The Mental Bias of Endowment

Part of my recent journey has been to gain insight and clarity into what is truly important in my life, gaining a razor-sharp focus required to cut out everything else — creating the space and freedom to pursue true passions with all my energy. This, I’ve realized, is the path to my most fulfilling life.

I recently caught up on Tim Ferriss’ pod with Greg McKeown, author of Essentialism. Tim and Greg discussed a fascinating trick our minds play on us called the endowment effect. Endowment essentially states that we overvalue/bias things we already have which prevents us from seeing them for their true value.

Why should you care about endowment?

Our lives are full of excessive options that all compete for our attention. Endowment prevents us from pursuing what makes us truly happy. The easiest example is your closest. If you have 2 sweaters, there isn’t an issue but when you have 2 dozen sweaters and you can’t find the one you want or have to shove things in to fit, this is clearly suboptimal. One day you finally decide you’ve had enough and resolve to do something about it. You go through all your sweaters one by one and decide whether to keep, donate or toss. If you’re like me, you’ll probably say things like “this sweater goes with those pants”, “this sweater reminds of my college days”, “this sweater is really comfy, “this sweater looks good on me” etc etc etc... You might go from 24 down to 22 sweaters. Because we already own the sweaters, we endow them with extra meaning compared to what the sweaters truly provide us with. We, as the Buddha said 2,500 years ago, create illusions in our minds from which we suffer (or are unsatisfied). I believe we do this with everything in our lives, not just our sweaters.

What to do about?

Greg McKeown suggests one simple mental trick to undo the power of endowment. Simply ask yourself, “If I did not own this sweater, would I still buy it? How much would I be willing to pay for it?”. The power of this mental reframing is huge! Imagine not owning any of your sweaters — which would you choose to buy again today? Those are the sweaters that you should own, nothing more, nothing less.

More than just sweaters.

In the grand scheme of things sweaters are a pretty trivial part of our lives but this same mental trick can be used to undo the power of endowment and gain a level of clarity on how we choose to spend our precious time and attention. Greg mentioned that CEO’s of Hewlett-Packard, Microsoft, Apple and many others will, every few months, sit down and ask themselves, if, for example, Apple Computers didn’t exist today, would we be willing to start building it right now? If the answer is yes, then proceed, otherwise say no. This gets the mind out of its natural habit of the sunk cost fallacy and allows us to lead far more deliberate/intentional/mindful/(insert buzzword) lives.

Not convinced? Here are a few examples that might speak to you:

Exercise 1: Pick up your phone and delete all the apps you don’t want. You can probably delete 5–6. Now, erase your phone to factory settings and start from scratch, chances are you’ll only put back a small subset of the apps you previously had. You don’t have actually have to do this, it should be obvious to see that completely different mental machinery is involved in the latter case. If you don’t believe me, then actually do it! (back up your stuff first, you hoarder 🙃).

Exercise 2: Go to your instagram account. Click on the list of people you follow (probably in the 300–1000 range). Now go through and unfollow anyone who isn’t directly adding/contributing to the kind of experience you wish to have on instagram. How many can you unfollow? 10? 20? 50? It’s tough!! We feel bad, these are personal connections, they might one day post some really good moments that we might miss out on (even though recently they’ve just been posting weird political memes). This is the endowment bias in full effect.

Now, try the following: create a new instagram account and go follow only the people you really care about. Whereas before we probably could only unfollow a couple dozen accounts, now you will probably only follow a couple dozen! Kind of makes me wish instagram had an “unfollow all” option…
If you want to take this up to the next level, try the same thing on Facebook! Given that instagram is mostly a unidirectional relationship (Person A can follow Person B without Person B knowing or following back) while Facebook is a bidirectional relationship (Person A and Person B both agree to tie the knot of friendship), the endowment effect is exponentially stronger.

