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					The Paradox of Choice
             By

    Barry Schwartz


        Winter 2011     1
   The Hypothesis--

Decisions are generally improved when we consider
multiple alternatives. We assume that more choice
means better options and greater satisfaction.
However, most everyday decisions have become
increasingly complex due to the overwhelming
abundance of choice with which we are presented.

 “Beware of excessive choice: choice overload can
make you question the decisions you make before you
even make them, it can set you up for unrealistically
high expectations…it can lead to decision-making
paralysis, anxiety, and perpetual stress.”

                         Winter 2011                    2
 Law of diminishing returns



Satisfaction




               Choices



                         Winter 2011   3
A day at the supermarket

  85 varieties of crackers
  285 varieties of cookies
  21 choices for chocolate chip alone.
  95 types of snack chips
  61 varieties of sun tan lotion
  230 soup offerings
  Etc. etc



  30,000 different items in a typical store
                        Winter 2011            4
What has this got to do with engineering?

 Engineers are trained to make educated
  decisions, based on facts and experimental
  observations.
 The scientific method relies on multiple
  tests to validate assumptions.
 We assume that the more facts we have,
  the better our decisions will be.


 Watch out!!, for the human brain is not
  always a logical computing device!!

                       Winter 2011             5
How do we choose?
 1. Decide on the goal(s).
 2. Evaluate the importance of each goal,
    based on existing data and facts.
 3. Examine key assumptions.
 4. Generate alternatives.
 5. Pick the best alternative.
 6. Implement the decision and evaluate the
    effectiveness of our choice from the
    results of the decision.
 Sometime the process is explicit, but more
    likely implicit.

                      Winter 2011             6
Dealing with our surroundings

What is more common in the English language,

  Words that begin with the letter “t”, or

  Words that have the letter “t” as the
  third letter?

What is your answer???
Words that have the letter “t” as
the third letter>
                     Winter 2011               7
Where do we go wrong?
  What information did you use to base your
   decision?
  It is easier to think of words beginning
   with “t”.

  We tend to rely on rules of thumb when
   evaluating information that seems readily
   available.



                      Winter 2011              8
Availability Heuristic
   A heuristic is a rule of thumb, and the
    “availability heuristic” says that we assume
    that the more available some piece of
    information is to our memory, the more
    frequently we must have encountered it in
    the past. This is the basis of advertizing.
   Just because it is easier to call to memory
    words with the letter “t” as the first
    letter rather than the third, does not
    make it true.

                       Winter 2011                 9
Common myths
  Who invented the light bulb?
  Thomas Edison?

  In fact, Thomas Edison not only did not invent the
   lightbulb, he did not invent many of the things
   attributed to him. Prior to Edison’s patent for the
   electric lightbulb in 1880, electric lights had
   already been invented. In 1840, British
   Astronomer and Chemist, Warren de la Rue,
   enclosed a platinum coil in a vacuum tube and
   passed an electric current through it, thus
   creating the world’s first light bulb - a full 40
   years before Edison.


                          Winter 2011                    10
Framing –establishing a reference point for
alternatives.
   Imagine that you are a physician working in
    an Asian village, and 600 people have come
    down with a life-threatening disease. Two
    possible treatments exist. If you choose
    treatment A, you will save exactly 200
    people. If you choose treatment B, there
    is a 1/3 chance that you will save all 600,
    and a 2/3 chance that you will save no one.
    Which treatment do you choose?

   The vast majority of respondents choose A
                        Winter 2011               11
Framing (2)
  You are a physician working in an Asian
   village, and 600 people have come down
   with a life-threatening disease. Two
   possible treatments exist. If you choose
   treatment C, exactly 400 people will die.
   If you choose treatment D, there is a 1/3
   chance that no one will die, and a 2/3
   chance that everyone will die. Which
   treatment do you choose?

  Now the overwhelming majority choose D.
                      Winter 2011              12
Framing (3)
  Which would you choose?
 1   A sure $100, or a coin flip for $200 or
     nothing?



