years, because of the fear of, "What might come from that? Will there be a payoff? Am I crazy to think that the grass might be a little bit greener on the other side?"

Jen: Yeah.

Pete: Versus the opportunity cost of, "Well, I'm in this great job at the moment. And I get to travel Australia. And I get, you know, the ability to do control my time quite a bit." And so like, there were all of these immediate known benefits, which would have become costs had I made a different decision.

Jen: Well, so here's the thing about decision-making, which Annie Duke talks about in her amazing books.

Pete: Oh, Annie. Annie, Annie, Annie.

Jen: You made a good decision when you ultimately decided to leave your previous job and go out on your own. That was a good decision. You also had a bit of luck in that you had an excellent outcome.

Pete: A lot of luck.

Jen: Right? But even if you had had a bad outcome, that doesn't mean you made a bad decision.

Pete: Yeah. Yeah. I feel like, I mean, I know we've explained this before but I just, I, even for myself, find it so helpful to continually explain that decisions and outcomes are not the same thing.

Jen: I know.

Pete: You can make a good decision based on the information you have in that moment, and it can lead to a good outcome or, like you said, it could lead to a really bad outcome.

Jen: Right.

Pete: Because decision-making is essentially an exercise in probability. And so with any probability, even if there's a 99% chance that it goes well, there's still a 1% chance that it doesn't. And so, that outcome is separate. So you're right, the outcome is always separate when we make decisions. So really, it becomes a...I guess like a decision-making process is like gathering information that I have available to me at this moment, "What might happen? What do I know," and then committing to a decision based on that information, and then being comfortable that, "This was a good decision based on me having this information." Which, I feel like is easy to do when the outcome goes well.

Jen: Yes.

Pete: But the hardest thing to do is if you get a bad outcome, to go, "No, I made a good decision back there."

Jen: Right.

Pete: That's really hard.

Jen: Well, that's the punch line of...I think it's not really a spoiler...it's like the first page of How to Decide by Annie Duke. She says, "Write down the best decision you ever made."

Pete: Right.

Jen: "Write down the worst decision you ever made." And then on the next page, it's like, "Did you just describe the decision? Or did you describe the outcome?" "Oh, I described the outcome."

Pete: Always.

Jen: Right.

Pete: Yeah. So, we ran a workshop....we've run a couple of these workshops. We ran one in particular on decision-making last year, and I distinctly remember us asking a question like, "What's keeping you from making this decision," some question like that. And without exception, the response was, "I want to make sure it's the right decision."

Jen: Right.

Pete: Which is like, "I want to make sure I can control the outcome." Which, you can't.

Jen: You can't.

Pete: Right. So wild, we constantly try and do this.

Jen: Well, I feel like we can connect this to the Tim Ferriss fear-setting exercise, which is very much an opportunity cost exercise.

Pete: Ah, yeah. Ooh.

Jen: So we've talked about it before, but for those of you who hadn't heard those previous episodes, the Tim Ferriss fear-setting exercise is essentially, you enumerate for yourself what you lose if the doomsday scenario happens.

Pete: Yes. What's the worst that can happen?

Jen: Right. So in this case, you come to America, nobody wants to see you, you and I break up, we never do another podcast again. You know, whatever the doomsday thing is.

Pete: Yeah.

Jen: And then the question after that is, what would it take for you to recover from that?

Pete: Yeah.

Jen: And I love that exercise so much, because it allows you to work through your fear. And in many cases, you realize that recovering from a not ideal outcome is not going to be as hard as you thought, and it bolsters your confidence to step into the unknown to take the risk. We've talked on one of my favorite episodes we've done, it's called FOTU (fear of the unknown), and the fear-setting exercise feels like some sort of an antidote to FOTU.

Pete: Yeah. Which is also the idea of a pre-mortem, which we spoke about in Episode 1.

Jen: Wow.

Pete: Which, by the way, I got some feedback recently that it was someone's favorite episode.

Jen: Wow. Episode 1, that's so funny.

