1.01 Decision Making

Delayed Gratification

Watch Don't eat the marshmallow! (5:58)

In the video above, you saw four year-old child demonstrating the ability to delay gratification a willingness to give up something now in return for something later . In the study being discussed, the children who were willing to wait fifteen minutes to eat the marshmallow were significantly more successful as teenagers than their peers who ate the marshmallow.

Our society values instant gratification an unwillingness to give up something now in return for something later by encouraging people to spend money rather than saving it, taking the easy way out instead of persevering when faced with challenges. However, people who are willing to delay gratification are more likely to achieve more.

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Tough Choices

While many of our decisions are simple and routine, other decisions take a little more consideration. For example, what are you doing this Friday night? If you're like most teenagers, you have many options, including:

• Going to the football game with friends
• Staying home and catching up on homework
• Babysitting to earn extra $$$
• Going on a date
• Going to a friend's party
• Sleeping
• Playing video games

All of those potential choices are called trade offs anything you give up when you choose one alternative over another . So, if you choose to sleep, all of those other activities are your trade offs. You can't go to the game because you are sleeping.

There is a special type of trade off called an opportunity cost the value of the benefits of the next best alternative that could have been chosen, but was not . In this example, let's say that you narrowed your choices down to going to the game and babysitting. Tickets to the game cost $5 and you likely will spend additional money on refreshments at, and possibly after, the game. Babysitting will pay $60.00.

• If you choose to go to the game, then babysitting and earning $60.00 is your opportunity cost.
• If you choose to babysit, then your opportunity cost is the potential fun you would have at the game.

Of course, there are many considerations that will help you determine your choice, including:

• Is there rain in the forecast?
• How badly do you need $60?
• Have you been to a game this year? If so, was it fun?
• Will there be other games to attend if you miss this one?
• Are your friends going to the game?

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Decision Making Process

Let's look at the Decision-Making Process through the example of what will you this Friday night.

Step 1: Define the problem This sounds really easy, but many students try to solve the problem in this step. They word the problem in a way that there is really only one solution. Try to keep your problem open-ended.
Bad problem statement: Should I go to the game Friday night?
Good problem statement: What will I do Friday night?

Step 2: Brainstorm Too many students ignore this step. Write down any idea you have (10-15 ideas)
Examples: babysit for $60, movie with friends, family game night, homework, sleep, play video games, go to the football game, go on a date, go shopping, etc.

Step 3: Identify the main choices The ideal number of choices for this step is three.
For example, let's choose babysitting to earn $60, going to the football game with friends, and sleeping.

Step 4: Evaluate your choices Determine advantages and disadvantages of each choice. Be sure to identify the benefits and trade-offs of each choice. Also, consider who benefits and who may be hurt from your choice.
For example, a disadvantage of going to the game is missing out on $60. In fact, after taking into account the cost of tickets and refreshments, you may be giving up close to $100.

Step 5: Make a decision This is where you have to make a choice. Sometimes it's easier to eliminate one alternative and then you can choose between the top 2 choices. Understand that there is no perfect choice. You are always giving up something to do something else.

Step 6: Review your decision Be sure to reflect on your choice. Did you make the right choice? Would you make the same choice next time? Why? Why not?

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Your Future

Throughout this course, you will be presented with fictional opportunities for you make decisions related to academic planning, technology, and financial literacy. As you go through the course, refer back to this lesson to review the decision making process and the concepts of trade offs and opportunity costs.

Examples:

• You will face tough decisions about what you will do after school. You may choose to enter the workforce, enroll in the military, or attend college. If you choose college, you may have to choose between your dream school and take out student loans, or would it be wiser to go a smaller, local school giving you a scholarship.
• Speaking of money, what if you are given a large financial gift upon graduating high school. What will you do with the money? You may be tempted by instant gratification and buy that new car, or maybe you should invest it for your future instead.
• In your daily life, you may encounter problems with technology. The night before your English report is due, your computer freezes. What will you do?

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