The Paradox of Choice
I recently read The Paradox of Choice – Why More Is Less by American psychologist Barry Schwartz. In this book, he talks about the counterintuitive idea that having more things to choose from makes us less happy than if we were to have fewer options.
His reasoning for this is the more options there are the more likely you are to regret the choice you made or you are already anticipating the future regret of a decision you haven’t even made yet. He explains every choice has an opportunity cost embedded in it and our modern world has caused our expectations to increase. This then decreases the likelihood of those expectation being met.
The most important idea he covered was the idea of self-blame. Meaning in a world where you have control of your decisions, you are increasingly likely to blame yourself when a choice you made was below your expectations.
Maximizing vs. Satisficing
After he describes why more choice can lead to discontent, Schwartz talks about the work of Herbert A. Simon and the concept of maximizing vs. “satisficing” when making choices.
- Maximizers are similar to perfectionists. They need to be ensured every decision is the “best” they could have made considering all imaginable alternatives. As the possible options increase, this becomes more and more difficult.
- Satifisficers on the other hand, are not worried about the possibility there could be something better. They have set criteria and standards and as long as their choice meets those, they are happy.
The key here is how one sets the acceptable criteria and standards when they are making choices. Often, we look to others to base our expectations. But this then sets the bar for a good enough choice too high. Alternatively, you can turn to experts in a given field for recommendations.
Satisficing In Retirement
When it comes to planning for retirement, there is a myriad of choices, many reoccurring, that need to be made, and a numbing number of options available for each. Many of the choices you make can’t be quantified on a spreadsheet and require thoughtful consideration.
If you approach retirement with the lens of a maximizer trying to make the best possible decision for each choice you could easily become overwhelmed. This is why you must look at it as a satisficer and make decisions based on your preset criteria and standards.
The Role of an Expert
Alternatively, you could turn to someone for guidance when making these choices. The role of any “good” financial advisor is to help clients:
- Determine their goals
- Evaluate the importance of their goals
- Simplify the ever-increasing array of choices
- Provide clarity to the potential trade-offs from a reduced list of options
- Work with them on the implementation of their decisions.
The advisor will be able to help you in setting acceptable criteria and standards for retirement. This is based on their subject matter expertise and past experiences helping clients in situations similar to your own.
This should be a collaborative process and you should leave any meeting with clarity on what was discussed and a connection with the advisor delivering the recommendations.
In a world of material affluence and endless options, we shoulder the responsibility to curate the life we think we should have based on our inflated expectations that aren’t based on reality.
The choice is yours and you must determine what is “enough.”
Let us know of any comments you have: info@westernreservecm.com
Below Is a Video of a Ted Talk Barry gave:
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