Why efficiency is dangerous and slowing down makes life better

As the British historian Niall Ferguson reminds us in his book The Ascent of Money (2008), the invention of money went a long way toward reducing this inefficiency, and much that has happened in the financial world over the past 200 years can be seen as a continuation of that revolution.Credit, for example, meant that you could go shopping for eggs and milk even without having the money right now. Arguably, a little friction to slow us down would have enabled both institutions and individuals to make better financial decisions.A decade ago, the American psychologist Adam Grant and I argued in a journal paper that this ‘too much of a good thing’ phenomenon might be a general rule. Finding the right amount – what Aristotle called the ‘mean’ – of motivation, collaboration, empathy, choice and many other aspects of life, including efficiency, is a key challenge we face, both as individuals and as a society.To be better prepared next time, we need to learn to live less efficiently in the here and nowBut finding the mean isn’t easy. One lesson, then, is that to be better prepared next time, we need to learn to live less ‘efficiently’ in the here and now.Seen in this light, at least some inefficiency is like an insurance policy. Every year that you don’t get into a car accident and your house doesn’t burn down and you stay healthy, you could think to yourself that you have ‘wasted’ your money on various pointless insurance products, and that you’d be financially better off without all those insurance premiums to pay.Most of us don’t like the sense that we’re wasting money on insurance. My reply, perhaps unduly snarky, was to suggest to her that maybe the next year she would get lucky, have a really serious illness, and get her money’s worth out of her insurance.Thankfully, in many domains, government regulations protect us from our desire for ever-greater personal financial efficiency by forcing us to have insurance. Perhaps we don’t need both, but what happens if we have neither?I think the real flaw in capitalism revealed by the 2008 financial crisis was its unbridled, single-minded pursuit of profit and efficiency.