Lessons from hol­i­day shop­ping

The Denver Post - - OPINION - By Mo­hamed El-Erian Mo­hamed El-Erian is a Bloomberg View colum­nist.

Phew. Some­how, I sur­vived the un­cer­tainty and anx­i­ety of what economists like me often re­gard as an in­ef­fi­cient tra­di­tion: spend­ing hours look­ing for the right hol­i­day gifts. For­tu­nately, this year’s tri­als and tribu­la­tions pro­vided me with a few more anx­i­ety-re­duc­ing steps for the next set of birthdays, an­niver­saries and hol­i­days.

This time, it was even more clear that most of the peo­ple I give gifts to do not buy into the neo­clas­si­cal economists’ view that cash dom­i­nates gift se­lec­tion.

The re­cip­i­ents ap­pre­ci­ate the asym­met­ric in­for­ma­tion ar­gu­ment: that they have a lot bet­ter in­for­ma­tion than I do about what they would want to re­ceive. But, whether they re­al­ize it or not, they im­plic­itly ad­here to a type of be­hav­ioral eco­nom­ics view: What in­ter­ests them is the sig­nal as­so­ci­ated with my gifts; the ex­tent to which I have spent time think­ing about, com­pil­ing and personalizing them.

One gift with the most im­pact is one that is se­lected to in­cor­po­rate strong per­sonal touches. Among these, I no­ticed that a big hit this time was a photo al­bum that com­piled mem­o­ries of a fun year. An­other win­ner, also for peo­ple who are re­ally hard to shop for, is an el­e­gantly de­signed his and hers foun­tain pen set.

Jew­elry and travel fit in this cat­e­gory, but in the (much) higher risk/higher re­turn seg­ment. The goal is to get your loved ones items that they re­ally want but hes­i­tate to get it for them­selves. To make this work, you you should start gath­er­ing in­tel­li­gence well be­fore the hol­i­days.

Pro­fes­sional in­vestors should ap­proach gift-giv­ing in same way they think of port­fo­lio con­struc­tion. Some di­ver­si­fi­ca­tion can prove both riskmit­i­gat­ing and re­turn-en­hanc­ing. In this re­gard, a well­con­structed bar­bell ap­proach can be a lot bet­ter than sim­ply mul­ti­ply­ing the “av­er­age gift.” In par­tic­u­lar, con­sider a com­bi­na­tion of a re­ally nice present and a se­ries of small and, yes, silly ones.

The holis­tic na­ture of the ex­pe­ri­ence is also im­por­tant. Specif­i­cally, how you give your gifts is an im­por­tant com­ple­ment to what you give.

For ex­am­ple, a hand­writ­ten note has far more mean­ing than those im­per­sonal from/ to stick­ers, no mat­ter how fancy they are. Sim­i­larly, a well-wrapped gift is bet­ter than gift bags (and if, like me, you worry about your wrap­ping skills, use pa­per with those help­ful grids on the flip side). And, when it comes to mul­ti­ple gifts, se­quence them, keep­ing the best one for the end; and don’t hes­i­tate to have some of the silly ones, maybe even la­beled as com­ing from the pets.

With these tips and the as­so­ci­ated learn­ing process, my fu­ture gift-giv­ing should be much less fraught with anx­i­ety. That is good news. Un­for­tu­nately, the im­prove­ment would be a rel­a­tive one: In ab­so­lute terms, the gift-giv­ing as­pect of the hol­i­days will re­main nerve-wrack­ing.

Happy New Year to all. Thank you for read­ing my Bloomberg View columns in 2016. May 2017 bring lots of hap­pi­ness, health and suc­cess to you and your fam­i­lies.

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