The Paradox of Choice

Barry Schwartz

From the title of Barry Schwartz's "The Paradox of Choice," we know the argument will be that choice perhaps might not always be a good thing. He likens the current situation in America to the small town resident who visits Manhattan for the first time and is overwhelmed by all the activity (choices). Although most of his research involves everything but investing, I was struck by how much his concepts fit perfectly into what would be a good way to approach a successful investing program.
If we put less emphasis on his discussion of whether or not we are better off with more choices (obviously we are), and more on his advice on how to deal with this product of freedom, we get a book that is logically laid out and argues its point well. He first describes the environment in which our choices come at us, then investigates how our inability of deal with them leads to numerous problems - personal, professional, psychological. The most important part of the book is his summation of how we can adapt and learn to live with this new phenomenon.
His solutions, which he says require practice, discipline, and perhaps a new way of thinking, very closely follow the ingredients of good investing:
(1) Choose when to choose - focus on what's important. Be jealous of how you spend your time. Prioritize. Some things just aren't worth the time and effort.
(2) Be a chooser, not a picker - A chooser actively creates directions; pickers take whatever is available. Choosers choose when; pickers select whatever's available. Choosers are people who think actively about the possibilities before making a decision. Choosers reflect on what's important and the consequences of the action. They makes decisions in a way that reflects awareness of what a given choice means about themselves as people. Choosers are thoughtful enough to conclude that perhaps none of the available alternatives are satisfactory. The pickers grab this or that and hope for the best.
(3) Satisfice more and maximize less - (His definition of the two types of people in the world - satisficers and maximizers). "It is maximizers who have expectations which can't be met. It is maximizers who worry most about regret, about missed opportunities...and it is mazimizers who are most disappointed when decisions are not as good as they expected." - (225). The satisficers settle for something that is good enough and don't worry about the possibility that there might be something better. They have criteria and standards. They search until they find an item that fits those standards, then stop. Maximizers are constantly nagged that they haven't chosen the best. Therefore they get less satisfaction out of their choices than do satisficers.
(4) The opportunity costs of opportunity costs - Don't belabor the alternative - beware of getting bogged down in comparisons. If it works, go with it.
(5) Make your decisions nonreversible - Being able to reverse the decision makes you always wanting to do just that. A "the grass is always greener" mentality that leads to failure and unhappiness.
(6) Practice an "Attitude of Gratitude" - Appreciate what is, not what might have been.
(7) Regret less - Realize that one decision isn't going to make or break you. Live with it and move on.
(8) Anticipate adaptation - Don't become dissatisfied with something that was satisfying.
(9) Control expectations - Don't expect too much.
(10) Curtail social comparisons - Don't compare yourself to others.
(11) Learn to love constraints - Set up your own rules and live by them. They help protect you from yourself.
All in all, an excellent course on dealing with an increasingly complex world. Schwartz's next work should be decision making in the investment world. He's already done all the ground work.