That is the title of both a book and a TED talk by psychologist Barry Schwartz. While having several alternatives from which to choose may seem like a good thing, Schwartz argues that having too much choice can produce several negative effects.
First, having too many choices can produce a kind of mental paralysis in that it becomes difficult to choose at all. He cites studies done on 401(k) plans where for every ten funds offered, the rate of participation decreases by 2%. While this may seem counterintuitive, it does seem plausible that having 40-50 funds to choose from could overwhelm some people to the point where they just don’t complete the paperwork.
The second negative effect he cites is that as a result of too much choice, we are often less satisfied with our decision. That certainly seems plausible, as we could think that one of the choices not picked could have ultimately been a better choice.
That leads to his third negative effect, that too much choice produces anxiety. I know that to some that may appear to be psychobabble, but I also think that there is at least an element of truth in it.
I say that because I see it in the life insurance arena. A major carrier I deal with offers six different whole life policies, three universal life, four survivorship and three term policies. Additionally, there are several different riders available for each type of policy.
You can’t blame the carrier for trying to serve as large a segment of the market as possible, but it can be daunting to the consumer.
As with most things, knowing your objective(s) can help tremendously. If you just need the coverage to secure a business loan, one of the term policies will suffice. If you want it in force the day you die, any of the whole life policies will work, so your objectives would need to be clarified to determine which whole life policy would best satisfy your needs.
The point is, with life insurance or anything else, lots of choices shouldn’t be a negative, but according to Mr. Schwartz’s research, it oftentimes is. To prevent that from happening, we need only to clearly define our objectives, which will reveal the product or service that will be best suited to help us accomplish said objectives.
Without clearly defined objectives, it is much harder to sort through all of the available products to find the one(s) that best suits our needs. Or, to quote Yogi Berra, “If you don’t know where you’re going, any road will take you there.”