The Leader's Brain by Michael Platt

Author:Michael Platt [Platt, Michael]
Language: eng
Format: epub
Publisher: Wharton School Press

Option Fatigue and the Paradox of Choice

Think about the last time you needed to hire someone. How many applicants did you interview? How many did you screen, possibly using applicant tracking software? Recruiting and hiring consultants report that only about 2% of applicants receive job offers.134 Hiring is one of the most important decisions a business leader has to make, yet it is also one of the most difficult—and one of the most expensive. One reason that making a good hiring decision is so challenging now is the sheer volume of applications that are submitted electronically.

Why does having more options make it more difficult to make a decision? After all, economists assert that having more options makes people happier and more satisfied because they are more likely to find the item—in this case, the job prospect—they really want. In reality, though, we experience what is often called a paradox of choice or option fatigue. This is a big problem whether you’re a leader who wants to make good hiring decisions, a retailer who wants to encourage consumers to buy products, or a home buyer searching for a new house on Zillow.

The paradox of choice was first studied experimentally about 20 years ago. Sheena Iyengar of Columbia University and Mark Lepper of Stanford conducted research at Draeger’s Supermarket, an upscale retailer in Menlo Park, California.135 The store was chosen because of the incredible variety it offers its shoppers, including 250 kinds of mustard, 300 kinds of jam, and 75 types of olive oil. It also frequently sets up tasting booths, so customers are used to being able to sample some of these options.

One day, Iyengar and Lepper set up a display table with 24 different kinds of Wilkin & Sons jam. Then another day, they offered six different types of jam. They found that while the larger display generated more interest, it led to significantly fewer sales (3% vs. 30%) than the six-jam display. The conclusion? Too much choice is “demotivating.”

The study has been repeated with other food items, prescription drug plans in Medicare Part D, and even mutual fund options in retirement savings plans. Iyengar found in this last study, remarkably, that when too many mutual fund options are offered, fewer people participate in the savings plan—even though it means forfeiting the money their employers would contribute (in essence, free money!).

But a few years after these results were published, new research seemed to provide more nuance to the paradox of choice. More than one study has concluded that, especially in a domain well known to the decider, more choices are preferable.136 The debate might have gone on indefinitely if not for neuroscience research. To start, let’s look at a study led by Colin Camerer at the California Institute of Technology in Pasadena.137

Participants were shown pictures of landscapes and asked to choose one out of a set of 6, 12, or 24 to personalize a mug or other item. While they were deciding, their brains were scanned with fMRI, which showed

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