Essays

Personal Finance and the Paradox of Choice

A few weeks ago, I was browsing the internet when I stumbled onto a decade-old TED Talk from psychologist Barry Schwartz. The talk, aptly named The Paradox of Choice, aimed to deconstruct how much affluence – and the choice it brings to our lives – affects our society.

Schwartz spoke of many frustrating truths almost anyone can relate to – the madness of shopping for salad dressing in a store where there are 175 different flavors and brands, or choosing among 285 varieties of cookies. At the store Schwartz shops at alone, he says, there are 75 different types of iced tea to buy, along with 230 different soups and more than 40 types of toothpaste.

Schwartz goes on to complain that his local electronics store offers 6.5 million different ways to build a stereo. That’s not an exaggeration. And when you buy a cell phone these days, there are hundreds of options available, plus too many upgrades and accessories to keep track of.

“Life is a matter of choice,” says Schwartz. “But, is this good news or bad news?”

Most of us would assume that the more options we have, the better. But Schwartz cites research showing that an overabundance of choice doesn’t actually make us happier. Instead, it can leave us feeling confused, disappointed, and often paralyzed.

With so many choices, people find it difficult to make any decision at all. And even if we do manage to overcome the paralysis of overanalysis and make a choice, we end up less satisfied with our selection than if we had fewer options to choose from.

It’s not that we don’t like the salad dressing or cookies we chose for our evening dinner, he says. It’s just that, with so many other options, it’s far too easy to second guess our decisions — to imagine that a different choice might have been better. (Newer research on this subject has been less conclusive, but it still appears that too much choice can create consumer confusion and regret in some situations.)

Schwartz goes on to argue that “the secret to happiness is low expectations” – and having fewer options would be better for everyone.

Simply put, when you don’t have as many choices, you don’t have to fret over insignificant trade-offs like the brand of tea to buy or which toothpaste is marginally better. And when you’re not wasting brainpower to choose from 85 different cell phone plans and 6.5 million different stereo configurations, you can spend more time actually enjoying life.