Why Are Easy Money Decisions So Hard to Make: Paralysis by Analysis

Have you ever stopped to think about what goes on inside your head when it comes to decision making, especially when those decisions involve money? Is it that people are simply afraid, confused, or are they just generally terrible decision makers?

If you suffer from paralysis by analysis when making easy money decisions, there may be a reason behind it. Let's see what science says about these choices.

Is it really way too “Easy to Be Hard”? Kind of like the band Three Dog Night sang back in 1969, though they weren’t talking about money decisions. But what the heck, I need a 60’s song about this time of day anyway, so why not this one? (I do just love sneaking these great oldies into the post even when they are just here to amuse myself!)

Everyday Decisions

Even the easiest of decisions can sometimes result in a long, involved, confusing, and even annoying process. My friends and family are completely surprised when it takes me 15 minutes to pick and order an item on the fast food value menu. Or when I seem to suffer a mild panic attack when I have to choose a flavor from a vast variety of mouthwashes. Dental floss decisions (or what I like to call the DFD’s!) are among those that I can find myself debating over for a half hour.

When you have too many choices, or you are “spoiled for choice”, you can have difficulty making up your mind. As you analyze all the different options and their pros and cons, you may feel stuck. This is what’s known as paralysis by analysis.

It’s a little weird because most people seem to believe that somehow I am able to make any decision quickly and efficiently just because I pontificate on this blog twice a week and I appear to have all of the answers to almost every question out there. Quickly and efficiently…ha! not exactly.

Let the Truth Be Known

Easy decision making and I are not necessarily on the same page at all times. In fact, there’s a really huge gap out there between the theories I spout blogging and the real life I personally experience when no one is really watching. Facing my reality here, don’t I know that to be the truth.

While I have improved my skills at decision making over my lifetime (and I really have had a few years to do it), it’s true that I still can do better. Even though I’m no longer quite as indecisive as I once was and I don’t spend 30 minutes debating breakfast cereals in the supermarket anymore, I have to admit that I still suffer from an occasional bout of indecisiveness. That’s the art, or is it a curse, of overthinking the easy and making it become the hard.

So, if you stumble upon a guy looking distraught while comparing the active ingredients of various toothpastes, look again. That may be me making a real mountain out of that proverbial molehill!

Why are We Like This in the First Place?

My basic decision making flaws are and have always been that I tend to treat easy consumer money decisions like picking a mouthwash flavor or choosing a value meal item as if it were really difficult. Although I know that every mouthwash flavor will get the job done well enough, I still can’t help but contemplate the pros and cons of each one and yes, I have to admit while sitting here at home away from it all it is an embarrassing waste of my time. But yet it happens to me over and over again. I remember that Yogi Berra once said “It’s déjà vu all over again” and that describes me when I am at CVS.

Why do I do this? Why do I squander so much mental energy on the mundane purchases of my everyday life? Here’s my theory and yes, I am not a scientist yada, yada, yada so it’s based on my personal experiences, whims, and my know-it-all attitude.

My hypothesis is that wasting time and deliberating on the simple things like the decisions I face in a drugstore are a basic cognitive mistake. Instead of just realizing that picking out a mouthwash is an easy decision, I confuse the huge number of brands and choices as being “important information” and that leads my brain to the conclusion that this decision is worthy of lots of my time and attention. Call it any name you’d like, but in my head a cluttered store shelf leads me to automatically assume that this choice must really matter. If it really didn’t, why would there be so many alternatives?

So, What Do Real Scientists Think About All This?

There are lots of opinions on this entire subject but here’s one that’s in line with mine. Scientists think that people use their subjective experiences of their difficulty in making decisions as a cue to determine how much time and effort they need to spend doing it. People generally associate important decisions with difficulty. Consequently, if a decision feels unexpectedly difficult for even silly incidental reasons, people may draw the reverse opinion that the decision is actually important. That’s when they increase the amount of time and effort they spend on making that decision.

The “Jam” Case Study

There is a very famous case study I read about—the “jam” study—that is often used to make the over analyzation point by having just too many choices. Sheena Iyengar, a professor of business at Columbia University and the author of “The Art of Choosing: The Decisions We Make Everyday of our Lives, What They Say About Us and How We Can Improve Them”, conducted the study in 1995. (Check out her TED talk on choosing if you have the time.)

In a California gourmet market, the professor and her research assistants set up a booth of samples of Wilkin & Sons jams. Every few hours, they switched from offering a selection of 24 jams to a group of six jams. Here’s the interesting part: 60% of customers were drawn to the large assortment, and only 40% stopped by the small one, but 30% of the people who had sampled from the small assortment decided to buy jam while only 3% of those confronting the two dozen jams bought a jar. And that 3% took their sweet time pondering that decision.

The result of this kind of experiment is that the increase of the perceived importance of a decision makes people spend more time deciding, and in turn validates and amplifies the behavior and increased time of the deliberation. Can you see where this is going?

