People tend to fall into two categories as decision-makers. The first group is maximizers, those who strive to make choices that will return the maximum benefit. Then there are the satisficers (made-up word blending satisfy and suffice), those whose choices are determined by more modest criteria and nothing more. In this episode, we look at both approaches’ ramifications and reflect on critical decisions we’ve made in our own careers.
- “The Paradox of Choice”
- Why maximizers struggle to enjoy the journey
- Paralysis by analysis
- What type of questions do you ask yourself when making a big decision?
- The concept of “mental accounting”
- Do the results of our decisions correlate with satisfaction?
- Where do famous CEOs fall on this spectrum?
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Do You Maximize Or Satisfice?
In this episode, we talk about two types of decision-makers, the maximizer and the satisficer. I did not make up that second stupid word, an economist or a psychologist did. Thank you so much for reading. If you haven’t subscribed, please do. We hope you loved this episode.
We are talking about decision-making. What we are talking about is the difference between maximizing and satisficing. By initial thought, when I heard of this concept, there’s a restaurant in Chicago. It was one of our favorites. Me and Jenny loved this place. It was called Leona’s. It was an Italian restaurant. It was affordable. We were kids, this was years ago. The menu completely stressed me out. Frank, it was a fourteen-page menu. They were one of those restaurants that could do everything. They were Italian/American. Restaurants like that have everything on the menu. It was all good but it would always be twenty minutes to order.
It got to a place where I was avoiding going there because I’d be like, “I don’t know about Leona’s. I don’t want to look at that menu.” I’d say that to Jenny. She’d be like, “Let’s not open the menu. We love the cheese sticks. We love the pizza. Can we go get cheese sticks and pizza?” I’d say, “Not looking at the menu?” She’s like, “We’re going to tell them no menus, just cheese sticks.” I would always have more fun when I went to Leona’s when they didn’t give me the menu. That is satisficing. Satisficing is when you satisfy your conditions but you don’t pick the optimal conditions, and you don’t stress out about the decision versus maximizing where you study that menu every nook and cranny of it until you find what you think is going to be perfect. Do you ever have those experiences at restaurants? Do you ever feel that way?
I love that you went with the restaurant right off the bat. For those of you that looked at our logo, it’s Ian and me eating. This is a perfect place to start. In addition to that, comedians in cars getting coffee with Jerry Seinfeld was an awesome show that I loved. He interviews Will Ferrell. They get a menu that looks like the size of the Bible. Will Ferrell goes, “I love a menu like this because you know the chef does everything right.”
That stresses you out when you see a menu like that. You’re like, “There’s no way you can do chicken cacciatore pizza. You can also bang out a good Szechuan chicken.” You can’t do all those things well in your kitchen.
The kitchen must be much bigger. There’s no way you can accomplish all of that back there. I don’t necessarily get stressed out by a menu like that. What I ended up doing is my expectations immediately get lowered. When I see there’s a menu of that size, I think of TGI Friday’s. When I was a little kid, TGI Friday’s was awesome. Back then, they had potato skins. They had cheese sticks. They had the Oreo Speedwagon, which was like a milkshake with Oreos thrown in it. My brother and I used to love that thing. I remember being a kid and the menu was sizable but not the Magna Carta.
By the time I stopped going there in high school or college with my parents, the menu had gotten six times bigger. I was like, “It was good before. Why did they add all this other stuff?” From a business standpoint, you know why. They no longer have a niche that works, so they’re trying to expand to keep people coming back. You know that it’s becoming midrange. It’s not as good. It’s becoming watered down because of all those choices. It’s stressful because you’ve got 1,000 choices.
We’ve both been to Italy. Compare that to an amazing restaurant in Italy where they come around and they don’t even hand you a menu. They know what we’re cooking back there. “We found some great mushrooms. It’s winter. There are mushrooms out in the forest back there, so we’re making good mushroom ravioli.” They give you five things. I remember a couple of places I went to with Jenny in the Tuscany area where they would bring it all to you, “Here’s what we’re making. I was going to bring it all over to you.” It was the least stressful experience ever. In Italy, on top of that, they always have the house wine of the day. They bring it in a big carafe. That wine also was usually not just crappy wine. It was wine from a local winery that had a little bit left at the bottom of their barrel. They are friends with the owner. They sold them the rest of the barrel and they would serve it to everyone. It was delicious. You didn’t have to think. They gave you pasta, some meat, and some wine.
I want to say this. A maximizer versus a satisficer, I don’t think you’re one or the other. It can be situational but it comes down to this. The maximizer is someone who tries to squeeze every drop out of something and someone who is almost a perfectionist. A satisficer is someone who allows a margin of error. This is mostly a business show, so I’m going to say this here. There are people who come into an interview and tell you, “I’m a perfectionist. I do everything right. I can’t delegate.” People say that in a way that there’s a badge of courage. To me, that means you’re going to be a terrible employee because you can’t lift up your head long enough to see something.
Someone who is a satisficer understands when something is close enough and also understands how to enjoy things. The Italian restaurant that you’re talking about, we both been through these before, some together, some not together. They understand, “This is what we can do the best. It’s close enough. That’s what’s on the menu.” From a business perspective, if you’re going to be a maximizer with a normal career, there are times to do it. If you’re going to be Jeff Bezos or Steve Jobs, you’re going to need to be a maximizer because if you’re not, you’re not going to have enough detail and what it is you’re focusing on.