I made a leap here that makes me (and probably you) a bit uncomfortable. Should we really treat the people in our (social-media) lives as sweaters? I’ll make the claim that we should given we spend far more of time working with people in our lives that picking sweaters. So far this has just been social media. If you unfollow someone online and they text you asking “did you unfollow me?”, you could say “yea, just trying to clean up my feed into a certain type of photography that helps calm me, nothing personal, lets hangout soon!” but we should also be willing to reevaluate the relationships we have with people IRL. Can you go through a list of people in your life and ask, “If I didn’t have this relationship with Person X, and I just met them, would I pursue this relationship from the ground up?”. If the answer is yes, then you know you have a relationship that serves you, not the other way around. It’s one thing to do with high school friends, it’s another to do with family members. To me, when the answer is yes — that is love. Love that makes you your best self which allows you to show up for others in truly beautiful ways.

Some personal examples:

1. #Vanlife. If something happened to my van (say it was stolen or totaled in an accident) today, would I go get an apartment and save up until I could afford a new van? Yes. Why? Because #vanlife has been one of the most important tools in my life to gain the clarity I need to lead the life I’ve been searching for. Every few months I will reevaluate that question and when the answer is no, then I will be done living in a van.
2. Vlogs. When I started traveling full-time I thought that making videos documenting my travels would be awesome. It turned out to take way more of my time, kept me from being in the moment (I was recording video ALL THE TIME), very few people engaged with the content I was creating compared to my photos which took 1/100th of my time and I still felt I had a long way to learn to develop my photography skills. So I put down all my video equipment and said “no”.
3. Sitka. He is a ton of work! Traveling solo with a dog that requires as much attention, exercise and is sensitive to heat is REALLY hard. But he has taught me some deeply impactful lessons about myself, lessons that I needed to learn now, lessons of responsibility, fear, and love that I think will serve me tremendously in future romantic (human) relationships and even when/if her and I decide to raise a family. Sitka has also introduced me to some of the most important people I’ve met on the road. Sitka comes at a huge cost but if something were to happen to him today, I would (after a period of grieving, a couple airplane flights and national parks in the US) rescue another dog.
4. Work projects. Anyone who knows me knows that I’m constantly coming up with new ideas and projects. From nomadic coffee roasting, to vanlife geolocation, to teaching coding, photography, writing, meditation, neurofeedback etc. I am currently in the process of figuring out the order of these, saying yes to one or two at a time which requires saying no to all the others.

Other examples: If you didn’t have the job you have now, would you pursue it again? If you weren’t in the relationship you’re in now, would you pursue it again? It takes courage to say no, to put something down you’ve worked so hard on, to walk away, to appear fickle, to start a new with just the essentials.

A link to buddhist philosophy of mind

The endowment bias is just another trick the Ego/Self/mind plays us on, in a way enslaving us to our previous decisions. The Ego does not care about your happiness or self-respect, it cares about passing genes onto the next generation and in tightly knit social tribes, being consistent even if we’re consistently doing things that make us miserable, has value to the tribe. It gives people an easy way of knowing what to expect from us and how to label us. Saying yes to any request that comes our way is the unfortunate default for so many of us (myself included) but it comes at the cost of feeling fulfilled, less stressed and achieving your best. Saying no comes at immediate social costs but has long term benefits when people learn to respect you and the work you can achieve when focused. Saying no is deeply grounding and freeing much in the same way that mindfulness meditation can liberate you from your own thoughts. While meditating on the sensations of the breath, thoughts constantly arise and your job is to say “no” to them — not because they’re not important or not valid, but because that’s not the thought you’re choosing to say “yes” to right now.

They say you need to let go, to be and let in. In the Essentialist world, we need to be mindful of endowment so we can let go (say no) to a million things in order to let in (say yes) to the couple things that really matter.

Thanks for reading! If you enjoyed this, click that clap button button as many times as you like! It helps me to know what kind of writing you find meaningful.

Cheers, Sante ✌🏼