The Paradox of Choice: Why More Is Less | Barry Schwartz

The Paradox of Choice: Why More Is Less | Barry Schwartz | Good and bad choices in financial trading

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The Paradox of Cho...

	The Paradox of Choice: Why More Is Less Barry Schwartz Harper Perennial, 2005 - 304 pages average customer review:based on 100 reviews view larger image
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highly recommended

Coping with Copious Choice

We are living during a time of copious choice. Prosperity washes us with abundant possibilities. Yet, when we receive what we thought we wanted, we often find ourselves wanting.

Barry Schwartz, a Swarthmore College professor, citing research results from psychologists, economists, market researchers and decision scientists makes five counter-intuitive arguments in this book, The Paradox of Choice: Why Less is More. We would be better off if we:

1. Voluntarily constrained our freedom of choice.
2. Sought "good enough" instead of "the best."
3. Lowered our expectations about decision's results.
4. Made nonreversible decisions.
5. Paid less attention to what others around us do.

Schwartz notes we are constantly being asked to make choices, even about the simplest things. This forces us to "invest time, energy, and no small amount of self-doubt, and dread." There comes a point, he contends, at which choice becomes debilitating rather than liberating. Too much of a good thing becomes detrimental to our psychological and emotional well-being, he states.

In the final, Schwartz offers an 11-step program for reducing choice's "tyranny."

1. Choose when to choose.
2. Be a Chooser, not a picker.
3. Satisfice more; maximize less.
4. Consider the opportunity costs of opportunity costs.
5. Make your decisions nonreversible.
6. Adopt an "attitude of gratitude."
7. Regret less.
8. Anticipate adaptation.
9. Control expectations.
10. Curtail social comparisons.
11. Learn to love constraints.

I have always had trouble accepting the virtues of what Isaiah Berlin, the political philosopher, terms "negative liberty" or "freedom from." In my mind "positive liberty" or "freedom to" is always the preferred option.

Schwartz's book makes a compelling case, however, that less can be more.

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Good and bad choices in financial trading

Having a choice in life is a good thing; a person without choices is often miserable. As the number of choices grows, our happiness grows with them, but then it begins to decline. Having too many choices creates stress. Schwartz describes his visit to a local supermarket: "...next to the crackers were 285 varieties of cookies. Among chocolate chip cookies there were 21 options. ... Across the isle were juices - 13 `sports drinks,' 65 `box drinks' for kids, 85 other flavors and brands of juices, and 75 iced teas and adult drinks. I could get these tea drinks sweetened (sugar or artificial sweetener), lemoned, and flavored. ... I found 61 varieties of suntan oil and sunblock, and 80 different pain relievers - aspirin, acetaminophen, ibuprofen; 350 milligrams or 500 milligrams; caplets, capsules, and tablets; coated or uncoated. There were 40 options for toothpaste, 150 lipsticks, 75 eyeliners, and 90 colors of nail polish from one brand alone."

Those wide choices may seem appealing, but Schwartz brings our attention to what he calls `the darker side of freedom' - the stress of choice. This paradox is the most pronounced in the financial markets. Even though his book is about the paradox of choice in general, I read it with an eye towards the financial markets, my own trading, and what I see in other traders.

Shall we trade stocks, futures, or options? If stocks, shall we trade the more seasoned issues on the NYSE or look for riskier high-growth candidates on the NASDAQ? Should we track agricultural, tropical, or financial futures? And what about the forex? Should we buy or write options, or look into more complex strategies, such as spreads? And worst of all - what if another market makes a spectacular move while our attention is focused elsewhere? No wonder the majority of traders feel so stressed. Schwartz says "Choosing almost always involves giving up something else of value. ... The overload of choice contributes to dissatisfaction."

"Losses hurt more than gains satisfy. ... The cost of any option involves passing up the opportunities that a different option would have afforded. ... Conflict induces people to avoid decisions. ...Emotional unpleasantness makes for bad decisions. ... The desire to avoid regret leads to inaction inertia. ... An overload of choice contributes to dissatisfaction."

Every trader who kicked himself after a profitable trade for having `left more money on the table' will chuckle at a cartoon of a kid in a t-shirt that says "Brown ... but my first choice was Yale." Schwartz shows how people are divided into `maximizers' who always strive for the best and `satisficers' those who settle for some reasonable level of success. "Almost everyone who scores high on maximization scale also scores high on regret." You can decide to be a maximizer in a very small number of situations that truly matter to you and be a more mellow satisficer in the rest of your life. "We would be better off seeking what was good enough instead of seeking the best."

Connections with trading kept running through my mind while reading this book. How many successful people kick themselves, feeling that their performance was not good enough. How many stay way too long in a bad trade because of `sunk costs.' Schwartz exposes the endless flow of coulda-shoulda-woulda as `counterfactual thinking.' He shows how keeping records of decisions impacts people's attitudes towards those decisions. I have been saying over and again that keeping good records is the single most important step towards becoming a successful trader.

The tone of Professor Schwartz's book is that of a friendly, intelligent neighbor, dealing with the same human dilemmas as you and I. He shares his thinking about our problems by talking with us, not at us. His compact and smoothly written book sheds light on many aspects of decision-making, the stress of `roads not taken,' the curse of high expectations, etc.

The mere fact of outlining a problem is a big step towards clarity, but after 10 chapters, I felt ready to hear about his proposed solutions. They were delivered in Chapter 11 (which I hope had nothing to do with the eponymous chapter of the bankruptcy code :-)). Professor Schwartz's advice was lucid, logical, and sensible - but you will have to read it yourself (I do not describe it here because reciting solutions without having worked through the problems is likely not to be useful.)

I highly recommend this book to all traders. My only quibble is the paper quality of the paperback - it is grayish, and should have been much whiter! But the publisher offers you no choice!

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F yeah

This book is one of the most interesting books I have ever read. The basic premise of this book is that the more choice we have, the more anxious we become about the decisions we have to make. Think for example, about how many different stores there are in a mall. You want to buy a dress shirt, but which store do you go into? Will the Gap have a better deal than Banana Republic? Or maybe Macy's or Lord & Taylor will have a better shirt. But then, which shirt do you pick once you decide what store to walk into? All these decisions prove to be quite exhausting, despite our unconscience ability to make such them on a constant basis.

Don't believe me cause Im just another dude? Well, it was required reading in my psychology class on personal security at The Ohio State University. Had a great professor...this book changed how I make decisions in everyday life.

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Great Book

If your like me and want to understand why making choices are so difficult and what you really gain from deliberating for so long you should definitely read this book. It is very enlightening, easy to read, informative, and fairly concise with plenty to back it up. Highly recommended.

One of the most interesting, thought, provoking, and immediately useful books I've read.

I read about 4 books per month and this is hands down one of the best ones I've read in the past year. Packed with information, yet enjoyable to read, I had a hard time putting this one down.

I use the ideas I learned in this book almost every day, in my own life and in my work with helping clients.

Schwartz skillfully illustrates how the sheer abundances of choices we have in life these days leads to stress and paralysis of action. He describes looking at 40 types of jeans and going home with none, overwhelmed by the choices and time it would take to go through all of them. We can all relate to this, right?

As a business psychologist and organizational consultant I use Schwartz's concepts all the time. Whenever a client tells me that their goal is to improve sales, one of my first questions is, "How many choices do customers have in this particular category?"

Psychological research tells us that the perception of choice and control is important, and Schwartz highlights the need to limit the number of choices for maximum effectiveness.

I'm happy to think of how many individuals and businesses have and will benefit from Schwartz's book.

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