The term satisficer is a blend of satisfy and suffice. It was coined by Herbert Simon in the 1950s, a psychologist. No relation to Simon & Garfunkel that I could find in our half-ass internet research. I’m not ruling it out because they’re both famous. Simon & Garfunkel both believed that people are maximizers or satisficers. Most people leaned heavily towards one or the other. Humans are complicated. We’re not all one thing. There’s a twenty questionnaire that they’d answered to figure some of this out. You leaned one or the other. What they found was maximizers tend to dwell on decisions after the fact. These are folks that get FOMO, Fear Of Missing Out.
Satisficers are good with their option choice, even if it’s not the best option because they value their time. They want to avoid the anxiety of choice in the first place. A maximizer is someone who will study the menu forever in a restaurant, can’t decide, asks the waiter, asks everyone at the table, “What should I get? The lamb chops or the fish?” Finally, get the fish, take a bite of the fish and immediately say, “I should have ordered the lamb chop.” Even though they put way more time and thought into their decision, they’re rarely happy with it because they agonized over it so much. Even when they maximize, they’re not happy with the utility of their decision.
We’ve all seen those kinds of things. My argument on your one or the other is this. In life, I would say almost always I’m a satisficer. Would you not agree with that with yourself?
I’m a satisficer for sure.
I don’t know what you’ll say to this but I feel like in picking a mate, picking a spouse, I was more of a maximizer. I got married in my 40s, but that was where I had an incredibly high bar. You’re signing on for a lifetime commitment here. In that instance, I was detail-oriented. Does that make sense?
A big chunk of when you were dating and when you met Ellie was in the world of online dating where the choice is overwhelming. There’s a book by Barry Schwartz, another psychologist, called The Paradox of Choice. He makes a point that people are less happy because there are so many choices that we feel stressed about missing things. Social media amplifies that because we can see what everyone is doing all the time. The internet has made it possible to go anywhere, do anything, talk to anyone, and start any business. Take our grandparents, Frank. They didn’t have a lot of choices. Immigrants coming over here never have a lot of choices. There were a few jobs you could maybe get because you barely spoke the language. My grandpa grew up in Alabama when he was a kid. He’d either went out hunting rabbits or fish. Those were his two choices. It wasn’t terribly unhappy if he chose one or the other, “Yesterday I did that, so I’m going to do this today.”
Your choices are infinity. They’re limitless. There are so many things that you and I are having a recorded show in two different cities in different areas. The things we can do with our time are outrageously more. What Barry Schwartz and The Paradox of Choice say is it makes for a more stressful world because you agonize over being perfect. When you talk about you are a maximizer, you had a girlfriend for a long time and then you didn’t. You came into this world of dating that was online. You were using Match.com. I remember you using these apps where there are thousands and thousands of people that you could look at their face picture. I didn’t have any of that. I went to a bar. I scanned it and tried to find the best-looking girl I could find and see if she wanted to talk to me. I didn’t agonize. If that wasn’t perfect, it was the best I could find in that bar that night.
It was funny when I was single and you were years married when this is all happening. You were stressed out for me because of what I was looking at and what I had going. I want to tell a couple of funny stories. Some of these are related, some of them aren’t, but they’re funny stories. Here’s the first one. If you want a date and you want to be stressed out using an online app, leave your phone around your asshole friend, Ian, so he can log into your Match.com account and direct message a bunch of girls telling them, “I’m gassy, maybe it’s because of the beans.” Ian message fifteen people while I was at another room playing with his kids, riding free babysitting. He sent out this message to a ton of people.
I destroyed a month’s worth of recon work you’ve been doing with those girls. Start all over. Create a new profile, everything. It creeps everyone out.
The other thing that’s funny about Paradox of Choice, and I told the story to Ian but it’s worth repeating. I was stuck at an airport in Arizona. I finally got home 48 hours after I was supposed to. My wife is nine months pregnant. She’s not due so I wasn’t being reckless in being gone. We thought we were okay. She calls me up on Sunday when I’m already supposed to be home. She’s like, “I’m nine months pregnant. I’m having some complications. I need to go to the hospital.” I’m in the backseat of a car getting driven home. The best flight I could get was two hours away. Our babysitter’s name is Bethany. I called Bethany. I’m like, “It’s Frank.” I go right into it.
I start talking about the things my wife was talking about. There was this awkward pause. At the end of the awkward pause, she’s like, “Do you happen to have more than one Bethany on your phone?” I’m like, “I don’t think so. Are you not the Bethany that’s with my son in Richmond, Virginia?” She’s like, “No.” I’m like, “I apologize.” I hung up and called the other Bethany. My mind started racing. I’m like, “Who the hell was that?” It turns out it was somebody that I’ve met years ago that I hung out with for a week in San Diego. I called this girl out of the blue. The best part is I have a good enough relationship with my wife where I told her the story. She’s like, “That’s hysterical.” Not only was it hysterical, she’s like, “I wonder how many people have the last name of match in my cell phone.”
It’s easy to go through and delete it. She needs to purge all of her last name matches in the login search.
Having Match.com is that menu that’s 4 inches thick which says, “One chicken and a beautiful bucatini.”
It’s worth talking about here, Frank. Let’s take it from a business perspective. You’re looking for a job. You’re looking for a career. It can be overwhelming. It can feel like, “I could go anywhere. I could do everything.” People are working virtual so you don’t have to move to different cities. There are millions of job openings. It can be overwhelming when you’re looking forward. “Am I choosing the right industry? Am I choosing the right company?” If you try to optimize, you may never find something good in the first place, rather than if you’re looking for a job, should you be asking the question of, “What are five non-negotiable things I want out of a job? Does this company meet those five things? Is it the best company in the world to meet those things?”
