“What were you thinking?” My older brother was almost shouting at the absurdity of the story. I had taken my mother to a new lunch spot and she hated it! There were three reasons that he thought that I could have predicted this outcome.
It was an Indian restaurant.
They only served vegetarian food.
They had no menus.
While the first two items would involve Mom being a bit adventurous (which she is not), the third was the obvious deal-breaker. It was simply not the restaurant experience that she was used to, and involved surrendering some degree of control over her meal.
Once seated at a table, you notice that your platter (or “thali”) is divided into several separate compartments. The layout is not dissimilar to a school cafeteria tray, only round and quite a bit more attractive. The restaurant owner approaches the table with the five items that he had chosen to serve that day. He then places some of each into the compartments of your dish while explaining a bit about the food. As you eat, he continues to work his way around the dining room and refill any section of your plate that you seem to have particularly enjoyed. This process continues until you are satisfied.
I loved this lunch the first time I tried it. I couldn’t wait to come back and to tell other people. You were not overwhelmed with a large menu or limited by the one or two items you ordered. You were able to try a few different things and eat as much of your favorites as you pleased. An additional benefit of this system is that there was very little wasted food.
There is a stark contrast between this concept and another “menuless” dining experience of the traditional American buffet. While it seems that the notions of “all you can eat” and getting more of what you want would make the two meals similar, there are a couple of subtle details that make all of the difference. The first factor is serving size. The amount of each dish placed on your plate in the Indian restaurant is relatively small. The expectation is that you will take more when the service cart returns to your table. At a buffet, however (picture a Las Vegas Casino) it is rather common to see people with absurdly large piles of food stacked high on their dishes. The second detail is the idea of “self-service”. Many people overload their buffet plates to avoid having to get up and take too many trips back and forth from their table. The Indian restaurant owner brings the food to you. You don’t feel the need to overfill your dish, since you know that you will have several more opportunities to have your favorites delivered directly to you.
Although the buffet and the Indian lunch may look similar at a glance, they are not. The combination of convenience, portion control, and a caring restaurateur create a few positive outcomes for both consumers, the business, and the environment. A diner is less likely to overeat. This helps to prevent both short-term discomfort and long-term health problems. The business can keep costs down by only preparing as much food as they confidently believe will be consumed. They also only need to purchase the groceries necessary for their limited daily menu. These cost controls allow them to provide the meals at a reasonable price to the end consumer. Lastly, everyone benefits from a little less wasted food going into landfills.
In his 2004 book, The Paradox of Choice - Why More is Less, psychologist Barry Schwartz argues that reducing choices can lead to reduced anxiety. A 2000 Study by psychologists Sheena Lyengar and Mark Lepper looked at two jam displays in an upscale grocery store. In each case, shoppers were offered a discount coupon for sampling different jams. One day, the display had six options and on the other, it had twenty-four. Despite the fact that more people visited the large display, the people that saw the small one were ten times more likely to make a purchase. In the case of the large display, too much choice led to a certain paralysis that hurt both the consumer and the merchant.
Schwartz brought this concept into my area of personal finance when he examined the habits of retirement plan participants as they relate to investment choices. He quotes a study of Vanguard records which show that for every ten additional fund options that a plan offered, the rate of participation went down by two percent! This study looked at about a million employees. This means that adding twenty more funds on average could lead to 40,000 people not saving for retirement, with many even forgoing free money in the form of an employer matching contribution! Once again, they suffered from decision paralysis as a result of too many options.
In the past, I have discussed how decision fatigue can hurt the quality of people’s choices, but today I am contemplating the danger of having too many options, and how that can lead to not deciding at all. Every economist, author, and psychologist I read seems to believe that autonomy and freedom of choice are critical to our well-being. There does seem to be a point where the number of available options does more harm than good though. Unfortunately, research has not yet produced a “magic number” for this. Schwartz looked at the problem through the lens of different personality types and how they each respond to different levels of choice. If the ideal number of options is a function of the chooser, then how are each of us supposed to set ourselves up for success?
For an answer to this question, I turn back to my experience at that Indian restaurant. Every feature that made the meal so delightful for me was the result of a decision that the restaurateur had made. The structure of serving meals “thali style” was his decision. Each day, he took the vast universe of food options and narrowed it down to the five items that would be on everyone’s plate. He took care to try to include ”something for everyone” and paid enough attention to make sure that you received more of what you liked throughout the meal. It is easy to see the structural differences in how the restaurant serves lunch, but the “human factor” is the true difference-maker.
Returning to finance, I can see why those in the Vanguard study were paralyzed by an abundance of investment choices. After all, most retirement plan participants receive absolutely no education in the area of investing. With your future in your hands and an overwhelming number of choices, it may be easy to say, “I’ll do it tomorrow.” Life goes on as it does, and tomorrow turns into next week, next month, or next year. If an increase of ten mutual funds has a measurable negative effect on retirement plan participation, it is likely even worse for individual investors. The investable universe has thousands of publicly traded stocks and over 100,000 mutual funds. Including bonds, cash, commodities, and other assets into the mix creates an infinite number of combinations that one could have in their portfolio. When facing this intimidating number of menu options, I suggest that someone should focus less on choosing a dish and more on identifying a good restaurateur. A diligent and attentive industry professional can help narrow that infinite list of possibilities down to a short selection of options that have been chosen with care. They can help you to learn about what works for you and what doesn’t, and adjust your experience appropriately.
Like psychologist Barry Schwartz wrote (and my Mom confirmed) some personality types will always prefer to see the full menu. I submit that it is worth experimenting to discover if you might find that you are happier or more productive with the help of a skilled caring professional.