How to Avoid The Pain of Opportunity Cost
More Choice Is Better, Right?
In our world today, you’re inundated with choices. The variety and quantity of products at your local supermarket dwarfs what you would have had just fifty or sixty years ago. The number of channels offered by cable TV providers has exploded in the last thirty years. And online marketplaces like Amazon, eBay and Easy offer a mind-boggling array of products, in every category you can imagine. The explosion of choices has increased competition, lowered prices, and it allows ever and ever smaller sub-groups of people to find products and services tailored specifically to their needs and wants. Having all of that choice is a good thing, right? In general, it is. But all those choices can negatively affect your motivation. When you’re faced with more options than you can easily evaluate (and that number, by the way, can be pretty small), you start to worry about the opportunity cost of making the wrong decision. And when that happens, the result is often that you make no decision at all.
Would you like to try a sample?
In a now-famous study by professors Sheena Iyengar of Columbia University and Mark Lepper of Stanford University, they set out to determine whether people actually prefer more choice. On two consecutive Saturdays at a grocery store in Menlo Park, CA, they set up a booth where they gave away free samples of jam. On both days they offered samples from the same jam producer and the same $1-off coupon, and on both days all of jams from that manufacturer were available for sale. The only difference was that one day they offered samples of six different jam flavors, and on another they offered twenty four.
On each of the two days, approximately 250 customers saw the sampling booth. On the day with the large selection of jams available for tasting, 60% of the people who saw the display stopped to sample the jams. On the day with the reduced selection, only 40% of those noticing the display stopped. Those results make sense, because more options are more visually appealing. If you’ve ever been to a farmer’s market or a flea market, which kind of booth or table were you more likely to stop at, one that was overflowing with goods for sale or one that only had a few?
The next part of the jam experiment is where it gets interesting. Of the 145 people who visited the display with 24 flavor choices, only 3% of them (4 total) actually purchased a jar of jam. But on the reduced-selection day, 30% of the people (31 total) who stopped at the display purchased jam. That difference is remarkable, and similar results have been produced in multiple other studies since then. Psychologists and Sociologists have a few different theories as to why people exhibit this behavior pattern, but one of the primary reasons has to do with opportunity cost.
The price of opportunity cost
When you're faced with an overwhelming number of options, you either don’t have the time or the ability to evaluate them in a way that satisfies your basic desire to make the best choice. As the number of options increases, so does the opportunity cost of making the “wrong” choice. Of course, there are degrees of “wrong-ness”. The consequences of making a “wrong” jam choice are much less severe and enduring than the consequences of making a “wrong” choice for your career or your spouse.
The effect of opportunity cost doesn’t just affect those who avoid making a decision, either. In another part of this same study, they gave out different flavored chocolate samples. Of the people who subsequently purchased chocolate, those who did so from the larger flavor selection reported higher regret and dissatisfaction with their selection after the fact. The irony is that while those with an abundance of choice found the decision-making process to be more enjoyable, they also found it more difficult and frustrating. And, as with anything involving human beings, if it is more difficult and frustrating, you are much less motivated to do anything with it.
The result of this experiment is an important lesson for all of us, especially since the trend of ever-increasing choice is not likely to go away. When you have a decision or project in your life that can’t seem to get motivated to do, think about whether part of the problem is that you have too many choices. Do you keep telling yourself that you’ll set aside time next week or next month to really evaluate your options so you can make the best choice or figure out how to start? If so, the opportunity cost could have you afraid of making the “wrong” choice, so you use it as an excuse to avoid getting started.
One way to overcome the opportunity cost roadblock is to immediately narrow your options down to just two or three things. If you do some research, either on the internet or by talking to a couple people who have some experience or knowledge of the topic, you can usually find out pretty quickly what the best couple of choices are likely to be. Then, give yourself a deadline and tell yourself you will make a decision by a certain date. If that strategy doesn’t work, then you may need to reevaluate how motivated you really are to do that project.
There’s a lot more to this topic than I’ve touched on here. If you’re interested in learning more, you can check out the book, The Paradox of Choice by Barry Schwartz.