How Financial Security and Useful Skills Change Your Decision-Making Process

A few weeks ago, an interesting event occurred in one of my old hobbies that sheds a wonderful light on how decision making processes of people change as they achieve success in the world. Bear with me – I have some interesting points that relate to this story.

Recently, there was a very large Magic: the Gathering tournament in Las Vegas. This tournament had an attendance in the ballpark of five thousand players and offered very nice cash prizes, including a $4,000 cash prize for first place and even $1,000 cash to players who rank fifth through eighth in the final standings. There are additional perks, too, for people who play in a lot of large cash tournaments, as there are ongoing seasonal points that they can earn to earn free admission and qualification for some events that can earn very large cash prizes, on the order of $50,000.

To put it simply, there’s a lot of money on the line, especially for the skilled players who have a good chance of winning the event.

So, let’s roll forward to the end of the event. The final eight players get to participate in a special event to determine the top eight seedings – it’s a miniature eight man tournament. Just before this event, the players have a draft where they take turns choosing the cards they’re going to play with from a larger pool of cards. Think of it as being like the NBA Draft or the NFL Draft or the MLB Draft if you’re familiar with those sports, where the players in this Las Vegas tournament are drafting cards to play with out of a dwindling card pool much like sports franchises draft players out of a dwindling pool of available prospects.

Here’s where we introduce Pascal Maynard. By the most common estimate, Pascal is the 39th best player in the world. While he would not necessarily be a favorite to win this event, it’s not unreasonable for him to have made the top eight.

Still, Pascal has not had enough lasting success in Magic to make a living at it.

There are a handful of players that are skilled enough at Magic – and at the business surrounding the game, such as giving advice and selling/trading cards on the secondary market – to make a very good living. There’s another big handful that manage to make a “scraping by” living at the game. And then there are the rest of the players. Pascal might someday (even someday soon) reach the “make a living” point, but he’s not quite there yet (as far as I can tell from my research into this article).

So, Pascal is at that huge tournament in Las Vegas, and he’s made the top eight. He’s checked out the prize pool – $4,000 for first place, down to $1,000 for fifth through eighth place, along with some season points that are somewhat relevant to him. He sits down to draft.

Late in the draft, unexpectedly, a choice appears before Pascal. He can either take a common card – Burst Lightning – which is essentially worthless but fits very well with the other cards he’s already drafted (which slightly increases his chance of winning the tournament), or he can take an extremely valuable card – a foil Tarmogoyf – that does not help his deck at all and thus likely slightly decreases his chance of winning the tournament.

That valuable card can immediately be sold for $500 without skipping a beat. As soon as the tournament is over, Pascal can take that card and make $500 on it probably before he leaves the tournament site and definitely within a few days on ebay.

Pascal thinks for a minute, then he takes the $500 card.

Now, before we get into how Pascal did and the ensuing controversy, let’s look at the odds here. By taking that card, Pascal guarantees himself a minimum of $1,500 and a maximum of $4,500 after the tournament – that’s his potential prizes plus the $500 he got from the sale. His odds are now slightly more skewed toward the lower end of the scale. On the other hand, if he took the “better” card, his prize range would be $1,000 to $4,000 with a slight skew toward the higher end of the scale in comparison.

In other words, when he saw that card, it became this question: would you like $500 now or a small chance at $3,000 (and a very small chance at even bigger rewards) later?

Most of us would take the $500. That’s not even a question that we would skip a beat at, right?

Well, after the tournament (at which Pascal ended up in third place, taking home $1,500 in prize money plus his $500 card), there was a great deal of discussion about his choice. Does it make sense to take the money and run, or should he play to win?

As you might expect, the vast majority of the commentary was in favor of Pascal’s choice. In other words, most people felt the right choice was to take the $500 card. Why? It’s $500, and $500 can pay a lot of bills.

A few people, however, criticized Pascal for his choice (and were quite vocal about it). The feeling of the critics was that Pascal undermined his chances to win and score a much bigger prize (and the potential for even bigger prizes) by not taking the “better” card.

