Practical implications of the “Paradox of Choice”

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Photo by Harry Brignull

A few weeks ago I wrote about Barry Schwartz’s inspiring talk about practical wisdom. After I relaxed from that amazing talk, I searched for more of his talks on TED and yesterday I saw his talk at TED from 2005. I actually saw it twice, because the first time I saw it I was enthralled to the screen. In his talk, he describes his book “The Paradox of Choice“.

This lecture is so interesting that I decided to recap it here in this post, and add my comments to the summary (in italics).

Schwartz’s theory attacks the official dogma of western industrial societies. In a nut shell, this is the dogma: Citizens welfare is maximized by maximizing individual freedom. Why? Because freedom in itself is valuable and worthwhile and because this gives people the chance to act of their own and maximize their welfare in the best way they can. They know better than some central government how to maximize their welfare. How do we do maximize personal freedom? By creating more choices. The assumption is that more choices lead to more freedom.

So basically the dogma is more choices create more freedom and more freedom maximizes welfare.

Schwartz’s actually tries to attack the casualty of the assumption. He says that there is no argument that more choice leads to more welfare, but what we usually ignore is that fact that too much choices can lead to less welfare.

And the problem of western societies today is that people have too much choice. If you go to the supermarket you can buy thousands of brands or types of salad dressing. If you buy a phone you can chose from thousands of cellphones. When you go to the doctor he gives you a choice on what medical procedure to take and explains to you the advantages and disadvantages of every choice. Theoretically, it is patient autonomy. But practically, it shifts the burden of choice to the citizen, who is usually less equipped to make that choice. We can work from everywhere with the latest technology. This means that we must decide each and every moment (must make a choice) whether we want to work or not.

Schwartz’s claims that the abundance of choices has two negative effects on people:

1. It produces paralysis rather than libration. When there are too many choices, people find it difficult to choose at all.
 This is a revelation that has implication in the marketing setting. I suggest you read chapter five of the book “Yes!“. The chapter is called “When does offering people more makes them want less”. Two examples from that episode:

  1.  
    1. A research showed that the more mutual funds employers offered their employees, the rate of participation decreased (for every additional 10 mutual offered, participation went down 2%).
    2. When “Head & Shoulders” reduced the number of shampoo choices from 26 to 10 they had an increase of 10% in total sales

People usually think that giving more options is a better marketing strategy. It actually isn’t. Too many choices create paralyses. People look for simple choices.

2. Decrease of satisfaction. Even if we overcome the paralysis and make the choice, we end up less satisfied than if we had fewer options to choose from. Why?:

  1. Regret and anticipated regret – If you have a lot of choices and you buy one, it is easy to imagine that there is another choice that will make you better. This subtracts from your satisfaction. The more options you have, the easier it is to imagine that you made the wrong choice.
  2. Opportunity costs – you lose more features from more choices. Opportunity costs subtracts from the satisfaction we derive from our choice even if our choice was great. The more choices there are the more features we are losing. When you are choosing to do one thing you are choosing not do other things. The more other options you have the more, psychologically, you lose.
  3. Escalation of expectations – we have so much choice and a lot of times we end up with the best choice, but we feel worst. Why? With all the choices we have, our expectations about how good our final choice should be goes up. When there is only one kind or one choice – you don’t have a lot of expectations. But if there are a hundred choices, one of them should be perfect! This produces less satisfaction with results even when they are good results. What this point means is that we cannot be truly pleasantly surprised anymore. Today, the best you can hope for is that stuff will be the best as you expect it to be. The secret to happiness is low expectations.
    This reminds me of Seth Godin’s book – “Purple Cow“. If you want a product or service to succeed you have to make it remarkable. You have to surprise people. You have to beat their expectations. Good enough is just not good enough. You have to be great or special (at least at something). Going for the average is the worst thing you can do.
    Surprise is also one of the key characteristics of sticky presentations (and thus, sticky brands) according to the book: “Made to stick“. Today, marketing and good presentations are all about exceeding expectations and surprising.
  4. Self-blame – When you have limited choice and something goes wrong. You are not responsible – the world is responsible. What could you do? But, it there is an abundance of choice -when you are disappointed – you are to blame – you made the wrong choice. When people make decisions, the results are good, but they are dissatisfied, so they blame themselves.
    I think this is one reason you have to try not to regret your choices. You cannot affect what happened in the past. This is what is called the sunk-cost bias. People put too much emphasis on the past in their choices when they should be looking to the future.

The conclusion from all of this is that the dogma is wrong. Some increase in the amount of choice does create more welfare, but adding to much choice, actually decreases welfare.

In the last week I have been studying in economics (again) the law of diminishing marginal returns. I am surprised to see in many facets of life it pertains.  Just this last week I wrote about it twice (1, 2). This is the third time. Because Schwartz’s conclusion is basically an implementation of that rule the world of choice.

And just to recap, watch this video – everything is amazing and nobody is happy for a more, let’s say, informal way to introduce the same idea!

Elad

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4 Responses to “Practical implications of the “Paradox of Choice””

  1. J. Barel Says:

    well, yes.
    I remember going to a supermarket in the US, and trying to choose a carton of bloody Ben ‘n Jerry’s. I was literally paralyzed by the overwhelming choice.
    But the “Western” culture implied in your recap is how Americans implement freedom=choice.
    The problem is that you’re not making decisions and choices about life. You’re making decisions and choices from a list of consumer goods.
    This, in fact, is an illusion of freedom, because it drives the need to consume, rather than the freedom to do so.
    Note how different cultures deal with this phenomenon: observe the super-conformist behaviour of some cultures in the far east, for example.
    In any case, here is a perfect example of how inter-personal competition and consumerism are driving the market, rather than the “pure economic theory” of supply and demand, where multiple manufacturers enter a large market of consumers. The so-called “choice” is generated by a different cause.
    And Seth Godin is a Purple Cow.

  2. J. Barel Says:

    Oh, and a nitpick:

    “If you buy a phone you can chose from thousands of cellophanes

    Elad, your spellchecker is out of control.

  3. sherfelad Says:

    Hey J. Barel,
    Glad to see you here commenting.
    First of all, you are right about the spelling. It is not the spellchecker, it is me. Will be corrected.
    Second, when We talk about “western cultures” we usually talk about Americans. but isn’t it also what happens in Israel and in Europe? I think it is. I can honestly say that it is also true in Australia…
    BTW, Schwartz actually says in the talk that there are places in the world that need more choice to improve their freedom and that his theory is limited to the “western world”, however you define that.
    Third, about the far east example. I don’t it has to do with the “super-conformist” culture. I think you will find it in Japan for example. From the little I learned about the far east from sitting in Australia, I can tell you that the more advanced they get and more choices they get, consumer goods or others, they get the same phenomena.
    Forth, the point is it is not just consumer goods, but also health services, work and more. The consumer society is only one perspective of it.
    Cheers,
    Elad

  4. You don’t have to be theatrical to make a point « The Comparative Advantage Says:

    […] bet this one will not inspire me or just blow me away”. And almost every time, I am wrong. My expectations keep becoming higher and higher, and still, I am not disappointed. This talk by Juan Enriquez is one of the best I have seen in TED, and that, as you know very well, […]


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