Choice Overload And Why It Matters In Business

Choice overload is a phenomenon where consumers are overwhelmed by too many choices. Modern consumers have access to a bewildering array of products and services. Simply buying the ingredients for a morning cup of coffee involves choosing from a long and varied list of milk, sugar, coffee, and coffee machines. Indeed, connoisseurs who prefer 1% milk over 2% milk or coffee beans from a remote Ethiopian plantation are well catered for.

Aspect	Explanation
Definition	Choice Overload, also known as Overchoice or Choice Paralysis, is a cognitive phenomenon that occurs when individuals are presented with an excessive number of options or choices, leading to feelings of stress, anxiety, and ultimately, difficulty in making a decision. It is a consequence of the modern world’s abundance of choices, whether in consumer products, services, or even life decisions. When faced with an overwhelming array of options, people may struggle to evaluate them all thoroughly and may postpone or avoid making a choice altogether. Choice Overload can impact various aspects of life, including shopping, career decisions, and personal relationships. Understanding this phenomenon is essential for both consumers and decision-makers to mitigate its effects and improve decision-making processes.
Key Concepts	– Excessive Choices: The central concept is the presence of an overwhelming number of choices. – Decision Difficulty: Choice Overload leads to increased difficulty in making decisions. – Stress and Anxiety: It often results in stress and anxiety due to the decision-making burden. – Decision Quality: The quality of decisions may suffer when overwhelmed by choices. – Optimal Selection: Individuals may struggle to identify the optimal choice among many options.
Characteristics	– Decision Paralysis: People may become paralyzed by the sheer number of choices, delaying or avoiding decisions. – Decreased Satisfaction: Despite having more options, individuals may experience decreased satisfaction with their choices. – Regret: There is an increased likelihood of post-choice regret when overwhelmed. – Cognitive Load: The mental effort required to evaluate numerous options can be taxing. – Information Overload: Individuals may feel inundated with information when faced with choice overload.
Implications	– Reduced Decision Quality: Choice overload can lead to suboptimal decision-making due to incomplete evaluation of options. – Decision Avoidance: People may avoid making choices altogether, leading to missed opportunities. – Stress and Anxiety: The cognitive burden of choice overload can result in increased stress and anxiety. – Product Returns: Consumers overwhelmed by choices may return products more often due to dissatisfaction. – Impact on Relationships: The phenomenon can affect personal relationships when individuals struggle to choose among potential partners or friends.
Advantages	– Variety: It allows access to a wide variety of options and potential experiences. – Market Competition: Encourages businesses to innovate and provide more choices to attract customers. – Tailored Selection: Individuals can select products or services that best match their preferences. – Consumer Empowerment: Choice overload empowers consumers to make informed decisions based on personal preferences. – Market Efficiency: Drives competition and encourages businesses to cater to diverse consumer needs.
Drawbacks	– Decision Difficulty: The primary drawback is the increased difficulty in making choices. – Reduced Satisfaction: It can lead to lower satisfaction with chosen options. – Decision Avoidance: People may avoid decisions, leading to missed opportunities. – Stress and Anxiety: Choice overload can result in stress and anxiety. – Analysis Paralysis: Overthinking choices can lead to analysis paralysis.
Applications	– Consumer Products: Choice overload is prevalent in consumer product categories like smartphones, where numerous models and features are available. – Dining and Restaurants: Extensive restaurant menus can lead to choice overload for diners. – Online Shopping: E-commerce platforms offer a vast selection of products, contributing to choice overload. – Career Decisions: Job seekers often face a multitude of job offers, causing choice overload. – Personal Relationships: Dating apps provide numerous potential matches, contributing to choice overload in personal relationships.
Use Cases	– Smartphone Purchase: A consumer shopping for a smartphone becomes overwhelmed by the multitude of options, leading to indecision and delayed purchase. – Restaurant Menu: A diner at a restaurant struggles to choose a meal from a lengthy menu, affecting the dining experience. – Online Shopping: An online shopper spends hours comparing similar products and eventually abandons the purchase due to choice overload. – Job Offer Decision: A job seeker receives multiple job offers and is unable to make a choice, potentially missing out on opportunities. – Dating App Usage: A user of a dating app has difficulty selecting a potential match from a large pool of profiles, leading to frustration and fewer connections.

Table of Contents

Understanding choice overload

But is this necessarily a good thing?

A lot of research has been done to attempt to answer this question. Psychologist Barry Schwartz coined the term “paradox of choice” in arguing that choice overload discourages consumers from making purchasing decisions.

However, a subsequent study explored the subject in more detail. By conducting 50 separate experiments on choice overload, researchers had mixed results. In some instances, large assortments of items hampered decision-making ability. In others, decision-making ability was unaffected.

Choice overload and the decision-making process

Disagreement over the validity of choice overload was quelled in a 2016 study conducted by Stanford marketing professor Itamar Simonson.

Simonson found that consumers do enjoy a large assortment of options, but the degree of enjoyment is based on where they are in their decision-making timeline.

