The idea of making mistakes about what we might want in the future has been termed ‘miswanting’ by Gilbert and Wilson (2000). They point to a range of studies finding we are poor at predicting what will make us happy in the future. My favourite is a simple experiment in which two groups of participants get free sandwiches if they participate in the experiment – a doozie for any undergraduate.
One group has to choose which sandwiches they want for an entire week in advance. The other group gets to choose which they want each day. A fascinating thing happens. People who choose their favourite sandwich each day at lunchtime also often choose the same sandwich. This group turns out to be reasonably happy with its choice.
Amazingly, though, people choosing in advance assume that what they’ll want for lunch next week is a variety. And so they choose a turkey sandwich Monday, tuna on Tuesday, egg on Wednesday and so on. It turn out that when next week rolls around they generally don’t like the variety they thought they would. In fact they are significantly less happy with their choices than the group who chose their sandwiches on the day.
… The argument about miswanting applies to any area of our lives which involves making a prediction about what we might like in the future. Career planning becomes painful precisely because it’s such an important decision and we come to understand that we have only very limited useful information.
In short, people who plan in detail what they will want in the future are often disappointed when that future arrives. Thus, when you plan early in your life for a specific career, you have a strong likelihood of being disappointed in your choice later in life – and thus that planning goes to waste when you jump to something completely different.
This lends itself well to the so-called chaos theory of career development, which basically argues that careers are a combination of “the importance of initial conditions and the impact of seemingly random perturbations on career development, that somewhat disrupt the ultimate trajectory of individual careers.”
Is there a point? Yes, we’re getting there.
If you assume this is true (and trust me, it is; at one point in my life, I was planning for a career as a park ranger, for instance, until many somewhat random events intervened), then it stands to reason that the best preparation for a professional life is to make choices that prepare you for the most possible careers. In other words, a challenging college major that forces you to learn to observe carefully and think critically, such as philosophy or a science, is perhaps the best choice. Why? It prepares your mind to handle whatever may come.
So, if we accept this theory as true and believe that traditional career development is a waste of time, what does this say about personal finance planning? I argue that strong personal finance planning is even more vital than in a traditional career mold.
Why? Personal finance planning is entirely about preparing for the unexpected and enabling you to have the freedom to handle “random perturbations” in your life. Thus, if we believe that careers are becoming more chaotic than before (and there is certainly plenty of statistical and anecdotal evidence to support this), then we need more fundamental preparation for the unexpected.
In short, if careers are becoming more chaotic, then personal finance planning is becoming more important than ever, and the sooner you begin to get your finances in order, the better.