Satisficing
Categories: Financial Theory
Cody’s dream is to find the perfect 15-foot-tall, generously filled-out blue spruce to use as a Christmas tree this year. He can see it in his mind’s eye, and it’s glorious. Unfortunately, not only can trees that big get pricey (especially since Cody lives in a place where blue spruce trees don’t really grow), but Cody’s a busy dude. He doesn’t have time to go to every tree retailer in the region looking for the ideal tree. So instead, he decides that, even though the 15-foot-tall blue spruce is his dream, he’d be okay with a 10-foot-tall Christmas tree of any variety, as long as it’s somewhat evenly shaped and doesn’t have a bunch of bare spots.
This is what’s known as “satisficing,” which is a combination of “satisfy” and “suffice.” Basically, “satisficing” is a decision-making process where we decide what we’d be okay with...as opposed to what we’d ideally like to happen. We do this all the time, because, as Mick Jagger told us, we can’t always get what we want. And if we try sometimes, we just might find that what we really want is great, but it’s more than what we need. We’d love to live on the beach in Hawaii, but we’ll be just fine living right here in San Antonio, Texas. We’re craving a medium-rare filet mignon drowning in butter, but our lunch break is short, so we’ll be satisficed with a burger and milkshake from the fast-food joint down the way.
In the business world, satisficing often comes out of conducting cost-benefit analyses. The goal of every business is to stay in business, and it’s real hard to do that without making money. Satisficing helps find the most economical way for a business to meet its obligations, while also providing a good or service that its customers want. Using tools ranging from simple math to complex algorithms, corporations can manipulate bajillions of factors in an attempt to find the most satisficing solutions for their own business issues. Maybe they won’t end up with he 15-foot-tall blue spruce they’ve always wanted, but they should end up with something that both satisfies and suffices.
