The transaction fallacies

Our lives and circumstances are a product of the thousands of tiny decisions we make along the way.

The people who are well placed, made a string of really good decisions along the way that led them there.

And conversely, the ones who are struggling, made some really poor ones. 

Most people choose to live mediocre lives that are a result of mediocre decision making. 

And that’s fine.

But if you have even the slightest wish of doing something worthwhile with your life, then you need to put your life in order and make decisions that your future self will thank you for.

Heads up, it is not as easy as it seems.

You want to know why?

Because most people don’t understand a fundamental theory about the nature of actions and outcomes.

And it leads them down the dark rabbit hole of wrong and misguided decisions. 

The decisions you make in your 20s, will define your life in your 30s and beyond.

And I am writing this newsletter so that some of you can learn and understand this theory, and hopefully not make the same mistakes that everyone else makes.

The Transactional Nature of Life:

Here’s a concept that you have probably heard of before. 

Everything in life is a transaction. And I mean this in a very holistic sense.

You have to give something, to get something. 

The way most of these transactions work is we pay the cost of the thing we want, and receive the thing in return. 

But here’s a little nuance of that concept that not a lot of people know about.

— Sometimes the cost, or the outcome, isn’t visible.

Because the transaction doesn’t always happen in real time. 

Now if you don’t quite understand what this means or what it implies, then read on, I’ll explain.

There are two major fallacies that play out because of this nuance. Both of them keep you from making sound decisions. It’s imperative that you understand both, so that you can do what’s necessary to avoid them.

Fallacy #1: The Cost Fallacy

Cost is primarily an economic concept. Its literal definition is “the amount or equivalent paid or charged for something”. 

Contrary to what people think, everything has a cost. EVERYTHING.

Most people believe their 20s are the time to live their life to the fullest. And it’s true to a certain extent. A lack of responsibilities and limited accountability provides for a very potent combo. 

But like all potential, this too has two sides. Light and dark.

Most people use convenient reasoning to justify living an aimless and hedonistic life in their 20s. 

Some common activities I have seen my peers indulge in are:

• Consumption of intoxicating substances

• Regular partying

• Spending time in reckless and worthless pursuits

• Hooking up and pursuing short term gratification in relationships

• Splurging money to buy useless stuff

All of these activities are extremely pleasurable in the short term, creating a burst of dopamaine and giving you the intoxicating feeling that you are living your best life.

In this case, the outcomes are clearly laid out. You have fun and it feels good.

There seem to be no real costs. 

Therein lies the first fallacy. This is where you are tricked by the devil.

The costs aren’t visible because the transaction doesn’t happen in real time. 

What this means, is that there is still a cost to all of this behaviour, you are only paying it later in life. So while you may live a hedonistic lifestyle in your 20s, you start to pay the costs after you turn 30.

If you think the cost of ambition is high, wait till you see the cost of mediocrity.

The costs include but are not limited to:

• Development of psychopathic tendencies

• A deep feeling of resentment 

• Major mental heath challenges 

• Lack of stability later in life

• A dearth of healthy relationships

• Impacted long term health

• Under development of skills 

• Waste of potential

All the people who make this transaction, deep down in their hearts, know that the costs are present.

But because they’re not paid in real time, they don’t feel the pinch. So they choose to ignore them.

It’s like a credit card. You keep swiping it, keep delaying payments, and the debt keeps piling up. You try to be one step ahead of it.

Until one day, it catches up. 

Fallacy #2: The Outcome Fallacy

The second fallacy is the more interesting one. And it is one that plagues more people.

When people live hedonistic lives, they don’t see the costs.

But on the other extreme of the spectrum, when people put real effort behind things that are tough to accomplish, another version of the fallacy takes place.

When you’re working on things that are hard, things that are worth doing, you can see the cost but the outcome is invisible. 

Because it’s delayed.

For these things, the cost is payed now, and the outcome comes sometime into the future. 

This cause frustration. Because you see no progress, no results. 

This is the feeling you get when you’re trying to learn a new skill, when you’re doing something hard, when you’re trying to achieve something big. 

For example, you want to get in shape? You start going to the gym. 

Day 1, you go, work out, and what do you see? Nothing. Day 2. Nothing. Day 7? Nothing. Day 15??? Still nothing.

You see the cost, the effort, the difficulty you’re going through. But no results. 

This is why young people are advised to practice delayed gratification. Delayed gratification solves for the outcome fallacy. It teaches you to persevere for an outcome that will arrive sometime in the future. 

The Solution:

And now that you understand these fallacies, you know why it’s imperative that you continue down the path of struggle and hard work, and not cave in to the beckons of your hedonistic desires.

So here’s what you need to do. 

1. Every time you take a decision to do something that feels good, try to think about what it costs. 

• Junk food isn’t free. It costs you your health

• One night stands aren’t free. They cost you genuine companionship.

• Inaction isn’t free. It costs you your future. 

2. Every time you think of not doing something thats unpleasant, think about what potential outcome you’re missing out on.

• If you stop working out, you miss out on a great body and health 

• If you stop learning a skill, you miss out on monetisation opportunity

• If you stop creating content, you miss out on a great personal brand. 

Sometimes the best of us make mistakes, screw up and make wrong decisions. But having some sort of moral and philosophical compass that guides our decision making makes it much easier to make the right decisions and live a life filled with purpose, meaning, and achievement.