Mental Model: Satisficing
Satisficing: A psychological and economic phenomenon that results from consumers choosing a product that meets criteria at an adequate level, rather than expending a great deal more time to find a fully optimal solution.
Put another way, people are not looking for optimal solutions in their life. They are looking for a combination of “just good enough” or “better than average” weighted by the total effort or cost expenditure necessary to acquire said solution. People don’t want a better mouse trap, they want a mouse trap that works at the lowest price or effort.
This ties in with our mental models related to brands and marketing: For those who lack knowledge of a specific industry, such as fine watches or cars, brand names serve as a proxy to communicate information and serve as a type of insurance against making both errors of omission and commission.
If one wants a fine watch and knows nothing about the industry, it is a fair bet that a Rolex is going to be wildly known, respected, and live up to its reputation. The newly wealthy, for example, would not be aware of brands such as A. Lange & Söhne. Likewise, a doctor who wants a good piano isn’t going to be able to tell the difference in touch and action from a row of piano brands so purchasing a Steinway & Sons is going to suffice for his needs, ensuring that he will be respected and get quality for his piano choice. Even though additional research could provide better savings or an even better brand of piano, satisficing results in him saying, “I want to be done with it and this works.”
Note: Mental models are a technique espoused by Charlie Munger wherein one catalogs and studies models of behavior in psychology, economics, and other disciplines for the purpose of using them to your advantage or guarding against them in business or life. This approach has had an extraordinarily positive influence on my standard of living, the enjoyment I get out of life, and my effectiveness as an investor. From time to time, you will see me add new mental models to a category on the site for my own benefit. You are, of course, free to read them but they are primarily there for my own reference.
Smart shopping is also time-efficient shopping. For the wealthy, even more so than the rest of us, time is money, and we’ve seen how “more time” is the number one item on their wish list. In luxury retail categories, we asked why they purchased the specific items they chose. The number one reason, on a par with quality, brand, and self-expression, was that the item was good enough. In other words, they said, “I was satisfied so I didn’t want to spend more time shopping around”.
Psychologists and economists call it satisficing: choosing a product that meets criteria at an adequate level, rather than expending a great deal more time to find a fully optimal solution. Of course, the minimal requirements for adequacy among the wealthy may be quite high in absolute terms, or relative to those of the less well-off, but the principle of time savings as one element of smart decision making is a crucial one. – Page 86, The New Elite