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The Paradox of ChoiceThe Paradox of ChoiceBy

Barry Schwartz

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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.”

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Law of diminishing returns

Choices

Satisfaction

Stay in the sweet spot

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A day at the supermarket (2002)

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

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

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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.

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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 Words that have the letter “t” as the third letter!the third letter!

Dealing with our surroundings

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Where do we go wrong?

What information did you use to base your decision?

Is it easier to think of words beginning with “t”.

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

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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.

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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.

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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

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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.

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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.

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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.

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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”.

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Prospect Theory

Subjective state

Objective state

+ Win

+ feel good

- feel bad

- looseThe prospect (fear) of losing has a much more pronounce effect than the prospect (satisfaction) of winning

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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.

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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.

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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!!

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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.

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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.

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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.

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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.

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Example of a Maximizer

BYUBYUBut my firstChoice was Harvard

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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.

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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.

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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.

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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.

4-Square Analysis

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Do It

Best I can Expect

Worst I can Expect

Don’t do it

4-Square Analysis Example

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Do It

Best I can Expect

Worst I can Expect

Don’t do it

Low on GasSee a station but the price seems a little high—Should I stop? I will make it home

and the price may be competitive with other stations I pass

I will pay significantly more for the gas than other stations I see on the way home

I will have enough gas to make it to the next station and the price will be lower.

I will not find another station close by and I will run out of gas.

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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.

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What’s left?? No more Lectures!! But I do want to meet with

your team in an informal meeting, in two weeks.

We will look over your team management sites during the informal team meetings.

You have an upcoming 2nd Project Review, Tues and Thurs 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.