Is Your Money Problem a Puzzle or a Mystery?

The distinction matters, it defines the best approach to deal with the problem.

Posted Jul 30, 2018

Gregory Treverton, a national security expert at RAND Corporation, famously distinguished between two types of problems, puzzles and mysteries. He was describing the modern challenges faced by the American intelligence community. According to Treverton, puzzles are problems having a definitive solution once the relevant information and insight is found and used. Solving puzzles requires taking a specific sequence of steps or actions to get to the answer. Mysteries, on the other hand, don’t have clear-cut answers. The solution is a moving target, depending on a host of factors that change over time.

Find a piece/ Ryoji Iwata/ Unsplash/ Licensed Under CC BY 2.0
Source: Find a piece/ Ryoji Iwata/ Unsplash/ Licensed Under CC BY 2.0

There are other significant differences between puzzles and mysteries. With a puzzle, more information is helpful. As more missing pieces fall into place, for example, a jigsaw puzzle is closer to the solution. For mysteries, in contrast, more information can muddy waters, take you down a wrong path, and generally make it more difficult to get a handle on the solution. As Treverton says, “mysteries often grow out of too much information.”

Over the past decade, the distinction between puzzles and mysteries has been instrumental in analyzing phenomena as diverse as the Enron bankruptcy from the early 2000s, the most effective way to treat prostate cancer, and even the interpretation of the Constitution by Supreme Court justices. These discussions are all about social problems where groups, often large ones, are involved in creating and solving the problem.

The distinction also applies to our personal problems and is psychologically useful. In this blog post, my main point is that we should ascertain whether our problem is a puzzle or a mystery before we try to figure out how to deal with it. Far too often, we frame our challenges incorrectly, seeing issues that are really mysteries as puzzles. This leads us to try and find specific solutions which don’t work. The end result is a worsening of our problem, and anger, frustration, despair.  Let’s explore this idea in the area of personal finances.

Puzzles and mysteries in managing your finances

Some financial challenges are puzzles, pure and simple. For example, if you have a goal of saving $1,000 for an emergency fund, there is no ambiguity in your desired outcome. You know exactly what your goal is and you’ll know when you get there. This problem can be solved in one shot (if you are fortunate) by, for example, taking a chunk of your income-tax refund and putting it in the emergency fund. Or you can solve it bit by bit, by saving a little here and a little there. Staying within a defined budget for food, travel, etc., or contributing a certain amount to a retirement savings account are also financial puzzles.

Doubt/ Niklas Hamann/ Unsplash/ Licensed Under CC BY 2.0
Source: Doubt/ Niklas Hamann/ Unsplash/ Licensed Under CC BY 2.0

Our most consequential money problems, however, are mysteries. Many people have concerns such as “I want to be financially secure,” “I want to save enough money to retire comfortably,” or “I wish I could be a smart shopper and not waste money on things I don’t really need (or even enjoy).” None of these money challenges has a definitive end-point. Most don’t even have a solution that applies in the same way to everyone, or even to the same person over time.

For the problem of saving for retirement, how much money is adequate? Different people will have dramatically different answers. And most people may not even have a precise value in mind or be able to work one out, simply because the answer is driven by a host of different factors, known and unknown. They include your household income at retirement, the age you want to retire, your and your spouse’s health, your lifestyle before and after retiring, whether you will work part-time in retirement, and so on. Treverton had this to say of mysteries:

“[A mystery] poses a question that has no definitive answer because the answer is contingent; it depends on a future interaction of many factors, known and unknown. A mystery cannot be answered; it can only be framed, by identifying the critical factors and applying some sense of how they have interacted in the past and might interact in the future. A mystery is an attempt to define ambiguities.”

He was writing about the challenges of gathering intelligence but Treverton could just as well have been writing about picking a retirement savings target or any other significant money problem.

The best ways to deal with your financial mysteries

Once we realize that our significant financial challenges are mysteries, not puzzles, we’ll figure out there are no clear-cut answers to find or outcomes to reach. Instead, the best thing we can do is keep paying attention to the issue, move forward towards our open-ended goals day after day through actions small and large, cultivate habits that support our progress, adapt and revise our goals and measures of progress as our circumstances and the environment change, and not get discouraged when we suffer setbacks.

I will expand on these points in a future blog post. But for now, we’ll let Treverton have the final word:

“Puzzles may be more satisfying, but the world increasingly offers us mysteries. Treating them as puzzles is like trying to solve the unsolvable — an impossible challenge. But approaching them as mysteries may make us more comfortable with the uncertainties of our age.”