What’s interesting here is that most of those critics come from that very small pool of people I mentioned earlier, the people who are making a living – and some making a very nice living – from this game.

These people have built up strong careers and strong businesses for themselves. These businesses and career activities produce a healthy income stream for those players, and that healthy income stream results in a significantly different perspective on things than most people would have.

First of all, because of that steady income stream, people with established businesses and careers can afford to take more financial risk. They’re professionals. They know that success often requires at least some risk. In this case, their steady income is enough that risking that $500 for a greater chance at the $4,000 prize (and access to chances at even bigger prizes) is worthwhile. That $500 won’t be a life changing loss.

On the other hand, for some people – such as the often-broke college students that are the most frequent players of the game – that $500 can make a huge difference in quality of life for a while.

Second of all, people who make a living in a particular field are usually far more confident of their skills in that field than those who do not. In other words, the professional-level players believe that they will win such a tournament if they have the right tools, so they are strongly predisposed toward picking the tools that will get them there.

On the other hand, people who are not necessarily professionals and have not devoted the same amount of time may not possess such confidence and thus choosing the guaranteed money makes more sense.

In the end, both the perspective of the “ordinary guy” and the professional make sense when you look at it from their situation.

That exact concept translates to everyday personal finance really well.

People who have stable income streams can afford to take more professional and personal risks. It’s a lot easier to devote a year to writing a novel that isn’t directly earning you any money if you’re already receiving royalties for several books you’ve already written and have other opportunities, such as teaching. The risk of devoting time and energy (and the lost income that the time and energy represents) to something that might not pay off loses a lot of downside when you have security.

At the same time, people who have experienced success in the past are often more confident and willing to believe that their skills will carry them through the challenge. Confidence matters a lot when it comes to earning money from the skills you have. Confidence means that you trust in your skills and apply them without second-guessing yourself. Yes, sometimes that does mean failure, but it often means greater success than you’d ever expect.

What’s the recipe for achieving these things?

First, be wise with your money and spend less than you earn. Build up some money in the bank so that the interest and investment income becomes an income stream that doesn’t depend on anyone else. Pay off your debts, as they just drain your finances and require you to have more income each and every month to just keep up with the bills.

Next, hone your skills, both related to your field of interest and otherwise. Spend your free time learning more or making your skills stronger. This doesn’t mean just endlessly participating in whatever it is that you enjoy. It means using deliberate practice to analyze what you’re doing well (and not doing well) and focus in on improving the things you need to improve and sharpening the skills that set you apart from the pack.

Also, keep your mind and body sharp. Get adequate sleep and adequate exercise. Eat a decent diet with healthy foods in abundance. You’ll feel better and have more energy, better focus, and more confidence.

Finally, keep testing the limits of your skills. Rather than always taking on the safe projects, take on challenging ones instead. Take on challenges that have some risk in their failure and see how far your skills can carry you. Volunteer for that big challenging project instead of keeping your eyes down. Write that novel in your spare time and put effort into making every bit of it as good as it can be, even if that means a giant time vacuum.

As you do these things, you’ll slowly start to see your perspective changing on a whole host of issues related to your life. Choices that seemed scary and risky no longer seem so, and big rewards that were once out of sight begin to feel as though they’re within your grasp.

So, did Pascal make the right choice? It really depends on where he’s at in his journey. For most people, the right choice is taking the guaranteed money, but Pascal’s skills and confidence are probably getting close to high enough that taking the “better” card may have been the right choice. However, if the guaranteed $500 is important to Pascal’s life situation, then it is undoubtedly the better choice.

Regardless, what matters is that you follow your own path. Spend less than you earn. Build steady and strong income streams. Keep your mind and body sharp. Keep sharpening your skills. Take risks that test your skills, small ones at first, but gradually bigger ones.

You’ll be glad you did, and you’ll never look back.

Trent Hamm
Trent Hamm
Founder of The Simple Dollar

Trent Hamm founded The Simple Dollar in 2006 after developing innovative financial strategies to get out of debt. Since then, he’s written three books (published by Simon & Schuster and Financial Times Press), contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.

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