topic that will be of interest to a lot of us. My name is Mark Rivera. I'm with the People

and Innovation Lab at Google. We spend a lot of time thinking about what makes people at

Google--all of us--happy and productive.

And so, we are very pleased to have Dr. Sheena Iyengar here, who is one of the foremost experts

on a really broad topic. That is, choice--how people make choices and what happens to us

when we're faced with an overload of choices, which, I think, it's safe to say all of us

usually are. To demonstrate this, we just took her to lunch at Charlie's.

[laughter]

One of the difficult choices we face on a day-to-day basis. Sheena wrote a book called

"The Art of Choosing," which has been an extraordinary hit. Amazon, in 2010, it was one of the best

books of Amazon.

It was the finalist for the Financial Times Book of the Year. Her work has been covered

in the New York Times, the Wall Street Journal, books like Malcolm Gladwell's "Blink." She's

been a guest on CNN, CNBC, CBS, and now at Tech Talk at Google. So, please join me in

welcoming Sheena.

[applause and cheer]

[pause]

>>Sheena Iyengar: Well, thank you for having me here today. This is my first time ever

coming to Google. And the place really is quite cool, particularly when you see those,

the volleyball pit. It was really quite cool. And when I went to Charlie's, I actually commented

to my assistant that there really are some benefits to being blind given that I couldn't

see all the choices. So, I didn't actually--.

[laughter]

So, as you know, I have been studying choice now for about 20 years. And I essentially

look at three big questions--and those are all covered in the book--which is why do we

want choice? What are some of the things that affect how and what we choose?

And what are some things that we can do to improve our choosing experiences and choice

outcomes? Now today, I'm going to talk about a particular modern day dilemma that has to

do with choice. And this dilemma is, perhaps, the biggest dilemma that we all face today.

And it relates to all three of these questions.

Now, as I talk about this modern day dilemma, I'm going to need your help. So, there's going

to be times when I'm gonna have some questions for you and I'm gonna wanna know your answers.

So, since I'm blind, when I ask you a quick question, only raise your hands if you wanna

burn off some calories.

[laughter]

Otherwise, when I ask you a question, I'd appreciate it if you'd, if your answer is

"yes" just clap your hands. So, are you ready to hear about the modern day dilemma of choice?

[clapping]

Thank you. So, this dilemma that I'm referring to has been referred to by many, many different

names now over the years. It's been studied now for over ten years. The first time I got

wind of the fact that it was actually being referred to by many different names was when

I met the head of Fidelity Research.

And he described to me this problem. In fact, he was describing to me my own study--not

that he knew that--and then he even gave me some slides that described this problem very

well. They were actually better than my slides, so I just took them.

[chuckles]

And he called it the "narrow it down" problem. Then there was the time when I met with senior

management in McKinsey and they described the same problem, the same study, the same

results. And they had an internal memo, which they titled, "The Three by Three Rule."

Now, my favorite description of this particular problem was the one offered by Rush Limbaugh.

He said it was the stuff of pointy headed intellectuals that didn't know the first thing

about the marketplace. Now, I figured I was in good company if I was being skewered by

Rush Limbaugh. You have probably heard about this problem.

It's most often referred to in the media as the "jam" problem. It was first identified

and discovered right here in the Bay Area, in the South Bay. So, I wanna now tell you

the real story behind the jam problem. When I was a PhD student at Stanford University,

I used to go to this upscale grocery store. And it was called Draeger's.

In those days, it was a rather unusual store. I mean, nowadays, you have stores like it

all over the country. In those days, it was truly unique. You went there. There were 250

different kinds of mustards and vinegars and mayonnaise. Over 500 different kinds of fruits

and vegetables. They even had 12 different kinds of bottled water.

Of course, I noticed you guys had three different kinds here at Charlie's cafe. I mean, who

even thought of--. I mean, distinguishing between water. Here is their olive oil aisle.

They had 75 different kinds of extra virgin olive oil, including those that were in a

locked case that came from a thousand year old olive trees.

[laughter]

Now, I used to go to this store. I liked going to this store. And one day, I asked myself

a rather strange question. How come you never buy anything? Now, true. I was a poor graduate

student, but I could afford some things in that store. So, I decided to pay a visit to

the manager. And I asked him whether this model of offering people all these choices

was really working.

And he pointed at the bus-loads of tourists, usually with cameras in hand, and said, "Yeah.

It's working." We decided to do a little experiment. We chose Wilken and Sons, it’s a jam. Oh.

Here's the jam aisle. And they had 348 different kinds of jam. We chose Wilken and Sons, the

Queen of England's brand, to do our little experiment with.

So, we set up a tasting booth right near the entrance of the store. We either put out six

different flavors jam, or 24 different flavors of jam. And now we measured two things. First,

in which case were people, entering in the store passing by, more likely to stop and

sample some jam? Second, in which case were people more likely to take the opportunity

and use the coupon that we just gave them for free--giving them one dollar off of a

bottle of jam--in which case are they more likely to buy a jar of jam?

