on making an all-or-nothing choice

Our incredible friend S, who rather sadly seems to be the only one I know who plays music, has just recently purchased on cash a new digital piano. As similar to a lot of other all-or-nothing financial decisions of considerable magnitude, the choice was difficult to make simply due to the variety of choices available.

An expensive piano has amazing sound qualities, and it also has considerable re-sale value, when the owner has had enough of it, but of course the problem is that it is more expensive; a cheaper one, on the other hand, is most difficult to re-sell, and the sounds are terrible, but then you inevitably have the self-doubt about whether you will actually spend a lot of time on the expensive piano "this time", as opposed to all those years you have abandoned the art and craft of it. Between these two extremes there are a whole spectrum of choices, not to mention the consideration of colour, design, and fancy functionalities that vary greatly from piece to piece.

There is also the consideration of time, which involves questions like "should I buy it right here, right now, or should I wait for the factory sale of another place another time?", "should I buy it now when the dollar is cheap, or should I wait for it to go even lower?"

The solution should be relatively simple, assuming that we are aiming to get the most all of the decision. It is what the decision is about, all, or nothing. You should either go all in and buy the most expensive piano that, one, makes you happy, and two, can be afforded by your budget, or you should feed your financial security by keeping all the cash.

Buying something in the middle, assuming you can afford 2000 dollars and you have spent 1000 on the piano, would mean that if later you can't stand the sound of the keyboard you cannot improve your happiness by buying another piano priced at 1000. It just doesn't work that way.

What if you have now spent all your 2000 precious dollars and find out that there is something very very similar (but slightly less as good) priced at 1500? Aren't you supposed to feel bad about losing 500 dollars (a month's rent)? The answer is no. As a piano is not simply a gold bar, or a bucket of wheat, or a tonne of copper (which is called Commodities), it is in fact more than the accumulation of sound technology and craftmanship (which is called Services). A piano at the same time priceless and worthless, it is an experience (individual and collective perception).

As a result of paying 500 dollars more than you would have otherwise done, you practise more, you love your piano more, you are more proud of it, and you are more willing to play it to your friends, which all enhances the experience. You know that this 2000 dollar piano is not as nice as the 2500 dollar model which has yet more functions and better sound quality, but that's all you could afford so there was no regret. After playing a few months you realize it's really a smart choice as it worths much more than you would have valued the 2000 dollars (which could have been spent on shoes now that you would have been less happy and gone shopping more). And you are definitely more than happy with the choice that you didn't buy the 1000 dollar model, even though 1000 sounded hugely expensive as well the first time you heard it.

Having this story in mind, take a look at the articles below.

Paul Krugman
TPM
Washington Post