by the choices, I thanked him and walked hurriedly out of the store. I pray that my old set will provide a few more years of service before I have to face that scene again.
Numerous studies show that when people are dealing with too much information and have too many choices, they are likely to make no decision at all. For example, Sheena Iyengar, a professor of business at Columbia University, and her colleagues have done a number of “too many choices” studies.13 One of these looked at the participation rate of employees in voluntary 401(k) plans offered by the Vanguard investment group. The investment executives were puzzled as to why there was such low participation, given the wide variety of plans that employees could choose from.
The researchers looked at the records of about 800,000 employees in more than 600 different companies. They discovered that as the number of plan options increased, participation in the plans decreased. When there were just two options, 75 percent of eligible employees participated, but when the number of options rose to fifty-nine, participation dropped to 61 percent. The many choices were so overwhelming that 14 percent of participants dropped out, and nearly 40 percent of employees opted not to enroll in any plan. They just could not make a decision. This result was bewildering because the nonparticipating employees not only were sidestepping the opportunity to establish a retirement nest egg, but were also passing up a gift from their employers, many of whom matched employee retirement contributions up to a set amount. At the same time, the employers who thought they were improving the financial well-being of their workers by offering more retirement plans were actually causing enrollment in these plans to drop. A positive goal but a negative outcome.
Even a seemingly simple decision, like buying a jar of jam, can be bewildering if the amount of information is excessive. In a California supermarket, Iyengar and colleague Mark Lepper set up a jam-tasting booth that switched each day between offering an assortment of six jams or twenty-four jams.14 These were just a small sampling of the brain-numbing 348 varieties available in the jam aisle of the store. Shoppers who stopped by the booth were able to sample each jam and receive a coupon that would take one dollar off every jar of jam they bought.
Not surprisingly, only 40 percent of incoming shoppers stopped at the booth when the researchers displayed just six jams, but that jumped to 60 percent when they displayed twenty-four jams. Obviously, the larger assortment appealed more to shoppers than the smaller one. However, when the time came to select a jam from the jam aisle, the shoppers who had seen only six jams had a much easier time deciding which jam to purchase. Listening in on the shoppers’ conversations in the jam aisle, the researchers discovered that the small assortment helped the shoppers to narrow down their choices, whereas the large assortment left shoppers confused and uncertain about their own preferences. In the end, the shoppers who stopped by the smaller assortment bought six times as much jam as those who stopped by the larger display, even though the latter was more popular. Too many varieties led many to a decision not to buy.
In another study, marketing experts Maria Sicilia and Salvador Ruiz of the University of Murcia in Spain created three versions of a website, each with increasing amounts of information about items available for online purchase.15 As potential buyers scrolled through the site that had the most product information, they felt overwhelmed and their thoughts drifted away from their purchasing task, resulting in disinterest. More importantly, they made few or no purchases.
Making a Poor Decision
No matter how experienced you are, too much information can derail your decision-making process. This is not a new discovery. As far back as the late 1980s, Paul Andreassen at MIT conducted an experiment with a group of business students who were to buy and sell stocks in an imaginary portfolio.16 Each student selected a portfolio of stocks. Andreassen then divided the students into two groups. The first group had access to all the financial information they desired. They read financial newspapers, watched financial broadcasts on television, and were able to contact stock market experts for their opinions. The second group, however, could see only the changes in their stock prices, with no information as to why the prices rose or fell. They had to make trading decisions based on this very limited amount of information.
Would you, like Andreassen, have expected the first group with all that information to earn more than the data-limited second group? Surprisingly, that is not how it turned out. The group with less information earned more than twice as much as the info-rich group. It seems the first group was distracted by too much information. The more data they got, the more difficulty they had separating good advice from bad. They made many trades based on rumors and tips—a guaranteed way to lose money in the stock market.
Imagine conducting a similar study today. With so much financial information available in seconds, one wonders what types of decisions individual investors make. One answer is to look at day traders, those people who make dozens of stock trades a day in the hopes of eking out a little profit on each. David Segal of the New York Times cites studies showing that about 80 percent of active individual traders lose money, and only about 1 percent are predictably profitable.17
Regretting the Decision
Recall the participants in Dijksterhuis’ and Messner’s studies: those who made a decision soon after reviewing all the data grew to regret their choice, whereas those with limited information who delayed their decision had no regrets.18 One of Iyengar’s studies supports these results.19 The study involved students who were doing job searches. She and her colleagues looked at the amount of information the students collected about an industry (such as prominent companies, the corporate culture, the cities where the companies were located, and average pay and benefits) and their degree of satisfaction with their choices. The researchers discovered that those students who collected a lot of information were less satisfied with their choices than students who collected less information. Apparently, the students who amassed lots of information knew so much about various job possibilities that they could see themselves doing better later in a job that they did not take. And this same regret occurred even when the individual made an objectively better choice. Professor Schwartz at Swarthmore says that when faced with so many choices, decision makers “may do better, but feel worse.” To him, “too many choices become paralyzing rather than liberating.”20
Once again, we have research results that seem counterintuitive. Having collected all that information, shouldn’t the students have been pleased with the final choices they made? Schwartz says that depends on a person’s goal when making a decision. Based on his research, he suggests that some individuals are satisicers, those who look at the options and settle for good enough. Satisficers have standards, and when they find the option that meets those standards, they choose it. They don’t fret over their choice or whether there might be something better. They move on. Then there are the maximizers, those who want to get the best choice whenever they make a decision. How does one get the best? By searching through all the possibilities—an impossible task even when deciding on jam in a supermarket. At some point, maximizers have to make a decision. Unfortunately, that decision often leads to regret. Regret? How can that be? Surely, with all that information, one should feel secure in the final decision. It doesn’t work that way. Maximizers start wondering, “What if I waited a little longer, or collected more data, or studied the options a little harder, might I have made a better choice?” If the choice they made is disappointing, they cannot escape the realization that the poor choice was their fault because, after all, they had plenty of other options available. Over time, the constant feeling of regret and self-blame begins to wear on maximizers—in some cases, to the point of clinical depression. They eventually become regret-aversive and start to avoid making decisions at all.
How to Deal With Information Overload
Before deciding how to handle information overload, you need to be certain that the problem is really too much information as opposed to too much work. Some people misinterpret work overload as information overload. Do your decision makers have
