Why Efficiency Is Dangerous and Slowing Down Makes Life Better Psyche Ideas⁠↗

If people had to visit a bank to withdraw cash, they might spend less and save more. This is not mere speculation – for instance, research reviewed by the Nobel Prize-winning economist Richard Thaler shows that people will pay more for an item with a credit card than with cash. Arguably, a little friction to slow us down would have enabled both institutions and individuals to make better financial decisions.

this ‘too much of a good thing’ phenomenon might be a general rule. Some motivation produces excellent performance; too much motivation produces choking. Some group collaboration produces cohesion and enhances productivity; too much of it leads to staleness. Some empathy enables you to understand what another person is going through; too much could prevent you from saying and doing hard things. Similarly, in my book The Paradox of Choice (2004), I argued that, whereas a life with no freedom to choose is not worth living, a life with too much choice leads to paralysis, bad decisions and dissatisfaction. Finding the right amount – what Aristotle called the ‘mean’ – of motivation, collaboration, empathy, choice and many other aspects of life, including efficiency, is a key challenge we face, both as individuals and as a society.

Seen in this light, at least some inefficiency is like an insurance policy. Think about your own situation. Every year that you don’t get into a car accident and your house doesn’t burn down and you stay healthy, you could think to yourself that you have ‘wasted’ your money on various pointless insurance products, and that you’d be financially better off without all those insurance premiums to pay. Most of us don’t like the sense that we’re wasting money on insurance. We would rather be wearing that money, or eating it, or driving it. Some years ago, with a struggle, I convinced my ageing mother to supplement her basic health insurance policy with a more comprehensive insurance product. Her resources were modest and the policy wasn’t cheap. The year went by and, happily, she had no serious medical conditions that required the use of the extra cover. When the time came to renew, my mother resisted, because, indeed, the money she spent the year before had been ‘wasted’. My reply, perhaps unduly snarky, was to suggest to her that maybe the next year she would get lucky, have a really serious illness, and get her money’s worth out of her insurance.

One way to think about insurance, however inefficient it might feel, is that it enables us to be resilient against shocks that could befall us from a world that is radically uncertain. And the world is radically uncertain. As the British economists John Kay and Mervyn King point out in their book Radical Uncertainty (2020), efforts to quantify risk by attaching probabilities to various unlikely future states of the world are mostly science fiction. The world is much messier than a roulette wheel or a pair of dice.

What should we do in the face of this radical uncertainty? When making decisions, instead of asking ourselves which option will give us the best results, we should be asking which option will give us good-enough results under the widest range of future states of the world. Instead of trying to maximise return on investment in our retirement account, we should be setting a financial goal and then choosing investments that will allow us to achieve that goal under the widest set of future financial circumstances. Instead of looking for the ‘best’ job, we should be looking for a job that will be good enough – satisfying enough – as co-workers and managers come and go, and the future economy gyrates. Instead of choosing the best college to go to, we should be choosing a college that will be good enough, even with an obnoxious roommate and a boring Bio 1 teacher.

If companies felt the friction of being caretakers of their communities, they might look differently at streamlining their operations by eliminating jobs.