What are the things that you and I have talked about a lot? You’re always someone that makes a decision and you don’t dwell on it. As a 45, 46-year-old, I feel like I’m way better at that than I was as a kid. I grew up in a way that was always second-guessed decisions. How you can apply this in the business sense is this. If you came up with a wish list of 3 to 5 items, small of what the job needs to have for you or what something needs. If you have a checklist of 300 items, it’s going to be hard to satisfy that. If you have a checklist of a few items, it’s easier to satisfy it. There is a greater deal of satisfaction that comes with it because you’re willing to let enough stuff fall to the margin.
While I’m saying this, Ian has a picture of Braveheart behind him. Braveheart had one thing. He wanted freedom. That’s it. He was fighting. He was battling. He lost people close to him. His wife was killed but he was incredibly satisfied because he was chasing one thing. It was niche. It’s specific. It wasn’t a laundry list of 900 things. It was one thing. He had a great purpose. If you are looking for something like that, it’s easier to start broad 1 item, 3 items, hone it in as time goes on and redefine it. That’s the best way to look for a job, to look for a mate. “Is this a good deal? Is it not a good deal?” There are a lot of things you can build on if you start broad.
In this study, Schwartz found it. Simon found it. Both of them talked about it. Maximizers struggled to enjoy the journey. A maximizer is so focused on that utilitarian thought process of, “I have to find the optimal solution to what I’m looking for.” They don’t pay much attention to everything that happens along it. Even when they do reach their destination, they have a higher level of regret and lower levels of happiness. Whereas in satisficers, they open themselves up more often. They’re more likely to say yes to new things. They’re more like explorers. They stop and pay attention to things along the way and they enjoy it. They’re not afraid to zig-zag a little bit. They don’t get so fixated on an end goal and optimal goal. They’re a little more flexible in how they move.
Most of the people we interact with are not maximizers. In a sales process, we call a maximizer a driver. It’s an engineer. It’s someone who is detail-oriented. Someone who wants to read every single word of a contract. What you find is if you’re not this kind of person, it’s oil and water. You bump heads with this person a lot because they’re specific.
I love that you brought up engineer because this is exactly an engineer’s personality, a scientist personality and accountant that has to be the balance book. They find great satisfaction in it. We’d keep with our car alarm startup, our CEO, David, he’s surrounded all day by engineers. Sometimes he’ll call me and he’s exasperated. He’s like, “I was on a call with eleven engineers. We’re trying to maximize battery life, so the battery lasts for 42 days. What are we doing? People don’t leave their car longer than 24 hours. This battery doesn’t have to get us through a nuclear winter.” His job as a CEO is making those trade-off decisions, because if you let engineers make decisions, they’ll keep optimizing until you have the most expensive possible device inside of it that customers won’t pay for. His job is to tell the engineers every once in a while, “Let’s move along. This cellular module we’re working for is good enough. This Bluetooth device that we’ve put inside is good enough. We don’t need to have the best of the best of everything inside. If you ended up doing that, we’ll be selling a car alarm that cost $1,800.”
Sales is an outlier here. I’m trying to run through the analysis in my head. In most other jobs besides sales, you must be good at being a maximizer. I’ll go into a couple of examples. You’re building houses. You are an engineer, everything I can think of. You need to have an accountant. You have some level of detail that you’re paying attention to. People struggle when they become managers because they’re so used to looking at every single detail and doing things one certain way. If you move up to manage, other people can be maximizers under you, but they might be doing it differently than how you would do it. To manage, you need to be a little bit more of a satisficer. You have to be.
It might be that you have people under you that are incredibly detail-oriented and talented but they all do it differently. On the whole, you can’t manage everyone to deal with exactly the same. That’s where the transition happens. That’s what people struggle with. They have the technical chops to do the job but they can’t grow past it because that requires a level of trust in others, some margin of error, if you will, some difference in technical definition because that’s what management is.
I’m going through a little bit of this. You asked me, “What’s your hold back on this?” I’m working with a company down in Florida. They want management training for all of their folks and giving them a proposal. They want me there a lot. They want me to come into town to give some presentations. They want some keynotes. They want live coaching. They wanted some design work. It’s $100,000 package but it would require me on a plane a lot. It would require me to spend a lot more of my hours, my time on the road. It’s also at a time where this is spring. It’s baseball season.Your choices are infinite; they’re limitless. The things we can do with our time are outrageously more than we think. Click To Tweet
Frankie asked me if we could record something. I said, “No. It’s baseball season.” Frank was like, “What exactly is baseball season?” I gave him an eleven-month window regardless. It didn’t work for me exactly where I wanted or where this client wanted for me. We’re falling on a program that’s $30,000 to $35,000. That’s not going to have me live. It’s not going to have as much design work. It’s going to be more video calls and programs. It’s less profitable for me. It’s not maximizing for me.
Instead of pushing the customer to wait until fall or late summer, it was better for them and better for me to do something less pricey, less involved with my hours. That’s pertinent. That’s helpful to them. I’m good with it. I’m not going to look back and be like, “I left $65,000 on the table. That’s not how I’m wired. I won’t do that.” I’m good with my decision. I didn’t try to force the customer into something that wasn’t perfect for them. I also didn’t concede on something important to me, which is coaching. That’s important to me.
Where are we at with that?
I requoted it. I put a second proposal together. I quoted the $35,000 package. We’re doing that package.
That’s satisficing. It’s a gloss over. It’s not exactly what everybody wants but it’s better than nothing. At the same time, it allows me to keep some parameters.
