My earlier post on the paradox of choice sparked interesting conversations with several people. I got inspired by these conversations to write this follow-up post.
Breaking Down Decision-Making
When we struggle to make a decision (i.e., selecting between different options) we are struggling to find the superior choice among alternatives. In other words, we are choosing between similarly good options with no clear winner (“good” in different ways, but “good” nonetheless). Were one option clearly superior, there would be no struggle.
Then, if options are “similarly good”, why is it so difficult to take a step in any direction? Why is decision-making paralyzing? What is the cause of this inertia?
Well, for one, we are not rational robots. Our minds inevitably factor in many variables rooted in our emotions: we tend to focus on the missed opportunities and undesirable outcomes inherent to decision-making. Said differently, these are the upsides of forgone options and the downsides of the selected option—driven by fear and regret, respectively.
If that felt like a mouthful, let me explain myself.
The Upsides Of Forgone Options, a.k.a Fear Of Missing Out
Loss aversion—a well studied psychological concept— states that people have a stronger preference for avoiding losses over acquiring gains (some studies even suggest that this preference can be quantified as 2x). Decision making, by definition, involves selecting a single option and letting go of one or multiple others. It involves closing doors, eliminating possibilities. In other words, you are “losing” the future benefits of many options and “gaining” those of a single option.
Hence, our loss aversion tendencies will shift our focus towards these missed opportunities, and away from the benefits of the selected option. It is frustratingly easy to imagine all the benefits we are letting go of when making a decision, and to ask ourselves that dreadful question: “what if?”. The Fear Of Missing Out creeps in. It paralyses us. And for a while, our brain will mistake this lack of action (or decision-making) with a lack of losses. While delaying decision-making may seem comforting in the short-term, it will often lead to a rushed—hence, less effective—decision down the line.
The Fear Of Missing Out thus leads to inertia—an unwillingness to take a step in any direction to avoid letting go of possible future benefits.
The Downside of Selected Options, a.k.a Ancitipation Of Regret
In his book “Thinking Fast And Slow“, psychologist and behavioural economist Daniel Kahneman defines Regret as what you experience when you can most easily imagine yourself doing something other than what you did. It is one of the counterfactual emotions that are triggered by the availability of alternatives to reality. Alternatives we must, by default, consider when making decisions.
Our mind is a powerful imagination tool. It will easily wander into the future playing out multiple scenarios of possible futures, including, in most cases, what can go wrong. The anticipation of regret thus plays an important role in decision-making. Take the example Dan illustrates in his book.
Paul owns shares in company A. During the past year he considered switching to stock in company B, but decided against it. He now learns that he would have been better off by $1,200 if he had switched to the stock of company B.
George owns shares in company B. During the past year he switched to stock in company A. He now learns that he would have been better off by $1,200 if he had kept his stock in company B.
Who feels greater regret? The results of an experiment are clear: 8% of respondents say Paul, 92% say George. However, objectively the two situations are similar: both own stock A and would have been better off by $1,200 had they owned stock B. The difference is in how each individual got to where he is: George got there by taking action, whereas Paul got there by NOT doing so.
The point here is that people tend to have stronger emotional reactions to outcomes produced by an action, rather than those produced by inaction. And since decision-making is akin to taking action, it leads to similar emotional reactions—specifically, regret.
It is the anticipation of regret, brought on by our wandering minds, that leads to inertia—an unwillingness to take a step in any direction to avoid a feeling of regret down the line.
Fear, Regret, and Awareness?
There aren’t any quick fixes for these psychological pitfalls. Our gut reaction will often be to delay decision-making. The best I have done so far is arm myself with awareness. An awareness and an understanding of these cognitive mistakes that helps uncover undesirable behaviours (like stalling) as they arise, and helps control emotional impulses (a.k.a. Fear and Regret).
The mind remains a funny thing.