MAKING DECISIONS: WHY MORE IS LESS

We are faced with decisions at every point of every day. Push snooze or get up? Oatmeal or fruit for breakfast? It starts from the first minute and doesn’t stop until we decide to face right or left as we’re falling asleep.

Most decisions are so simple or so routine they’re hardly noticed. Not many get anxious trying to decide which shoes to wear. Other decisions that should be routine, however, have developed so many options that they can, and do, cause anxiety and confusion.

Consider, for example, the illustration that opens the book The Paradox of Choice by Barry Schwartz, a professor of Social Theory and Social Action at Swarthmore College. He goes to replace a pair of jeans. He gives the salesperson his size and is immediately peppered with questions: slim fit, easy fit or relaxed fit? stonewashed or distressed? button-fly or zipper? faded or regular? His response to the salesperson is, “I just want regular jeans. You know, the kind that used to be the only kind.” The salesperson had no idea what he was talking about.

The story ends with Schwartz leaving the store with the best-fitting jeans he’d ever had, but feeling worse. The reason, he says, is that when our choices increase, so too do our standards. While we may have, in the past, been satisfied with a pair of jeans that fit just okay (since they were the only pair available), we now expect the perfect fit and the perfect look, all at the perfect price.

This wide array of options is found in so many aspects of our lives. Go to the grocery store and there are more varieties of bread and cookies and lunchmeat than any one person would care to count, not to mention choose from. When faced with overwhelming choices, Schwartz says we fall into two separate personality types. He recently discussed with us the two types of decision makers.

“A maximizer is somebody who is out to get the best: the best chocolate chip cookie, the best restaurant, the best jeans, the best investment, the best job, the best anything. A satisficer is somebody who is looking for a good enough chocolate chip cookie, pair of jeans, investment. Good enough can be very good. You can have high standards, but you don’t need the best.

“If you’re out to find the best, there’s only one way to get the best and that’s to examine all the options. If you don’t examine all the options, how do you know that the one you didn’t examine wouldn’t turn out to be the best? If that’s your goal, in a world with the kind of choice we have, life becomes a nightmare.

“On the other hand, if your goal is simply to find something that’s good enough, you can look at your cookies or your jeans or your investments one at a time and as soon as you find one that meets your standards, you choose it and you don’t worry about what else is out there. The distinction between looking for good enough and looking for the best is not a terribly important one in a world of limited choice, but in the world we live in, it becomes increasingly important and people who are out for the best are, by almost everything we can measure, pretty miserable.”

Schwartz uses the example of finding 285 different kinds of cookies at the grocery store. A daunting choice, no doubt. But what about the decision involved when you consider choices in the investing realm? Imagine trying to examine the thousands upon thousands of individual securities and mutual funds available to individual investors.

Schwartz includes in The Paradox of Choice a case study involving participants in 401(k) plans. Of the one million people across 1,500 companies researched, there was a striking correlation between how many people participated in a plan and how many investing options were available. For every 10 additional options, participation decreased by 2%. In some cases, Schwartz reports, employees were passing up as much as $5,000 in matching money from the employer, all because they couldn’t figure out how to decide, so they just didn’t. People fail to realize that in so many situations, any decision is better than no decision.

The key to overcoming decision paralysis is to work your way out of the maximizing state of mind. “It’s maximizers,” Schwartz says, “who suffer most. It’s maximizers who have expectations that can’t be met … who worry most about regret, missed opportunities, social comparisons … who are most disappointed when the results of decisions are not as good as they expected.”

While maximizers by their very nature aren’t content to settle on a decision when a better one might be available, the trick is to embrace and appreciate satisficing, rather than being resigned to it. Every maximizer has occasions when they’ve been a satisficer, only because maximizing every decision would be impossible. Maximizers should consider those times in their life, however trivial they may seem, when satisficing has been comfortable. Then, for decisions they’re facing, develop standards for what is good enough. Boil the decision down to its absolute minimum requirements.

This is easy for investors. A maximizer is going to play Wall Street’s games—picking stocks, timing the market and chasing returns—all in the interest of beating the market. A satisficer, however, knows that there’s really only one decision to be made: owning the market. Once that decision is made and the satisficer investor holds a super-diversified portfolio, the work is done.

The good news here, however, is that the satisficing decision—to own the market—isn’t just the good enough Schwartz alludes to. It’s also the best. So, in choosing the satisficing route—not to choose from the options Wall Street has laid on the table—the satisficer has chosen the option the maximizer wants, but will never get.

“Becoming a conscious, intentional satisficer,” Schwartz says, “makes comparison with how other people are doing less important. It makes regret less likely. In the complex, choice-saturated world we live in, it makes peace of mind possible.”

Less regret and more peace of mind? Sounds like a decision that’s already been made. 

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