It’s still profitable to me. It allows me more flexibility than I would have had. You did a great job of coaching me when I was frustrated with myself. “What the hell is wrong with me? Why am I turning this down?” You said, “What’s your hold-up?” You wouldn’t let me get off of it. You asked me three different times. You threatened to turn it into a show episode. I said, “I’m not doing that.” When I got off the phone with you, as you normally do, you’re a great coach in that way. I was irritated with you for pushing me on it but then I was irritated at myself of, “Why don’t you answer his question?” The question was find a balance. Find something that is not as profitable but gives you all the flexibility and both parties win. It was satisficing in a major way.
We should say this here because it’s relevant. Most great managers are satisficers. Most people who are successful in the corporate structure of America are satisficers. Maximizers are people in the military, people in communist governments, or people building airplanes or cars. I want someone who’s building my car to be a maximizer. Every rivet, bolt, nut and screw is in the exact right place. If we don’t have that, we’re going to have major problems. You need to know where you are in your station of life. Are you with a doer? Are you a manager?
We need to think about what your product is. Do you have the ability to have flexibility there? If you’re an entrepreneur like Ian and me, it’s hard sometimes to come to terms with what do you want to do because you don’t have to do anything. You talk about a menu being overwhelming. Having no tether to anything on what you can and can’t pick to do for work is also incredibly hard. It’s way harder than ordering something on a 25-page menu.
Not having a boss, not having to do anything is overwhelming if not more than having a boss and being told what to do. Take me. I have a whole bunch of different routes that can make money. I have commercial real estate. I can write and make a little money. I sell online programs. I can bill out my hourly rate as an executive coach. I have a tech startup. I have lots of different things that I could spend my time on at any given time. Sometimes, that’s overwhelming to me. I can choose to spend my time in any of those. Any choice on anyone is a choice to not spend time on something else. It can be overwhelming to me.
Some days when I come in, it’s like, “Which one of these do I spend my time on?” I don’t have demands. I don’t have employees coming in and saying, “What should we do, boss?” I don’t have any of that. I’m my boss. That can be overwhelming. If I were a maximizer, I don’t know that I would do as much things that I consider as fun as I think. If I was a maximizer, I don’t know if I’d be doing a show with you. I don’t know that you’d be doing a show with me. It won’t be profitable for us for a while. It’s fun. We would drive each other nuts on this show if we were maximizers because we would never ever publish anything until we got a better camera, a better microphone, or we had a better social media team. We would never do anything. We’d be paralyzed.
I’m going to talk about both of these two things with boss and no boss. I’ve said this here before. I say it all the time. I said it a lot when I first quit my job. The best thing about having no boss is you have no boss. The worst thing about having no boss is you have no boss. What that means is no one’s telling you what to do. You got to figure out what it is that you are going to do with. There’s an abyss too. The abyss is this. “Who the hell are you to think you can achieve that? Who the hell are you to think you should be working on that? How the hell do you think with no formal writing training you could be a writer for Forbes? How do you think is a C student with an A-plus work ethic thinks you could be a real estate developer?” There are all these things. There’s doubt and fear. There’s, “What do I focus on first?” There’s no freaking roadmap. You’ve got to figure it out.
The other thing is I’ve hired and brought in maximizers. A lot of them don’t work because they’re so detail-oriented. They can’t function enough in the gray to make things work. If you and I were maximizers, we would never quit our jobs. We would have had paralysis. “Screw it. Let’s do it. Done as the new perfect,” are two things that you do not say if you are a maximizer. That’s a satisficer. The satisficer gets it out there and then iterates. If you are someone who can do that, you have to be able to live with a little bit of this comfort always if you are a satisficer. That’s how it feels to me.
You think about how many people complain about their manager, “My boss is an idiot. He makes me do certain things and I don’t want to do. He always has me do extra things.” The other side of that is it takes an incredible decision-making burden off of you when your manager is giving you directives, deadlines and things to go work on. There’s no thought process. There’s no decision-making. You do what you’re told and you do it to the best of your ability. It takes it off of you. When you become your manager, it adds this whole level of anxiety of, “How you’re spending your time. Are you spending it well? Are you ready to do certain things to take on certain things, taking on commitments?”
The deal I told you about. We agreed in terms on the phone. I had to call my attorney and be like, “How’s this proposal? How do I put this in writing what I proposed to him?” I didn’t know how exactly to do it. I proposed a price and set it up. I set up my website a little different to do it right. There’s so much of being an entrepreneur. Entrepreneur is satisficing. You have to decide on what’s the next step. It’s never optimal. I feel like I never make an optimal decision. I feel like if there are optimal decisions, I’m not one who’s good at making them. I’m making decisions. I’m moving. I’m selling this property in Orlando.
I’ve had a few people ask me, “Why do you think it’s the time to do it?” I’m like, “Here’s what I’m thinking. It’s a gut. I feel fortunate that it’s as profitable as it wasn’t in years. Could it be more profitable? I waited more years maybe, I don’t know.” Frank, there’s no manual. I don’t have a boss who’s saying, “Why are you doing that?” At worst, I have investors that I worry about. It’s like, “We’ve all made good money. I’m taking some risk off the table for all of us.” In a way, I’m satisfied saying, “I’m not maximizing on that but it’s profitable.” It’s the old pigs get fed, hogs get slaughtered. There’s a little bit of that investing as well, satisficing.
