Thursday, March 6, 2008

Russian proverb day: Better is the enemy of good enough

First, some background. In my home growing up, all the best parental advice was in the form of Russian proverbs. Don't ask me why. I don't think I have a drop of Russian blood in my veins. Still, I'm predisposed to dispense advice in pithy Slavic sayings. This is the first of what will be a recurring feature.

Wouldn’t it be great to choose the best possible online bank?

Don’t you wish you knew which mutual fund was perfectly balanced for your risk tolerance and investment horizon?

Are you holding off on writing your will because you aren’t sure how to split up your assets?

Are you kicking yourself because you could have gotten an interest rate half a point lower on that car loan?

A quest for perfection often leaves important items undone. We don't want to mess up, but we don't have the time to do everything.

Better is the enemy of good enough. This proverb is attributed to the Soviet naval officer Sergei Gorshkov. The thinking behind it was explained to me by an former US naval officer, who keeps this statement framed above his work computer.

During the Cold War, the Soviets could not compete with the United States in technological innovation. The Soviet Union struggled to maintain a credible nuclear program and military infrastructure without the United States' economic advantages. As a result, R&D money was focused on high-profile and high-importance items. While the US was inventing velcro and space ice cream, the Soviet Union was cutting costs as much as possible.

My favorite example? NASA astronauts discovered that pens didn't work in space. They required gravity. So NASA developed an amazing gravity-free pen (now a staple item at museum gift stores.)

Cosmonauts used pencils.

Sometimes, worrying about the "better" options--the 0% balance transfer, the perfect asset allocation, whether Quicken or Microsoft Money is right for you--is costing you big as you put off necessary tasks. If you walk in front of a bus tomorrow, it would be nice if you had the perfect life insurance plan. But your quest for perfection isn't much help for your family if your pursuit of perfect life insurance has taken two years of indecision and you're still uncovered.

Very few consumer decisions are forever. If you have a list of undone tasks, look at them according to:
  1. The potential cost of inaction. High in this category? Purchasing life insurance. Writing your will. Allocating your stocks.
  2. The cost of future changes. High in this category? Home buying. Investment in an annuity. Retirement or job change. Mortgage financing.
  3. The time commitment to complete on a good enough level and on a better level.
If you have undone items on your list with a high value for #1 and a relatively low value for #2, do them NOW. You can revisit them later to improve them. But have the "good enough" option already in place. Home software is available to write a will. You can google life insurance and come up with a decent term plan. You can move your 401(k) from that money market into a retirement target fund while you work out the nuts and bolts of your investment strategies. Don't wait until you have the time for "better."

Items with high costs in #2 do need to be done right the first time. Those are worth a proportionally higher investment of effort. But if you've gotten your "good enough" items out of the way, you've freed yourself to focus your efforts.

Ultimately, you may be able to work everything into the "better" category. But let's get real. You have a life. You have other things to do. Some items--well, in some cases, a pencil is good enough.

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