Now, more people stopped when there were 24--60 percent--as compared to when there were six--40

percent. Well, when it came down to buying behavior, we saw the opposite effect. Of the

people who stopped when there were 24, only three percent of them actually bought a jar

of jam. Now, by contrast, of the people who stopped when there were six, 30 percent of

them actually bought a jar of jam.

Now, if you do the math, people were at least six times more likely to buy a jar of jam

if they encountered six than if they encountered 24. So, although people were more attracted

to the larger display, when it came down to actually making a choice, they were more likely

to choose when they saw fewer than when they saw more.

Now, that study was published in 2000. And since then, there's been over a decade of

research that has looked at this jam problem, which I'm gonna call the "choice overload"

problem, across many, many domains. Jams to chocolates to speed dating to any kind of

dating type choices, political choices, investment choices, health care choices, job search choices,

in lots of different domains of choice, ranging from the trivial to the consequential.

And essentially, we observed three negative consequences of offering people too much choice.

I'm gonna summarize these results. And keep in mind that while I'm biased towards describing

you results from my studies, many of my colleagues in the field have also looked at this phenomenon.

First, consequence.

The more choices people have the more likely they are to delay or procrastinate. Now, this

is a good thing when the choice is whether or not to buy jam. That's probably really

good for my waistline. The problem is that we delay and procrastinate even when it goes

against our best self-interest. So, I'm gonna give you one case of a situation where clearly,

we should not be delaying or procrastinating.

At least most of us would agree with that. Let's take the specific case of retirement

savings decisions. I had an opportunity to do a project with Vanguard. We looked at 800

thousand Americans from 657 institutions, drawn from 64 different industries. And we

looked at whether the number of funds offered in a retirement savings program--the 401K

plan--was correlated with participation rates.

And we found that it was. So, here's a snapshot of the graph. So, for plans that offered you

about a handful of choices, participation rates, some were in the 70th percentile. Still

not great. But by the time you got to plans that offered you 60 options, participation

rates had dropped to about 60 percent. Notice how the big trend in retirement savings industry

now is to reduce, reduce, reduce.

Bring it down to about three options. So, first consequence. The more choices people

have, more likely they are to delay and procrastinate even when it goes against their best self-interest.

Second consequence. The more choices people have, the more likely they are to make inferior

choices, worse choices.

So, let's just stick to the 401K decision. The more choices people have, even when you

look at the people that actually chose to participate, the more choices they had, the

more likely they were to put all their money in money market accounts. We all know that's

a dumb decision. That doesn't even grow at the rate of inflation.

The more choices they had, the more likely they were to entirely avoid equities. We all

know that when you're talking about long-term financial growth, that doesn't make sense.

Sure, in a one-off bad year, but not from a long-term future financial perspective.

We also know that the more choices people have, the more likely they are to exhibit

inconsistent preferences.

And that happens even on important domains like romantic choices, job search choices.

Third consequence. The more choices people have, the more likely they are to be less

satisfied with that which they have chosen. Why? Because you're constantly saying, "What

if?"

[laughter]

So, here's one of my favorite examples--just because food's on the mind right now. So,

imagine either being shown six different kinds of Godiva chocolate or 30 different kinds

of Godiva chocolate. And the only thing you have to do is pick a chocolate, eat it, tell

me how delicious it is. Turns out, the same chocolate selected from six is regarded as

less, as more delicious than when it was chosen from 30. Now, how anybody could consider any

chocolate less delicious is beyond me, but--.

[laughter]

As they're walking out the door, now here they had this wonderful experience. They got

to eat a free chocolate. As they're walking out the door, they now have a choice. They

can either get paid for this highly entertaining activity or they could get a free box of chocolate.

The people who saw six were four times more likely to go for a free box of chocolate,

more satisfied with the choice.

So, why do we experience choice overload? Right? After all, the more choices we have,

the more opportunities we have to find the best choice, the perfect match. Well, let's

now think about the causes of choice overload. We've always known that our eyes are too big

for our stomachs, but it turns out that our eyes are too big for our minds as well.

We have cognitive limitations. In 1956, the famous psychologist George Miller, came out

with a very simple idea. And that idea still holds true today. He came out with this paper

called "The Magical Number Seven, Plus or Minus Two." Very simple idea. We keep wanting

to attack this idea and say, "No, it's too simplistic."

But it keeps coming up. And here's how the idea goes: We have some basic limitations

of our brains. If I ask you to rank order from best to worst for a whole bunch of things--taste,

smells, looks of things--no matter what it is, beyond about seven, I just get confused.

Things I thought I liked better, I like less well and vice versa.

If I ask you to keep track of some things in your minds--words, numbers, pictures--and

I don't give you the opportunity to rehearse or memorize that information, beyond about