Time is Time & Money is Money and They Meet Quite Often

It’s pretty easy to imagine an endless loop here between time, difficulty, and perceived importance. Inferences from difficulty may not only impact immediate deliberation, but may kick off a cycle that leads people to spend more and more time on a decision that initially seemed rather unimportant and that time spent is not only not necessary and unproductive but it can actually be costly—even in dollars and cents!

Everyone’s time is worth real cash, after all when you work you get paid for your time, don’t you? So it makes sense that if you are trying to save some money by carefully considering the details of any purchase, that when you are paralyzed and waste time getting caught up in comparing and analyzing 21 types of cola before making a decision, it is costing you time and thus money, even if in the end of it all you priced the best for less item!

Only In America, or Make That Planet Earth

The modern marketplace is basically a conspiracy to confuse and to trick the mind into believing that our most routine and boring choices in life are actually extremely significant. Companies literally spend a fortune trying to convince us that only their toothpaste will clean our teeth best, or that only their detergent will remove the toughest stains from our clothes, or that every other cereal tastes like cardboard except the one they make and sell!

And then there is the unreal abundance and bounty of the store shelf itself. Do we really need 13 different varieties of Cheerios? Why does the average drugstore contain more than 5 dozen floss alternatives and over 350 different kinds of toothpaste? Why are there hundreds of choices in the soda aisles at the grocery store? Isn’t cola just cola?

All these products and many more are designed to cater to particular consumer niches, but they end up duping our brains into believing that picking something like dental floss is a really important high-stakes game and it’s so damned hard.

How Depressing is That?…But Wait

The good news is that some companies are now starting to realize this kind of marketing might just be a mistake and that people can get turned off by this illusion of difficulty of choice. Choosing oral hygiene products shouldn’t feel like taking the SAT exams felt when you applied to get into college!

Over the past few years, manufacturers have actually begun putting the brakes on new product introductions. Last year the number of toothpastes on store shelves was down by over 100 according to Procter & Gamble Co. (maker of Crest).

The old saying being actively applied here is that “less is more”. Taking its original meaning of minimalism and expanding it into making a customer feel more relaxed and happy with a purchase experience is a way of getting a customer’s loyalty and repeat business.

Stores are Trying to Simplify, Too

Supervalu Inc., a grocery industry leader serving customers through a network of over 3,000 owned, franchised, and affiliated stores across the country, is a giant that has capped the number of package sizes and flavor versions in its stores. It’s a good thing too, because I am pretty sure that my palate can’t actually discern a sixth strain of flavoring in any product!

In the meantime, I’m going to continue on my quest for self-improvement, reminding myself to be less of a maximizer and more of a minimalist. If I keep on telling myself that my selecting a dental floss doesn’t really matter as long as I am saving some money of course, then I’m bound to one day realize it’s true. I will then finally be able to spend my time worrying about much more important things in life, like baseball and who is going to win the next World Series. See, I am already making much better sense of the world than I was just a few minutes ago!

Do you suffer from paralysis by analysis? Are you spending too much time and energy to save money? Have you caught yourself like I have wandering the store aisles trying to decide on the best shampoo deal you can buy? What can you do to keep saving money and still have the time to enjoy it?

Image courtesy of Danjo Paluska on flickr via CC BY 2.0

Financially Savvy Saturdays

About Gary Weiner @ Super Saving Tips

Over the last 45 years I've worked in retail (department stores and supermarkets) and financial planning. In addition, I am a shopper, born and bred, who enjoys the challenges of finding the best items for the best prices. When I'm not busy saving money or writing here at Super Saving Tips, I enjoy baseball, music, and classic movies. I am retired and live in New Jersey with my wife.
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4 Comments

  1. I think it’s really interesting that there were 10 times the sales with fewer jam options than with the high number of jam options. I get overwhelmed when selecting cards (for birthdays, baby showers, etc.) – and my husband is a real candidate for analysis paralysis when it comes to buying things he doesn’t normally buy. Interesting post, Gary. Here’s to keeping things simple!

    • Thanks for your feedback, Ruth. I’m trying to do better myself in the simplification process, but sometimes I get too caught up in the decision making. I just don’t know if I’ll ever become more efficient at it than I am right now. I have to recognize the fact that I’m fighting against professional marketing and that’s a big part of the problem.

  2. I consider the amount of money involved in the decision. At the grocery store, I scan prices almost instantly. I probably make the wrong decision several times each trip, but it probably won’t cost me more than 5$.
    Car buying, mortgage shopping, insurance decisions, and electronics are difficult for me. It is hard to tell if I am overdoing it or just doing the necessary work and research.

    • Certainly when you are making a big purchase like a car, it’s important to do the research and homework. And if that means going overboard sometimes, I think that’s fine since you don’t make that kind of decision every year. On groceries, or other weekly purchases, it’s easy to obsess and I think when you’re making decisions that only cost you a few cents here and there, you have to do the math on your time versus what you might save. I appreciate your letting us see how your mind works when it comes to this subject, Mr. JS.

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