Pete: I'm too scared to listen to it, because...

Jen: I've listened to it once or twice over the last couple years, and I'm like, "Wow."

Pete: We've come a long way.

Jen: "We really are trying to cram every single thing we've ever learned into one episode."

Pete: That's what I remember from it too. It's like, "Here's twenty-seven different concepts in twenty minutes." But we talked about the pre-mortem, which is like the idea of painting the worst-case scenario before you make a decision so that you can then seek to mitigate it before it happens, or like Tim Ferriss talks about, get clear in how you could reverse it. You know, it's this idea again of one-way doors and two-way doors that Amazon is famous for talking about within their workplace culture. So the the assertion there is, most decisions we make are two-way doors but we often mistake them for one-way doors. And by that, what we mean is, you can make a decision but then you can reverse it and come back through the door and go, "Okay, let's try something else." And so, as far as I know, the idea within or the philosophy within the Amazon culture is, "Don't overthink those decisions, because they're reversible."

Jen: Right.

Pete: "Commit, make a mistake, come back through. Commit, get a great outcome, and then continue." But then on the flip side, when you recognize there's a one-way door...

Jen: Uh-huh.

Pete: ...like I don't know, starting a family for example, you want to like, yeah, think about that really intentionally, really deeply, spend a bit of time like noodling on it, don't commit in a fashion that's rushed or too quick. You want to think deeply and intentionally about those one-way doors. But I think the reminder for me is that one-way doors are pretty rare.

Jen: Yeah. Yeah. You know, another thing you and I had talked about over a coffee or a smoothie or whatever...

Pete: Some sort of beverage.

Jen: ...that we've been doing since we've been together in-person.

Pete: We're just showing off now.

Jen: Well, we were talking about our impatience with having to wait to see if a decision is a good decision, and wanting that more immediate payoff. Like, you and I had been talking about working on a very long-term project together. And one of the things that was holding us back and really throwing us into the dip was how long we are going to have to wait to find out if that project works. And then, what we came up with was a way to satisfy that craving by doing like a mini beta-version of it...

Pete: Yeah.

Jen: ...to get some quicker, more immediate satisfaction with feedback.

Pete: Yeah.

Jen: Which, I think ultimately also helps us determine what our true opportunity costs are.

Pete: Totally agree. Yeah, I totally agree. Those long term projects where the feedback loop is super long, it can be kind of demotivating.

Jen: Yes. Yes. You finish a project, you ship it, it's in someone else's hands. And then a year, two years later, you find out if anyone likes it.

Pete: Yeah. Or it gets released....I was talking to a friend recently who does a lot of really great video production work, and it was the same thing. You do this great project, you make this great video, you do all the editing, you send it to the client, the client says, "We're going to release it in eight months time."

Jen: Right.

Pete: So when it gets released in eight months time, you've forgotten about it.

Jen: Yeah.

Pete: And you're like, "Oh. Oh yeah, I remember doing that. I've sort of let that go now." So there's no feedback gratification, closing the loop of that project. Yeah. Which is kind of back to that, the payoff is sort of delayed and unknown.

Jen: Right. Which I think is part of what you are grappling with, with this particular trip. Because I have no crystal ball...

Pete: Okay.

Jen: ...but here's my prediction.

Pete: Alright.

Jen: My completely unscientific Jen's whim prediction: You will see the seeds that you planted in the last two weeks provide fruit for you.

Pete: Yeah, yeah. Yeah, I think you're probably right. Which, will then...I'll have to be careful that I don't think, "Well that was a good decision, based on that outcome." Right?

Jen: Right, right. Exactly. Exactly.

Pete: I have to be comfortable that it was a good decision now, regardless of what happens. Because here we are sitting across the room from one another recording a podcast, like that on its own is an outcome that, even now I'm doing it, is worthy of a good decision. But like before even that, it was still a good decision before I got on the plane, based on the information I had at the time. Well, another episode where it's therapy for Pete, apparently.

Jen: And that is The Long and The Short Of It.