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Allianz SE : The Tyranny of Choice

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04/05/2012 | 11:04am CEST

Sheena Iyengar is professor of business at Columbia Business School and author of The Art of Choosing, shortlisted for the Financial Times Business Book of the Year 2010.

At a luxury food store in California, researchers set up tables offering jam tasting. Sometimes, there were six different flavors to choose from, at other times 24. Shoppers were more likely to stop by the table with more jam, but those who stopped at the smaller selection were 10 times more likely to actually buy jam (30 percent versus 3 percent).

While choice is important, says Sheena Iyengar, Professor of business at Columbia Business School, and author of The Art of Choosing (shortlisted for the Financial Times Business Book of the Year 2010) more selection does not always result in a clearer or better choice. Allianz asked her why not.

Your book, The Art of Choosing (Twelve, 2010), describes the desire to choose as so innate that we act on it as infants before we can even express it. Why is the desire so strong in humanity?

Sheena Iyengar: It's not just people. Animals also need choice. You see this in zoos. They don't need to worry about food, shelter or safety from predators. All the necessities of life are catered for, but they suffer terribly as choice is taken away. All species have the desire for some control over their environment.

You illustrate that with, among others, the Siberian tiger and the Berlin "surfing" bear and their quests for freedom. Yet, you imply that the drive for choice is particularly strong for people.

Iyengar: What animal is happy in a cage, no matter how gilded? Prison seems to be a universal penalty. But people are more sophisticated in that we've moved beyond just control. We are also able to think of ways we want to exercise control, of the tools by which we execute control and choice.

This is perhaps our most powerful ability for controlling our environment and has enabled us to dominate the planet despite the absence of claws, sharp teeth or other obvious defences.

How can we understand whether we're making the right or wrong choice? Is it innate?

Iyengar: If we can define our goals precisely and in a way that we can measure the outcome, we can then see if we're choosing for the better or for the worse. When it comes to choice, too many of us procrastinate, particularly on weighty topics such as retirement planning and investment.

How can we overcome this?

Iyengar: The first thing is to identify your goals. Many of us don't spend enough time doing that. Until you identify that goal, even if it's just a short-term one, you cannot determine what the best of the competing alternatives would be. But you have to define your goals in a way that they are measurable.

Is there some kind of discipline to help define our goals?

Iyengar: Yes, we can ask ourselves, "What would be the best-case scenario I can hope to achieve and what would be the worst-case scenario?" That gives us our parameters. Now, bump it up from the worst-case scenario and say, "If I got this much, could I live with that? And if I got a little more than that, could I live with that?"

Then you find out where your cut-off point is. Once you find your cut-off, then you know what the dominating alternative is.

At the root of procrastination is often fear. We are scared that we will make the wrong choice.

Iyengar: Quite so. I think people aren't willing to identify their goals because they are worried they will learn what their constraints are. They are also worried they might actually find out they are going to end up being poor.

However, the only way you can maximize your ability of getting closer to what you want, of aligning the odds in your favor a little, is by starting with the process of identifying your goals.

And that applies in all areas of life?

Iyengar: Anywhere you can achieve a measurable outcome. One big area where you can't is happiness. Money, in some sense, is a much easier goal to obtain, as are financial stability, job security and those kinds of things.

What is hard is identifying, aligning and measuring your goals in terms of happiness. We know if we're miserable, neutral or happy. But we only know all of these emotions in a fleeting way.

These emotions change a lot, and we don't have an accurate ability to measure them. This is what makes decisions of happiness, love or anything involving pure emotion kind of tough.

In terms of retirement planning, you say one obstacle is getting people into retirement plans, but once in, they are often overwhelmed by the choices. Can you explain this dilemma and how we often end up making poorer decisions when more choice is available?

Iyengar: When we have more choice, we feel we should be able to find the perfect option. We demand more, but at the same time, the presence of more choice does not guarantee that it will offer you more - it could all be the same option in different packaging.

It also takes more work to figure out if the options really are different, which one is the best, which one isn't. That all creates a sense of confusion, frustration and disillusionment that can end up with us making poorer decisions.

So, too much choice can be a tyranny?

Iyengar: Absolutely. Take the Swedish pension system, for example. When they switched in 2000, the system was designed as pro-choice, but people were simply overwhelmed by having to choose up to five of 450 funds.

Would we be happier if we gave up our right to too much choice in some areas of life?

Iyengar: Traditionally, Europeans seem more comfortable with that idea, while Americans have much more mixed feelings about that. This contributes to notions of happiness within the different cultures because when you believe in more choice, it becomes harder to be happy.

If you're convinced that there's possibly something better out there and it's your job to find the best, happiness can become ever more elusive.

As with all content published on this site, these statements are subject to our Forward Looking Statement disclaimer, provided on the right.

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