What I had written down is you never need to apologize for taking a profit. That’s satisficing. You and I have both talked and giggled many times about making and losing money on Apple. We’re the two old people on Earth at some point loss of money on Apple. We’re like, “We’re going to miss out. What did he lose money on Apple in the last decade besides us?” That’s part of it. The other piece of it is if you take a win on something. Here’s a great example. I sold a house, 522 North 27th Street. The house does not matter. I bought it for $65,000 and I sold it for $208,000. It took me thirteen months. I sold it in the beginning of 2014. That house sold again for $500,000. In the years since I’ve sold it, it’s traded hands three times. Everyone that bought it, moved into it, and sold it has made multiples past what I made as the person who did all the damn work. It’s the same house. I could get so frustrated and look at it like this is what happened. At the moment in 2014 when I sold it, I needed the income so I sold it.
If you didn’t buy and sell all those little $65,000 to $100,000, $65,000 to $140,000, $65,000 to $200,000, you would have two employees. It’s tiny still. You’d be small. You’d be holding on to assets. All your money would be tied up. You wouldn’t have leveraged it, turned it into the next thing. Part of what I’m doing with the collision center of selling similar things. I’m giving up some of the profits but it’s a great profit. It’s an exciting one. This one is a $3.5 million deal selling it for $4.2 million. I have investors that are about half of that. I keep a chunk of their equity. To me, the whole thing is a 40%-some deal that I did years ago but it’s going to free up capital.
Let’s say in years, these things were $6 million. It’s in Orlando, in a great area. That could happen. I’m freeing up a bunch of capital. I might do a couple of deals with you. I might do a couple more deals on something else. What else am I passing up by sitting and hoping it will get better? I love what you said. Never apologize for taking a profit. I might pay little taxes. Paying taxes is fine. That means I’ve made a bunch of money. That’s a good thing.
I don’t get into the field nearly as much as I used to but when I’m in the field, I drive by that house. I get two sets of emotions. I wish I still owned it but I’m glad I don’t. I’m glad I don’t lead me here. You and I have talked about if you don’t sell that collision center. You and I want to start a fund. We want to raise real money. We want to put it into real estate. You’re not talking about deals and where we’re going to place it, where we’re going to bring to market. “Could you make more?” “Sure.” “Will you make more if you hold it?” “Almost certainly.” It’s a matter of when you sell it, but what else will it be? What’s the launching point? A satisficer is someone who is okay with not knowing.
Jumping off a diving board as a kid is a satisficer. You don’t know what’s going to happen. You’ve got good data. If you can swim, you’re going to get up but you’re taking a leap of faith. That’s what quitting your job is, starting a business, selling something, every single thing. You will be riddled and kill yourself with doubt and cancer if you sit down and lament every decision. What you have to do with some point is you have to have the bathtub brain. You got to say, “That was a good decision for the moment.” Good enough. Pull it. Move on. There is some level of needing to look backward and analyze what you’ve done good and bad, maybe calibrate and get better. You also have to give yourself a little bit of grace and say, “I made the best decision I could at the time.” That’s got to be good enough.
I have a friend of mine in Florida. You know him, he lives in Tampa. We talked about him a lot. He makes between $1 million and $2 million a year. He runs a small business. It’s incredibly successful. $1 million or $2 million is a lot of money. He has a ton of money. It’s real money anywhere. What I tell him all the time is, “You don’t just hand out $1 million a year jobs. You’ve got to have something special. What you need to be good at is you got to focus enough where you have a niche product.” You don’t have the menu that’s 900 pages. At the same time, you’re willing to overlook enough stuff where you can function in profit. That’s what it boils down to. It was picking and choosing those things and getting good enough at it. If you do it right, that’s how a capitalist society and a business society like ours reward you. It penalizes you because you always live in this state of not knowing in some level of uncertainty but it rewards you with huge amounts of money if you do it right.
The worst part of the people that are on the far spectrum of maximizing, what I’ve found in business is they get into analysis by paralysis. I’ve got an example. I worked for a president that could not make a decision. At the heart of it, one, it was a confidence issue but wanted every decision to be perfect. One of there to be zero chance that the decisions he made could come back to make him look bad in front of the CEO. We decided to go paperless. We were years too late to do it when we decided in the first place. We’re a finance company. Finance companies have 3-inch files on everybody. Outrageous dollar amounts we spent on paper. We made a decision to go paperless. When we did, we started with a dozen software companies and software providers.When you become your own manager, it adds a whole level of anxiety on how you're spending your time. Click To Tweet
It took us forever to make a decision and go through this evaluation process because all of them had to come in and present to us. All of them had to give us 2 or 3 customers as referrals that we could talk to. Our IT department had to dig into all of their requirements. We went on field trips to go see how this software was working. It dragged on forever. Looking back of it, this process was taking two years, we knew three companies that had 60% of the market. We could have looked at those three, talk to a few of our biggest partners and said, “Which one do you like best and why?” and made a decision. The money we would have saved in paper alone if we had started, it would have way made up. By maximizing, maybe we found the best software provider or maybe we didn’t. By doing that, the cost of taking too long to maximize was way greater than making a decision and living with it.
I never made it this high up the food chain as this guy, and I know who you’re talking about. He was in a high-paying job inside of a corporation, a president in a corporation. That’s high. What I did when we were making a similar decision, we started the property management division years ago. What we did is I went up to the woman I hired. I hired the right person. I told her, “We needed a software program. Find me no less than three and no more than five. Research them. Come back to me in no more than two weeks and give me your findings.”