Put differently:

When a consumer begins by considering whether they want to make a purchase or not, a large selection of products increases the odds that the consumer will make a purchase.
However, if a consumer selects a single product from an assortment of products before considering whether to make a purchase, the larger selection increases indecision and reduces the likelihood that a purchase is made.

The decision to purchase under choice overload actually involves two decisions. As Simonson noted, “If your first decision is about whether you want to buy, then having more options is conducive to buying. But if your first decision is on which specific product to select, then having a big assortment can make it more difficult to identify the best option.”

Implications of choice overload for consumers and business

When a consumer becomes indecisive and fails to act, there are several negative consequences for businesses. Here are a few of them:

Indecisive consumers tend to purchase less, hurting sales revenue.
Indecisive consumers tend to put less thought into purchasing decisions. When a study gave participants the choice of several variants of the same toothpaste brand, most opted to avoid the pain of making a decision and went with a brand with a single variant.
Indecisive consumers are less satisfied. Choice overload causes a consumer to become instantly dissatisfied with their purchase – even if no better alternative exists. This can lead to products receiving negative reviews and seriously hinders the ability of a business to build relationships with its target audience.

Implications for business

Businesses can address indecision by reducing the complexity or breadth of their product range. Perhaps counterintuitively, a smaller product range with fewer distractions can also improve conversion rates. This is because consumers are less overwhelmed and tend to make careful and reasoned purchasing decisions that meet their needs.

For those who absolutely must offer a large product range, improving site navigation on mobile and desktop can help avoid choice overload. Products should be grouped into categories where possible. However, a consumer without a particular product in mind might want to see a large range of unrelated products – so websites must incorporate this functionality too.

Key takeaways

Choice overload describes the tendency for consumers to become overwhelmed in the face of too many product options.
Choice overload occurrence is dependent on where a consumer is in the decision-making process. Consumers browsing a list of products without a specific preference in mind are more likely to be immune to this phenomenon.
Choice overload causes dissatisfied consumers who tend to purchase less often. When a product is purchased, the decision is based on a desire to avoid careful deliberation and not on whether the product satisfies their needs.

Key Highlights about Choice Overload:

Definition: Choice overload is a phenomenon where consumers are presented with a vast array of options, leading to a sense of overwhelm and hampering their ability to make decisions.
Barry Schwartz’s “Paradox of Choice”: Psychologist Barry Schwartz introduced the concept of the paradox of choice, suggesting that while having many options seems desirable, it can actually deter consumers from making purchasing decisions.
Mixed Research Results: Subsequent research has provided mixed results on the impact of choice overload. Some experiments suggest that a large number of choices can hinder decision-making, while others show no significant effect.
Itamar Simonson’s Study: Stanford marketing professor Itamar Simonson conducted a study that clarified the role of choice overload. He found that a larger assortment of options can encourage purchase decisions when the initial choice is whether to buy or not. However, when consumers are selecting a specific product, a large assortment can lead to indecision and lower the likelihood of making a purchase.
Negative Consequences for Businesses: Choice overload can lead to indecision, reduced purchases, lower customer satisfaction, and negative reviews. Consumers may opt for simpler decisions or default to a single option to avoid the stress of making a choice.
Business Strategies: To mitigate choice overload, businesses can consider:
- Reducing the complexity and breadth of their product range to provide clearer options.
- Improving site navigation to group products into categories and make browsing more manageable.
- Providing options for consumers without specific preferences while also catering to those looking for a wide range of choices.
Impact on Consumer Satisfaction: Choice overload can lead to instant dissatisfaction with chosen products, even when no better alternative exists. This can hinder building positive customer relationships.
Consumer Decision-Making: Consumers who are unsure of their preferences are less likely to be affected by choice overload. They may benefit from a larger assortment of options.
Simplicity in Decision-Making: Businesses can improve conversion rates by simplifying product offerings and aiding consumers in making careful, reasoned decisions that align with their needs.

