How to Make Better Decisions
Imagine that you need milk, so you go to the grocery store to pick some up. When you get to the dairy aisle you see that there are dozens of options. These days, not only do you have to make a decision on the percentage of fat you want (1%, 2%, skim, etc.), but also what source you want your milk to be coming from: cows, almonds, soybeans, oats... So, you stand in front of the aisle and have no idea what milk to pick. There are so many choices that you are overwhelmed.
This phenomenon is known as the paradox of choice and it is becoming more of a concern as time goes on. Now more and more options are becoming easily available to us. This means that the paradox of choice stipulates that while we might believe that being presented with multiple options actually makes it easier to choose one that we are happy with, having an abundance of options actually requires more effort to make a decision and can lead us to feeling unsatisfied with our choice. Say, if we only had to choose between 1% and 2% milk, it is easier to know which option we prefer, since we can easily weigh the pros and cons. When the number of choices increases, so does the difficulty of knowing what is best. Instead of increasing our freedom to have what we want, the paradox of choice suggests that having too many choices actually limits our freedom.
Key Terms
Choice overload: the tendency for people to get overwhelmed when they are presented with a large number of options, often used interchangeably with the term paradox of choice.
Maximizer: an individual who seeks out the most optimal outcome when making a decision.
Satisfier: an individual who is more concerned about making a decision that is ‘good enough’ and fulfills their desired criteria instead of making the best decision.
Choice architecture: techniques that are implemented to organize the context under which people make decisions in order to influence them to make certain decisions.
Second-order decisions: decisions that follow a kind of rule, that acts as a strategy to help people make ordinary decision-making easier or simpler.
Opportunity cost/missed opportunities: the benefits of options that are not chosen when one makes a certain choice. This includes hypothesizing about missed opportunities and can be mentally costly to calculate.
As we make social, scientific and technological advances, we find ourselves with more options than were available to previous generations. The choice of what milk to buy is but one example of the ways in which we have become privy to an abundance of choices. There are hundreds of options for what kind of clothes we should purchase, the groceries we should buy, the car we should be driving, the beauty products we should be using, the restaurant we should eat at… the list goes on and on. While on the surface, the quantity of options might seem like it should increase consumer satisfaction, since people are more likely to find one option that fits their particular wants and needs, we can also become very overwhelmed. While it is easy to choose option A if there is only an option B, it becomes much harder to gauge the value and utility of A when there are options A-Z. As a result, we encounter a choice overload and become more dissatisfied with the choice that we eventually make.
The paradox of choice is not only a concern for economics and consumer satisfaction but an issue that is popping up in various areas of our lives as our possibilities come nearer and nearer to being endless. Moreover, the internet and social media has made it easier for us to see all the different options that are available to us, no longer having to physically stand in a store to determine what our options are. Fast-paced advances being made in technology and science also mean that there seems to be new kinds of jobs created on the daily – not to mention all the different social media applications that created a whole host of jobs. Social media has also changed the way that we choose a life partner. Dating apps like Tinder and Hinge have enabled people to have dozens of options of who to date at their fingertips.
While many studies have demonstrated that people are less satisfied with the decisions they make the more options are available, other studies have conflicting evidence. For example, the decoy effect suggests that we feel more strongly about an option when there are three options than if there are only two. The paradox of choice has been criticized for not having enough concrete and scientific evidence behind it and critics often offer up countering evidence, such as the fact that Starbucks, which boasts a menu with hundreds of possibilities and customizations, is an incredibly popular and profitable company. Another phenomenon that counters the paradox of choice is single-choice aversion, identified by Daniel Mochon, professor of marketing. Single-choice aversion suggests that people are unwilling to choose an attractive option if there are no alternative options since they have nothing to compare it against.
Describing people’s tendency to scroll through terms of service and click agree without actually reading them, our writer Tiago Rodrigo examines the cognitive bias behind our disregard of the specificities of terms of service. He suggests that one reason behind this tendency is the fact that websites and services overload us with information we become overwhelmed and make a rash decision without taking the time to consider the details and nuances of our decision. The overload of information parallels the paradox of choice and can cause consumers to feel a great deal of anxiety and distress.