 2   Now, which would you choose, a sure loss
     of $100 or a coin flip for a loss of $200
     or $0.



                       Winter 2011               13
Framing (4)
  Imagine that you have decided to see a
   concert where admission of $20 per ticket.
   As you are in line to buy a ticket you discover
   that you have lost a $20 bill. Would you still
   pay $20 to see the concert?

  Over 90% of respondents say yes. They
   don’t associate the loss of the $20 as part
   of the cost of the entertainment.


                       Winter 2011               14
Framing (5)
  Imagine that you have decided to see a
   concert and have already bought a $20
   ticket. As you enter the concert hall you
   discover that you have lost the ticket. The
   seat was not marked and the ticket cannot
   be recovered. Would you pay another $20
   for another ticket?

  Less than half of the respondents say that
   they would buy another ticket. It doubles
   the cost in their entertainment “account”.
                      Winter 2011               15
  Prospect Theory

                                  + feel good

Objective state

     - loose                                    + Win
            The prospect (fear) of losing has a
            much more pronounce effect than
            the prospect (satisfaction) of
            winning
                                - feel bad
            Subjective state   Winter 2011          16
Endowment effect
  Once you “own” something, it becomes
   yours, and has a “sunk” cost, and giving it
   up entail a loss.
  Examples,
      Money back guarantees
      Delete options, vs. Add options
      Purchased tickets
      Expensive shoes that don’t fit. What do you
       do with them?

      You leave them in the closet forever.
                         Winter 2011             17
We see that our brains can fool us
  So what can we do about it?
  We have to make conscious decisions about
   how we view information, and how we
   respond to information.




                     Winter 2011               18
Maximizers vs Satisficers.

 Maximizers are individuals who aspire to find and
  accept only the absolute “best”. They will attempt to
  analyze every known option before making a decision.
 Satisficers are individuals who settle for something
  that is “good enough”. A satisficer sets standards
  and criteria and searches until they find a solution
  that meets those criteria.

 In general Maximizers really hate to loose!!




                         Winter 2011                  19
Maximizers and Satisficers
 Take the test—score from 1-7
   1=completely disagree, 7= completely agree.
    1. Whenever I’m faced with a choice, I try to imagine
       what all the other possibilities are, even ones that
       aren’t present at the moment.
    2. No matter how satisfied I am with my job, it’s only
       right for me to be on the lookout for a better
       opportunity.
    3. When I am in the car listening to the radio, I often
       check other stations to see if something better is
       playing, even if I am relatively satisfied with what
       I am listening to.
    4. When I watch TV, I channel surf, often scanning
       through the available options even while attempting
       to watch one program.
                                Winter 2011             20
Maximizers and Satisficers (2)
  5.    I treat relationships like clothing: I expect to try
        a lot on before finding a perfect fit.
  6.    I often find it difficult to shop for a gift for a
        friend.
  7.    Renting videos is really difficult. I’m always
        struggling to pick the best one.
  8.    When shopping, I have a hard time finding clothing
        that I really love.
  9.    I’m a big fan of lists that attempt to rank things,
        (the best movies, best singers, best novels, etc.)
  10.   I find that writing is very difficult, even if it’s just
        a letter to a friend, because it’s so hard to word
        things right. I often do several drafts.
                              Winter 2011                   21
Maximizers and Satisficers (3)
  11. No matter what I do, I have the highest standards
      for myself.
  12. I never settle for second best.
  13. I often fantasize about living in ways that are
      quite different from my actual life.
  (courtesy of American Psychological Association)

  Now add up your score. A score of 65 or higher
    indicates you are clearly a maximizer. A score of
    40 or lower indicates that you tend to be a
    satisficer.


                         Winter 2011                22
Differences between Maximizers and Satisficers.

1.   Maximizers engage in more product comparisons than
     satisficers, both before and after they make
     decisions.
2.   Maximizers take longer than satisficers to make a
     decision.
3.   Maximizers spend more time than satisficers
     comparing their decisions to the decisions of others.
4.   Maximizers are more likely to experience regret
     after a decision.
5.   Maximizers are more likely to spend time thinking
     about hypothetical alternatives to their decisions.
6.   Maximizers generally feel less positive about their
     decisions.
                           Winter 2011                 23
Example of a Maximizer




                  Winter 2011   24
What is wrong about being a maximizer?

