Author and researcher Rolf Dobelli writes in his book The Art of Clear Thinking
that we “systematically forget to compare an existing offer with the next-best alternative.”
This tendency is called “alternative blindness.”
For example, suppose you have money in your savings account and you ask your investment broker for advice.
She recommends a bond that will earn 5% interest: “That’s much better than 1% interest you get with your savings account.”
Does it make sense to buy the bond?
We don’t know.
We do know that it’s wrong to consider only these two options.
To accurately assess your options, you would need to compare the bond with all other investment options, and then select the best one.
Dobelli cites Warren Buffet’s approach to investing: “Each deal we measure against the second-best deal that is available at any given time – even if it means doing more of what we are already doing.”
For another example, imagine that your doctor discovers a tumor that will kill you in five years.
He proposes a complicated operation that removes the tumor completely if it’s successful. But the procedure is risky, and has a survival rate of only 50%.
How do you decide?
You weigh your choices: certain death in five years, or 50% chance of dying next week.
But maybe those aren’t the only two choices.
Perhaps there’s a variant of the invasive surgery that another hospital offers. This alternative surgery may not remove the tumor completely, just slow its growth, but is much safer and gives you an extra ten years. In that time, maybe a more sophisticated and successful process for removing tumors will become available.
For Dobelli, the lesson is: when you’re making a decision, don’t limit yourself to the choices that are most obvious.