3 Properties is in the net lease business, not higher education, but we still enjoy getting our nerd on. So grab your favorite reading glasses, pour a cup of coffee, and let’s talk about the paradox of choice!
The paradox of choice was first popularized by Swarthmore College psychology professor Barry Schwartz. He wrote a book called – you guessed it – The Paradox of Choice, and he gave a very popular TED Talk in 2005 by the same name.
The good professor’s premise was simple. Too much choice leads to decision paralysis. He explains this well in a 2006 Harvard Business Review article.
It all began with jam. In 2000, psychologists Sheena Iyengar and Mark Lepper published a remarkable study. On one day, shoppers at an upscale food market saw a display table with 24 varieties of gourmet jam. Those who sampled the spreads received a coupon for $1 off any jam. On another day, shoppers saw a similar table, except that only six varieties of the jam were on display. The large display attracted more interest than the small one. But when the time came to purchase, people who saw the large display were one-tenth as likely to buy as people who saw the small display.
Other studies have confirmed this result that more choice is not always better. … These studies and others have shown not only that excessive choice can produce “choice paralysis,” but also that it can reduce people’s satisfaction with their decisions, even if they made good ones. My colleagues and I have found that increased choice decreases satisfaction with matters as trivial as ice cream flavors and as significant as jobs.https://hbr.org/2006/06/more-isnt-always-better
It’s worth noting that, as with most popular and groundbreaking ideas, the paradox of choice has endured its fair share of scrutiny. In part because replication of the study has been hit and miss, and in part because science has a way of placing a finer point on hypotheses over time.
However, the science seems clear now. There is a such thing as choice overload, and there are articulable factors that contribute to it: choice-set complexity, decision-task difficulty, preference uncertainty, and decision goal. This article from the Kellogg School of Management covers these factors in detail.
So what exactly is your point, and how does it relate to net lease investments?
The idea that more choice is bad runs counter to our conditioning. If you’re a broker, when was the last time a client said, “Bill, would you please send me as few options as possible?”
That’s just simply unheard of in real estate. But it should be the norm.
Brokers are hired for their expertise, not for their ability to simply search online, collect every property, and overload their client with options. That serves neither the client nor the industry well.
Instead, brokers should act as the expert they are hired to be. This entails researching the market, gathering data, distilling that data down into important component parts, and providing the client with a small, superior, and actionable sub-set of investment options.
This may also require some coaching, because clients, just like the rest of us, are conditioned to believe that more is better.
In short, avoid the paradox of choice and better serve clients. It’s the right thing to do.