  Maximizing takes a lot of time, and time is
   the ultimate scarce resource.
  Maximizers are less satisfied with their
   decisions, because they are never sure
   they analyzed all the alternatives.
  Maximizers tend to compare themselves
   with others to assess whether they really
   made the best decision.
  Maximizers can become depressed because
   they can’t meet their own expectations.

                      Winter 2011                25
Maximizing and Regret

 Regret Scale         (1=completely disagree; 7= completely agree)
  1.   Once I make a decision, I don’t look back.
  2.   Whenever I make a choice, I’m curious about what would have
       happened if I had chosen differently.
  3.   If I make a choice and it turns out well, I still feel like
       something of a failure if I find out that another choice would
       have turned out better.
  4.   Whenever I make a choice, I try to get information about how
       the other alternatives turned out.
  5.   When I think about how I’m doing in life, I often assess
       opportunities I have passed up.
                       (courtesy of American Psychological Association)

      To score, subtract 8 from each of your answers before totaling the
       numbers. The higher the absolute value of your score, the more
       susceptible you are to regret.
                                 Winter 2011                          26
What can we do?
 Choose when to choose. Maximizing is ok on a limited
  basis. Develop some rules of thumb about how many
  alternatives to evaluate.
 Satisfice more often. Develop criteria for important
  decisions as to what is “good enough”. Control your
  expectations to be more realistic.
 Evaluate the “opportunity costs” of opportunity costs.
  You should think about the costs of making a less
  than optimum decision, but also contemplate the
  potential that you will generate unrealistic
  expectations for what is “good enough”.
 Make more decisions nonreversible. Once a “good
  enough” decision is made, don’t spend much time
  looking back. Put you energy into making the decision
  work.
                          Winter 2011                27
What can we do? (continued)
 Look for the best in your decisions.    Every experience
  can have both delightful and disappointing aspects. If
  you look for the positive in your choices you will be
  much more satisfied with the results.
 Anticipate Adaptation. Adaptation is the effect that
  no matter how excited and pleased we are with our
  initial decision, over time we will become less satisfied.
  Even the best ice cream loses its effect after the
  third bowl.
 Avoid social comparison. We tend to evaluate the
  quality of our experiences by comparing ourselves to
  others. Social comparisons are among the most
  subjective.
 Learn to love constraints. Freedom of choice
  eventually becomes the tyranny of choice.
                           Winter 2011                  28
4-Square Analysis

            Best I can            Worst I
            Expect                can Expect

   Do It


   Don’t
   do it
                    Winter 2011            29
   4-Square Analysis Example
Low on Gas
See a station but     Best I can                Worst I
the price seems
a little high—        Expect                    can Expect
Should I stop?
                    I will make it home       I will pay significantly
                    and the price may be      more for the gas than
        Do It       competitive with          other stations I see
                    other stations I pass     on the way home

                    I will have enough gas I will not find another
        Don’t       to make it to the next station close by and I
                    station and the price will run out of gas.
        do it       will be lower.

                                Winter 2011                          30
Summary
 As an engineer and a leader in industry you will be
  faced with many decisions. The quality of your
  decisions will directly impact the quality of your life.
  Our society is awash in alternatives, and you can quickly
  develop a case of analysis paralysis which can
  significantly decrease your productivity and
  effectiveness.
 There are no perfect solutions. Engineering is the
  practical application of science to the needs of society.
  A timely decision is far superior to a perfect solution
  that is late.
 Develop an individualized process for dealing with
  complexity and apply it generally to everything that you
  do.

                           Winter 2011                  31
What’s left??
  No more Lectures!! But I do want to meet
   with your team in an informal meeting.
  I need your website URLs!!
  You have an upcoming 2nd Project Review,
   starting next week.
  You have a formal final presentation, end of
   semester.
  You have to submit a final, comprehensive
   report.
  Individual team members will need to submit
   a teamwork survey for ABET.
                      Winter 2011             32

				
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