In years, she’s like, “I think we picked the wrong one.” I’m like, “No. We picked the right one for them. The market has changed. We’re better. There are other products that have innovated and gotten better than this particular product. We’ll iterate again.” In the last years, we built an entire division, which didn’t exist. We manage 400 properties a year. We have near 0% vacancy, 100% collections. It was good to us. Is it perfect? Who cares? It’s damn near. We’re saying, “There are different pieces of information. Let’s make a new and good decision and continue to ride it forward.”
Years ago, I went down to this single-family real estate. It was a conference. I go down there with Frank. This is right after I left NVR. I don’t have much going on. He’s like, “Come down here. Meet some people. See what I do.” I was looking for a three-day trip to Miami with Frank anyway. Frank, Mr. Big Swinging D, he’s leading a couple of side sessions. We’re in this room with the panel discussion. I’m sitting in the back of the room. I got some notes but I’m not taking any because Frank is talking. There’s another guy who’s moderating. He’s got all these challenges. He was fishing for excuses out of this group of owners of real estate. One of the bullet points was software. He starts saying, “What kind of software are you using to run project management?” All these guys are going in circles. “If we had this software, it would help us.”
They started arguing over how some software was holding their business back. I’m watching Frank and he’s squirming. He has no patience with this nonsense. You could tell he was getting irritated. Finally, Frank asks if he can have the microphone. He grabbed the microphone. I’m paraphrasing but it was like, “I built a 300-unit a year business that makes $7 million with Excel. Software is not your problem.” Everyone got quiet in this room. It banked them all in the room. He was like, “Let’s move on to the next bullet.” That was the end of it. All the time, I joke with Frank about this time when he clowns all of these dudes talking about software. He’s like, “I’ve got Microsoft Excel. That’s it.”
You left out one critical other piece of technology. I use Microsoft Word and Excel.
“I built a 30-person business with Word and Excel. I don’t want to hear about your software problems.” It was amazing. What was happening in that room is everyone was feeling sorry for themselves. They were thinking about the things they didn’t have and they got themselves into paralysis. In business, you got to ask, “What are the tradeoffs of a long evaluation process?” If Frank would have waited for the perfect $100,000 software to run his business, he didn’t ever run his business. He used Excel and he built a huge business until the point where he had enough excess cashflow to go buy some decent software. That was it.
We beat this one to death. The important thing isn’t the software. The important thing is the product, what it does, what it does for you. People own thousands of units and they didn’t have computers. It’s not software. It’s the other part. It’s either an excuse or it’s paralysis. You want someone to manage it who is a maximizer. As the owner, you want to be a satisficer. You want to look at it and say, “We’re good. Ninety-eight percent, keep rolling.” Society rewards that.
This leads to a term in psychology called Mental Accounting. There’s a famous study of New York City taxi drivers where if you were to look at a taxi driver from a traditional economic standpoint, they would maximize their utility. Meaning on days where it was busy and they were getting high fares, they would work longer hours. You would expect on days where it wasn’t busy and they weren’t making as much on fares that they would come home early because it wasn’t a profitable day. Fish more when the fish are biting than on days where it’s slow. What they found is it was the exact opposite. Taxi drivers quit early on days where they were making more money and worked longer on days when they were making less.
What they found was the average and far in the way, the majority of taxi drivers were satisficers. If they had a number of mental accounting, let’s say it’s $300 a day they wanted to make. Once they hit their number, they quit working. That meant if it was in four hours, they quit in four hours. If it took thirteen hours, they would work through there even though economic theory would tell you that or predict the opposite of that behavior. This is one area wherein talking with you, you and I are both a little bit more maximizer. We tend to stay out on the lake longer if the fish are biting. We’re a little different than taxi drivers here. We’re not satisficers. We know when it’s raining to go out with the bucket and stay out there as long as it’s pouring because we know it doesn’t come too often.
In my business, we use a testing platform called Predictive Index. There’s somewhere in the neighborhood of sixteen different profiles. I’m what’s called a strategist. It’s someone who’s always thinking and trying to think about the next several moves. I go into a meeting. I always got a page of notes. I’ve thought through it ahead of time, so I know how to navigate. I don’t think everyone’s wired that way. The taxi cab drivers that we’re talking about certainly aren’t. As a whole, Ian and I are both satisficers more than maximizers. From time to time, it makes sense to be a maximizer. I talked about it while selecting a spouse. Around managing salespeople, it’s hard to manage, but what I always tell them is my compensation plan is built.
For everyone in sales, if you hit certain thresholds, you make more. I bang the drum of if you’re at 50, you can get the 65. If you’re 65, you can get 75. You can get from 75 to 100. If you can get there, your cap blows up. Most people are like, “I am an 80.” That’s good but I want you to work harder when you get an 80 and get to 100. The reason is for me, as a business owner, you weren’t going to make a ton but as the business owner, I have already got some costs. My marketing is done. What I make goes through the roof if you go to 100. That’s how the best comp plans are written to get you to think about, “I’ve hit my number for the month and it’s the 20th. Should I work this weekend or not?”
To have a good life, you need to be a satisficer most of the times. You need to take your foot off the gas and enjoy things. From time to time, when it’s right, you’ve got to hit it. That’s when you push. When I was in salesy, I can remember times when I was sitting on a five and I was crushing my month. The month was half over and I wanted to get to eight, “I’m going to have $60,000 a month. That’s going to set me off for the whole year.” That’s the kind of stuff that you have to think about from a strategy perspective. If you can grind it out and get that incredible month, take a month off. That’s the mentality that we’re trying to drive at.
