Photo: i_yudai
The conclusion of a book I read this year resonated with me, and since completion I have noticed it keeps popping up in my life – that sometimes more options can have a negative effect on a decision. The Paradox of Choice: Why More Is Less by Barry Schwartz argues that if you have three choices, the consequences of adding a fourth choice will outweigh the utility of another option.
How can this be? This fourth option may be better than the other three, and if it is not, then it can simply be disregarded and you are back at three choices. Yes, that is a logical conclusion, but humans are not perfectly rational. First, this additional option will require further effort on your part to compare it to the others – if the choices are all very similar this can be excruciatingly difficult. More importantly, additional options provide the opportunity to second guess your decision. Schwartz illustrates in the book that the doubt in your mind introduced by more options will result in you being less content with the outcome.
The Jam Study
Two psychologists put this hypothesis to the test to find out if more choices can have negative effects on the decision. One study they ran was to setup a table of jam samples at a grocery store – sometimes they displayed 6 flavors and other times 24. While they found that more choices of jam incited a greater number of shoppers to sample, they were ten times more likely to buy with less choices and “reported greater subsequent satisfaction with their selections.”
The Paralysis of Analysis
The book lumps individuals into two categories: those who want the absolute best, and those who are happy with the first option that meets their requirements. Can you guess which group is happier with their outcome? Even if the perfectionist chooses a marginally better jam, they still are not as satisfied with their choice and have wasted a great deal of time.
Investing is a great example of this principle – we all know we are supposed to invest our money as early as possible to take advantage of the miracle of compound interest. But we also know that a 9% return is a whole lot better than 5%. If possible we should strive for 9%. Before we realize what has happened, the paralysis of analysis has taken hold, we have stalled looking for the perfect safe place to invest our money, and we are 45 without any investments. Just pick the first good investment that comes your way (there will always be better, no matter how much time you put into it), pick it now, and be happy!