It was the early 1990s and researchers at The University of Iowa were looking for a simple way to determine whether someone had brain damage in their ventromedial prefrontal cortex (vmPFC), an area of the brain responsible for decision-making. At the time, demonstrating impairment in someone’s vmPFC wasn’t possible within a lab setting. So the researchers devised a game, later known as the Iowa gambling task (IGT), to change this.
The IGT worked as follows: You are presented with four virtual decks of cards (labeled “A”, “B”, “C”, and “D”) and some starting money (see image below).
You are then told to choose a deck and draw a card from it. The card will have a monetary reward on it, but it may also have a fee, which is netted out against your reward. Therefore, some cards will earn you money while others will lose you money. The goal of the game is to maximize the amount of money you have before you run out of draws.
However, there’s a catch—not all the decks are the same. Some decks are “good” (they contain cards that tend to grow your money over time) while others are “bad” (they contain cards that tend to shrink your money over time). Unfortunately, you don’t know which is which. You have to figure it out as you go along.
Most people who play the IGT are able to identify which decks are good and which decks are bad after about 40-50 draws. However, this isn’t true for those participants with brain damage. Participants with impairments to their vmPFC didn’t improve their performance over time and continued to draw from the bad decks even as they watched their money dwindle.
The researchers who originally designed the IGT got what they wanted. They created a simple tool that they could use to understand decision-making and when it was impaired. Yet, despite its simplicity, the Iowa gambling task taught me far more about life than I could have initially imagined.
The first time I played the IGT (which you can try for yourself here), I did pretty much what everybody else does. I picked from the decks at random, came up with a theory about which decks were good/bad, and then played the good decks until the game ended (after 100 draws). I finished my first game with $3,400 (after starting with $2,000).
“Not bad,” I thought to myself. But, I had to know if I could do better. I had to find the optimal solution. So I played the game over and over again until I did. Sometimes I played using only one of the decks. Other times I played using multiple decks. And there were even times when I switched decks at random or mid-way through a game.
And guess what? It worked! Through my many trials and tribulations, I discovered that the highest score you can get on this version of the IGT is around $4,500 (technically, you can score higher, but you have to get lucky). However, in my quest to get the highest possible score, I realized that I was completely missing the point of the game. The IGT was originally designed to understand decision-making under uncertainty. But by replaying the game over and over again, I had removed the uncertainty altogether.
Unfortunately, this is how many of us (myself included) judge our own lives. We look back and wonder whether we could have done better. We tell ourselves, “If I only knew back then what I know now…” But, this is an illusion. Because once you remove the uncertainties of life, you can almost always find a better option that you could have chosen instead.
I think this kind of thinking occurs because many of us are trying to optimize our lives. I know it all too well. I hunt for the best restaurants on Yelp, search for the best products on Amazon, and write about the best ways to invest your money on this blog.
And I know I’m not alone. In nearly every domain, you can find content to help you optimize your life as well. Should I have 10% of my portfolio in bonds or 20%? Should I eat fresh blueberries or frozen blueberries? Should I do leg press or squats? It’s optimization all the way down.
But, how much does all this optimization actually help us? For some people (i.e. professionals), these kinds of decisions can be important. But, for the rest of us, it’s marginal (at best). Yet, we try to optimize all the same. We get lost in trivial details instead of focusing on the few big things that actually matter. As Rami Sethi likes to say, “Stop asking $3 questions and start asking $30,000 questions.” In personal finance this means earning a high income and investing in income-producing assets. In nutrition it means eating whole, natural foods. And so forth.
Of course, some optimization is good (and necessary). If you’re running Google, finding the quickest way to return the best search results is paramount. But, if you’re trying to live an enjoyable life, this level of efficiency isn’t needed. In fact, too much optimization can lead to problems of its own, as this therapist (from this Reddit post) wonderfully explains:
What I find is that those who lean too much into this logic of optimization are the ones that suffer from a (literal) maddening degree of alienation.
It’s an easy trap to fall into as it is so very sensible: Why would you spend six hours cleaning (doing a chore you hate and doing it badly) if you could just work an additional hour and outsource that? So you hire a cleaner. And a cook, a personal shopper, an interior designer and a nanny. But if you don’t watch out, all your little self worth eggs, so to speak, are kept in the same work basket – and, step by step, you start to live the life of a stranger. You eat the food of someone else, wear the clothes of not-you, in an apartment that might as well be a hotel room, with kids that are more attached to their nanny than to you. Your vacations are glamorous, but there’s little connection to anyone or anything in them.
At this point you might start to feel a little unease. You might start to wonder why you’re unfulfilled and try to treat yourself better – so you double down. You get a PA because dealing with a schedule is annoying, you get a personal trainer because mens sana in corpore sano and while you’re at it, you also start therapy, where you learn techniques that help somewhat and where you analyze childhood events. But what somehow is kept at bay, in a fish-not-having-a-word-for-water-way, is that you identify with your job of optimizing processes to maximum efficiency to a degree that you treat yourself like any work project.
Unfortunately, your life isn’t a math equation. You have to accept that you can’t maximize every experience. You will make mistakes. You will behave sub-optimally. And that’s okay.
What’s not okay is spending time debating whether you should buy stocks monthly vs. bi-weekly or whether you should eat spinach vs. kale. Instead, learn a new language. Pick up a new hobby. Call an old friend or relative. Enjoy life.
The first time I played the Iowa gambling task my final score was $3,400. That’s 76% of the maximum possible score you can get. And, guess what? I’m okay with 76%. I hope you can be too.
Thank you for reading!
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This is post 314. Any code I have related to this post can be found here with the same numbering: https://github.com/nmaggiulli/of-dollars-and-data