Business owners make mistakes here where they get overly focused on how much a certain level is making. They don’t think about how much I’m making as the business owner. They cap commission plans. They don’t let someone enjoy in the profit because they’re too focused on the absolute number of, “A salesperson shouldn’t make this. A project manager shouldn’t make this.” What you should be thinking about is, “What are my personal goals as the owner?” If that means I’ve got to pay people more, their motivation will stop wherever your cap stops. If you make it so that they’ve hit their number, they’ll quit working. They’ll chill. We worked at a big company that kept a lot of those different bonuses. The goals of that company were not to burn through all its land. They would never tell you quit working but they didn’t want you to destroy it because they had a measured 5 and 10-year plan. If everyone was making too much money that meant that the plan wouldn’t be in place long-term.
The takeaway here is this. From a balance standpoint and from a life standpoint of enjoyment, most of the time, you need to be someone who is a satisficer. If you want to enjoy your life the few times in your life when you can be a maximizer, do it. I watched the Ian get up at 3:30 in the morning. He had babies at home, go to work, put in twelve-hour days and be home in time for bath time because he was in maximizer mode. That was the time where you were smashing it. You were sleeping little. It was a period. When that period of time passed because you did that in that moment, it gave you this incredible ability to do whatever the hell you wanted later.
That’s fair, Frank. As you’re talking about that, there was a 6 or 7-year period where I thought to myself, “I have a lot of runway to gobble up a lot more stock options if I kick ass. There’s no one else who can go take these extra territories on. They’re going to have to ask me. I’m going to have leverage. I’m going to get more options of a stock I know is about to explode.” I went all-in for years of my life with work. It set me up to retire a couple of times over. You’re right. I maximized. It was babies, Jenny, work, nothing else. I didn’t watch TV. I didn’t know anything about pop culture references. I didn’t go out much. I didn’t do anything but work. That was it.
Nickel is going to love this. In your Maslow’s Hierarchy of Needs, you have your pyramid. You look at that stuff and you made good decisions based upon it. You’re where you’re at. I’m not going to say anything that’s out of line here, but I’m going to say it and walk through it. You and I know each other incredibly well. We have conversations that don’t get recorded. We just talk about stuff. One of the things that we’ve talked about many times is what you’re putting your focus on. In your pyramid, family and baseball are at the top. It’s because you don’t need money so you set yourself up in a way that you don’t have to have it. Underneath that is business opportunities.
You bought a couple of collision centers in cash and then you bought the other collision center with some equity partners that you talked about potentially selling. It comes down to making other good decisions. You’re in a position where you get to make a decision and you get to be discretionary, Keep comes along. You’ve already worked with David. You know him. You and I have talked about this. Baseball and family are the things that are most important. I’ll do some deals with Frankie. I’ll put some time into writing. I have enough money coming in because I’ve set myself upright. The next piece is David comes along with something that could be explosive like NVR stock. It might turn into nothing and you don’t need it. If it turns into something, it’s going to be like a windfall like the stock is. That is the right way to toggle between the two.
Frank, I love that you’re bringing that up. All of that leads in right. Keep our tech startup, we’re building a product. We’re taking it from prototype to production. I don’t have anything to sell. That’s my skillset. I’m not in Atlanta. I have an Engineering degree but my engineering chops are not strong enough to add much value. I’m working on strategy with David doing other things. You and I are talking about this. I see this wave coming where when we start getting busy, I’m going to go all-in on Keep. There is a good chance. I’ll be back to maximize it because if it has the runway that we all think it has, it could explode. I am not going to shortchange it with effort. After years of picking and choosing my battles, I can be back to all-in again. That’ll be fine because the upside will be there. It will be fun. My family will understand it. They’re sick of me hanging around too much anyway.
People have asked me many times, “What do you want for your kids?” I don’t want to leave them a lot of money. I think that ruins them. The biggest things that I’ve had in my life that I’ve enjoyed the most have been the hardest and then the biggest struggles. The biggest thing I want for anybody that I’m close to is discretion and ability to make discretionary decisions. That’s what this is. This is a discretionary decision. Your discretionary decision is to say, “It’s time to maximize.” You’re going to do that. Here’s a silly example. Ian does all of the admin on our show. He spends 5, 10 hours a week with editing and other stuff. I do none of it because I don’t have time. There’s going to come up period where Ian’s not going to have time to do it either. It doesn’t necessarily mean I have to do it. Maybe it’s like, “We need to pay somebody. We need to use someone on my staff.”
It’s like the software decision. We made the right decision at the time and then we iterate it. We made another good decision based upon it. That’s what people miss is you look at it and you’re like, “I don’t want to grind. I don’t want to do this. I’ll have to do this forever.” You don’t. Forever is a long time if you can do it for 36 to 60 months, Nickel worked in New York City for years driving a train back and forth 12 and 14-hour days. It gave him a position where it’s so unique. His skillset is so different because he did all these things. We always used a cliché.
He’s still in one way to a certain position that could change his life. It was worth going and trying to get it.Business owners make mistakes where they get overly focused on how much a certain level is making. Click To Tweet
It will. It’s fascinating. It comes down to the thing that we say a lot, which is, “If you do it for years where others don’t, you live the rest of your life the way others can’t.” Tim Ferriss said this in his book. “I built the way that I can live a four-hour workweek.” I don’t. I like to work but that’s the discretionary part.
He could work a four-hour workweek. If he wants to work 40, he does. If he wants to work 60, he does. What Ferriss does is he does things that are fun and nothing else. He’s ruthless about cutting things out when he decides they’re not fun anymore. Frankie, let’s wrap this up with a few questions that people can ask themselves as they’re making decisions. Getting themselves into maximizer territory and things that they shouldn’t, which they’re going to regret it sometimes. Questions to ask yourself, “Does this choice satisfy my conditions?”