Related Framework	Description	When to Apply
Choice Overload	Choice Overload, also known as decision fatigue or option paralysis, refers to the phenomenon where individuals face difficulty making a decision when presented with too many options. Instead of feeling empowered, individuals may experience stress, anxiety, or dissatisfaction when confronted with an overwhelming array of choices. This can lead to decision avoidance or making suboptimal decisions. Understanding choice overload can help individuals and organizations streamline their offerings, simplify decision-making processes, and provide guidance or recommendations to facilitate better choices.	When designing product offerings or organizing decision-making processes, addressing Choice Overload can improve customer satisfaction and enhance decision quality by streamlining options and providing guidance, thus reducing decision fatigue and minimizing decision avoidance in retail marketing, user experience design, or policy formulation, ultimately enhancing customer engagement and improving decision outcomes through simplified choices and clear decision frameworks.
Behavioral Economics	Behavioral Economics is a field that combines insights from psychology and economics to understand how individuals make decisions in real-world contexts. It recognizes that people’s choices are influenced by cognitive biases, emotions, and social factors, often deviating from the rational model of economic decision-making. Behavioral economics offers frameworks such as nudges, defaults, and framing to help individuals overcome decision-making challenges, including choice overload. By understanding the underlying psychological mechanisms driving decision-making, organizations can design interventions that facilitate better choices and mitigate the negative effects of choice overload.	When designing choice architectures or developing decision support tools, leveraging Behavioral Economics can improve decision outcomes and promote behavior change by addressing cognitive biases and aligning choices with desired outcomes, thus mitigating choice overload and facilitating better decision-making in consumer behavior research, public policy design, or organizational management, ultimately enhancing decision efficiency and promoting welfare through behavioral interventions and evidence-based strategies.
Decision Support Systems	Decision Support Systems (DSS) are computer-based tools or software applications designed to assist individuals or organizations in making complex decisions. DSS utilize data analytics, modeling techniques, and algorithms to provide insights, recommendations, or visualizations that aid decision-makers in evaluating alternatives and assessing outcomes. By leveraging DSS, organizations can streamline decision-making processes, reduce information overload, and present relevant options tailored to the user’s preferences or criteria. This can help mitigate choice overload by presenting information in a structured and digestible format, enabling decision-makers to navigate complex decision spaces more efficiently.	When implementing decision-making tools or managing information overload, utilizing Decision Support Systems can improve decision quality and enhance decision efficiency by providing relevant insights and presenting options, thus mitigating choice overload and streamlining decision processes in business analytics, financial planning, or healthcare management, ultimately empowering decision-makers and facilitating data-driven decision-making through technology-enabled solutions and actionable insights.
Minimalism	Minimalism is a lifestyle or design philosophy characterized by simplicity, decluttering, and prioritizing essential elements while eliminating excess. In the context of choice overload, minimalism advocates for reducing options to essential or high-quality choices, eliminating unnecessary complexity, and focusing on what truly matters. By embracing minimalism, organizations can simplify product offerings, user interfaces, or decision-making frameworks, making it easier for individuals to navigate choices and avoid feeling overwhelmed by excessive options. This approach can help mitigate choice overload by promoting clarity, reducing decision fatigue, and enhancing user satisfaction.	When designing user interfaces or developing product lines, adopting Minimalism can improve user experience and reduce decision complexity by simplifying options and prioritizing essential features, thus mitigating choice overload and enhancing user satisfaction in website design, product development, or brand management, ultimately streamlining decision processes and fostering user engagement through clear design principles and focused offerings.
Preference Elicitation	Preference Elicitation techniques are used to systematically gather and assess individuals’ preferences, values, or priorities to inform decision-making processes. These techniques may include surveys, conjoint analysis, or choice-based modeling, aiming to understand how individuals weigh different attributes or alternatives when making decisions. By eliciting preferences, organizations can tailor their offerings, recommendations, or interventions to align with users’ needs and preferences, reducing decision complexity and minimizing the likelihood of choice overload. Preference elicitation can help streamline decision-making processes, improve user satisfaction, and ensure that choices are aligned with individuals’ values and objectives.	When conducting market research or designing decision frameworks, leveraging Preference Elicitation can improve decision outcomes and enhance user satisfaction by understanding preferences and aligning choices with user needs, thus reducing decision complexity and mitigating choice overload in product design, policy analysis, or personalized recommendations, ultimately improving decision efficiency and promoting customer engagement through user-centered approaches and tailored interventions.
Curation Strategies	Curation Strategies involve selecting, organizing, and presenting content or options in a deliberate manner to facilitate decision-making and enhance user experience. Through curation, organizations can filter out irrelevant or low-quality options, highlight relevant choices, and provide context or guidance to help users make informed decisions. By curating options, organizations can reduce decision complexity, mitigate choice overload, and guide users towards preferred or recommended choices. This approach can improve decision satisfaction, streamline decision-making processes, and foster trust and loyalty among users.	When presenting options or designing decision environments, employing Curation Strategies can improve decision outcomes and enhance user engagement by filtering content, providing guidance, and highlighting relevant choices, thus reducing decision complexity and mitigating choice overload in e-commerce platforms, content aggregation sites, or information portals, ultimately enhancing decision satisfaction and fostering user trust through curated experiences and personalized recommendations.
Decision Architecture	Decision Architecture involves designing the structure, layout, and presentation of choices to facilitate decision-making processes and optimize decision outcomes. By carefully designing decision environments, organizations can reduce decision complexity, guide users towards preferred options, and mitigate the negative effects of choice overload. Decision architecture draws on principles from psychology, behavioral economics, and user experience design to create intuitive, user-friendly decision frameworks that support better decision-making. This approach can improve decision efficiency, enhance user satisfaction, and ensure that choices align with individuals’ goals and preferences.	When structuring decision environments or developing choice frameworks, applying Decision Architecture can improve decision quality and enhance user experience by guiding choices and simplifying options, thus reducing decision complexity and mitigating choice overload in online platforms, financial services, or policy design, ultimately streamlining decision processes and promoting user engagement through intuitive design and clear decision pathways.
Decision Fatigue	Decision Fatigue refers to the deteriorating quality of decisions made by an individual after a long session of decision-making. As individuals make more decisions, their mental resources become depleted, leading to reduced impulse control, procrastination, and reliance on heuristics or defaults. