Too Many Options - Nudge by Cass Sunstein and Richard Thaler - Joe Abittan

Too Many Options

Writing specifically about new employee enrollment in retirement savings plans, Richard Thaler and Cass Sunstein in their book Nudge write, “One study finds that the more options in the plan, the lower the participation rates. This finding should not be surprising. With more options, the process becomes more confusing and difficult, and some people will refuse to chose at all.” The important lesson that Thaler and Sunstein present with this quote is that getting people to do things that they want to do and know is in their best interests is challenging, even when it shouldn’t be. Additionally, people have ideas of what they should be doing and have goals for where they want to be, but don’t often have a great sense of the best way to get there. When that is the case, such as saving enough for retirement, making the path simple is more important than ensuring that the path leads to the most optimal choice or maximizes the individual’s choices.

 

One size fits all approaches and solutions usually are not great. They typically get the job done, but usually don’t lead to the best outcomes for most people. This is true with health insurance plans, retirement savings accounts, and special event t-shirts. One size fits all health plans cover general health needs, but might not work well for someone who needs expensive asthma medicine. Generalized retirement savings accounts help people get started on the path to saving for retirement and ensure that people at least have something banked when they get to 65, but they often fall short and have minimal risk taking approaches that prevent losses, but limit growth. And unisex t-shirts fit everyone, but aren’t the most comfortable and certainly are not form fitting to match current fashion trends. However, despite their inadequacies, these examples are often good first steps in helping people make a decision and get started with a plan.

 

It would be great if every person could pick the perfect healthcare plan, could find the optimal investment strategy for retirement, and have perfectly tailored clothes for every special occasion, but it isn’t realistic everyone to make great choices in all of these situations. No one knows exactly what their healthcare demands will be for the upcoming year. Our risk tolerance and savings needs and abilities will change throughout our lifetime, and no one can mass produce special event t-shirts that are tailored to every participant. Information is lacking, preferences don’t stay the same, and resources are constrained.

 

Getting people (or products) started is the first step toward ensuring healthcare coverage, retirement savings, and having race-day t-shirts for a charity run. Given the constraints I mentioned above, the initial choices need to be simple. Presenting an individual with 20 healthcare plans is going to be confusing and frustrating. The same is true for retirement options, and people looking to coordinate clothing for a special event can’t spend the too much time arguing between thousands of combinatorial options for their shirts. Rather than making a selection, people risk dropping out if they face too many choices. When there are too many options, people become frustrated, and if they don’t walk away, might select the first option they see, making suboptimal choices.

 

A solution is to take a one size fits all approach that can be adjusted and customized at a later point. Getting people started with something simple and generalized can avoid the frustrating paralysis that presenting too many options can create. Helping people understand how to make changes and learn between selections will help people improve their decisions over time and better identify healthcare plans, retirement savings plans, and custom t-shirt options that match their needs, preferences, and constraints. It is possible to present people with a few options initially, and allow them to explore additional options later on if the initial options are not a good fit or if the individual wants to explore more nuanced and complex options.
Default Choices

More On Default Choices

In many decision situation there is a default choice. Many online forms already have a bubble selected as you scroll through, there are many opt-out clauses in hospital disclosures, and when you go to sign-up for a social media platform there are pre-set security and information sharing agreements and settings. These defaults can matter a lot, and sometimes they matter much more to someone other than the recipient of the default. As Richard Thaler and Cass Sunstein write in Nudge, “note that not all defaults are selected to make the chooser’s life easier or better.”

 

Default selections are nudges because they shape the easiest choice path, what Sunstein and Thaler refer to as the path of least resistance. When a default has already been selected, the chooser doesn’t have to make a decision. Their non-decision still results in a choice being selected. The default is often the most popular option, even if it isn’t the best choice for anyone, because there is some cost to switching away. The cost is usually only time and effort, and normally a minimal amount of time and effort, but still, it is a cost that people won’t pay.

 

“If, for a given choice,” write Sunstein and Thaler, “there is a default option – an option that will obtain if the chooser does nothing – then we can expect a large number of people to end up with that option, whether or not it is good for them.”

 

Most of us probably agree that it isn’t in our best interest to allow Facebook to gather massive amounts of information about us to be sold to advertisers and political campaigns. However, the default settings for Facebook require us to opt-out of having our data sold. The process for finding the settings and opting out of targeted advertisements and having our data sold is hard to find, and the exact spot in the settings menu changes periodically. We lose time trying to find the right spots to check to get out of the default, and we can become frustrated if we can’t find the settings we are looking for. As a result, many people never change away from the data sharing default.

 

The Facebook example is a fairly nefarious use of defaults, but using defaults as nudges can be positive for individuals and societies as well. In 2019 the state I live in, Nevada, approved a new law which allows people to register to vote when completing anything they need at the DMV. By default, individuals over 18 who are eligible to vote are asked if they would like to register or update their registration. People don’t have to ask to update their voter registration, they don’t have to track down a website to update voter information, and they don’t have to hope someone approaches them in a parking lot with voter registration forms, it is a default option while doing regular paperwork at the DMV. Many states have a similar process with becoming an organ donor, where registering as an organ donor is the default option when applying for a state issued identification, requiring people to opt out of organ donor programs rather than opt in. States and countries with such systems have far more organ donors than states that don’t include people by default.

 

The path of least resistance created by nudges is important to consider. It can be a helpful way to encourage people to make decisions that are good for them and for society. At the same time, defaults can take advantage of laziness or forgetfulness. When we are not directly informed of the defaults that are being applied to us, we can end up in situations like the Facebook data sharing example above. As a result, questions about the default choice are often contentious, especially when a company’s business model requires a default that is not in the best interest of most people, or when a selected default can have political or moral dimensions.

All Options Policy

What I really liked about Colin Wright’s book Some Thoughts About Relationships is that he focused on more than just romantic relationships. Wright examines how humans interact with each other within all types of relationships from romantic relationships with an intimate partner, to business relationships, to cordial but surface level relationships with the mail man. With so many possible relationships out there, Wright developed a framework for thinking about the multitude of ways that humans can relate to each other. He calls it the “All Options Policy”.

 

About the policy, he writes, “The key to understanding this policy is accepting that there’s no single moral, upstanding, golden model when it comes to relationships. There are as many valid relationship types as there are people, and it’s up to each of us to figure out what unique, specific shape ours will take.”

 

I really like this policy and wish we did more to apply this policy to our relationships and to build similar policies across our lives. I grew up watching too much TV, and I developed certain expectations about life, work, and relationships. These expectations were narrow in scope because they were based on what I saw on TV and were unrealistic because they were less about me and more about a performance for someone else. The way I grew up assumed there was a right way to act, behave, relate to others, and generally live. My mindset was the opposite of the “All Options Policy.” What’s more, this worldview was formed by scripted 30 minute tv segments, where reality, nuance, and true emotions were replaced by spectacle and overblown emotional reactions.

 

When we fail to recognize the variety in human life and experience we begin to force people into set boxes. We make assumptions and we try to live within a narrow range. Expanding that scope the way that Wright does with the All Options Policy allows for more creative and authentic human experience. We all have unique views and perspectives of the world, and we should expect that we will all have the capacity for developing our own ways of relating to the world and to other people. When we allow this to be the case, we can think deeply about what we want, expect, and need from our relationships with others, think about what other people want, need, and expect from us, and find a way to develop relationships with the people in (or potentially in) our lives. If we try to force relationships to be something that we think society, TV shows, or other people want our relationships to be, then we will never experience the rich complexity and individuality of human existence that the All Options Policy reflects.

And What Else?

Yesterday I wrote about our tendency to view situations and decisions in the world as binary, and how the reality of the world is often more complex and nuanced than our decision making structures would suggest. Michael Bungay Stanier offers a way to get beyond binary views in his book The Coaching Habit. His solution is simply to ask the question, “And what else?” to get new ideas flowing and to break out of the simple this-or-that mentality that so many of us often stumble through.
In his book he writes, “…What would happen if you added just one more option: Should we do this? or This? or not? The results were startling. Having at least one more option lowered he failure rate by almost half, down to about 30 percent.
    When you use, “And what else?” you’ll get more options and often better options. Better options lead to better decisions. Better decisions lead to greater success.”
As almost everything in Bungay Stanier’s book, his advice and research is geared around professional and business coaching situations, but the takeaways can be expanded upon and used in more areas of life. His research shows that businesses perform much better when they consider a third option and are willing to look beyond the binary perspective. It is reasonable to think that other areas of our life would improve if we became better at recognizing when we were in a binary mindset and asked ourselves if there was a different option or even if we didn’t have to make a decision at all. When we start to become more comfortable with slightly larger perspectives, by making a choice between three options rather than just two, we start to see that the world has more possibilities than we originally recognized, and we start to be able to live a little more flexibly. Recognizing that our vision is limited, especially if we only give ourselves two possibilities for how the world is shaped, is key for growth and learning. Asking what else is a first step to challenge our thoughts and begin to expand our worldview.