We talked about finding wives. I was fortunate enough to find my way earlier than yours but Jenny blew away all of my conditions. I wasn’t even about to take a risk of losing someone as special as her. This was a long time ago. I knew enough at that point, having dated long enough to know she blew away all my conditions. We’ve been married for many years. Am I a perfect mate for her? No. I’m sure she wishes I was handy around the house and doing other things. I satisfy enough of Jenny’s conditions where she keeps me around.
Humility is high on the list of things that you satisfy with you for sure. It doesn’t satisfy my conditions. This is mostly a business show. It can satisfy your conditions for the moment. It can satisfy your conditions for a short period of time. It can satisfy your conditions for a while or get you to something else. You can lever it. That’s the beautiful thing is you get to make choices. If it’s satisfying your conditions and your conditions change, you can change. You can either get a raise, a promotion, go into a different realm or you can leave and go to a different job. That’s one of the reasons why divorce rates are so high is people aren’t happy. They go out and find something else. “Does it satisfy?” is a question you need to ask yourself. What I would say is you need to ask yourself annually, potentially, as often as quarterly but no more often than that. If you’re doing it more than that, you’re driving yourself nuts or it’s time to go.
“Does it move me forward?” People get so caught up in making decisions that will get them to some optimal place in their career that will get their business at some optimal level. The better question to ask yourself is, “Am I getting closer? Does it move me forward? Am I getting closer to my goals where I want to be? Does it have to be optimal?” This is Frank’s decision to use Excel and Word to grow his business instead of spending a lot on software. If it didn’t add value at the time, he didn’t do it. He’s bought the software. It helped him. He’s about to buy even better software. “Does it get me where I want to go?” Your software that Cindy said was the wrong choice moved you forward enough and you can make another decision.
Years ago, when I was doing triathlons, there was a briefing. It’s a safety briefing. They tell you different things. Part of what they told you was that if you are an empty Doritos bag and you get in the water, you will finish the swim course in under an hour because it’s got an incredible tide pulling unit. I thought it was an incredible example when I used it being a Doritos bag. The Dorito bag can’t see stir, can’t move its head up. It can’t paddle. If you get in the water, it’s going to push you and you’re going to finish the race because of the current. Along the way, you might not be exactly where you want to be or everything might not be perfect.
That’s the thing. Get yourself into a place where you’re moving in the right direction. While you’re moving in the right direction and the tide is pulling along the Dorito bag, then you can make some decisions but you’re moving in the right direction. There’s inertia, that’s the stuff. If you’re a normal human being, you’d be like, “This isn’t moving fast enough. I’m not learning enough. I’m not being paid enough.” There’s going to be things. As long as you’re moving in the right direction, even if it isn’t perfect, it still makes sense to continue to move in that right direction. When you feel like you stopped, you’ve reached the end or you’re not moving in the right direction is when you need to make a different decision.
That’s a great analogy. Don’t get in if the current’s taking you to a place you don’t want to end up. Be smart enough to see where that current is going, “Where does that take me in years?” If you don’t like those destinations, don’t get in the water because the current is going to take you. It’s going to catch you up. That can be a company’s culture, market, industry, or anything. Don’t get in if you don’t like where that current is headed.
The next question is, “Does it have to be optimal?” We answered that. If you think it’s optimal, you get in the water and you’re being pulled in one direction, awesome. Keep riding it. If it’s no longer optimal for you, get out, swim to shore, and get into a different current. It has to generally be going in the right direction. If it isn’t, change it.
The last thing is, “What are the trade-offs to spending too much time on this decision?” Not making a decision is making a decision. Like our paperless taking years to come to that decision was completely ludicrous. A lot of us do the same thing where we don’t make decisions. We waste time and we don’t give enough weight to the opportunity cost of what it would mean to have done something. One thing that’s going to stick with me long after this show, Frank, is you telling your manager that software did exactly what it was supposed to do. Even though it’s not optimal, it did its job. If we need to upgrade it again, then let’s upgrade it again. There are trade-offs if you hadn’t made that decision.
I don’t know where I learned this but it’s like you look at something. It was a good ship. It got us here. We got a better ship, a better car and a better opportunity, but we don’t get here without that one. It’s constant. There’s a lot of prudence to celebrating what it is that got you somewhere. This is a good way to wrap it. I’m not good with hypotheticals. When you asked me a hypothetical question about something, my wife will do a lot of times. I can’t participate. The reason I can’t participate is I’m focused on, “What I’ve dealt with, what’s happening, and where I’m at.” If I was having some other alternative life, I can’t relate to it. Being present and grounded with that is part of that reasoning. The other reason is I’m happy with the decisions. “Is it perfect?” No. The reason why most of the time I’m a satisficer is because it’s good enough, it’s a great life, I’m pleased with it, I know when to hit the throttle, and to be a maximizer.
I can tell you one thing for certain. I’m not going to second-guess our decision to choose this topic for this show. It’s dynamite material, incredible content. You are good. You nailed it. You brought your game. I’m not going to second-guess you as a show and co-host either.
I agree with you, you are correct. You maximized with me.
I have the optimal co-host. There is no doubt about it. I maximize it. You did a great job. You settled but that’s okay. I’m glad that you’re a satisficer and you chose me. I’m maximized on this one.
My wife is in the other room. I can’t wait to walk in there, have her giggle, and tell me what I did wrong.
That’s happening. Frankie, it’s great to see you.
It’s always a pleasure.
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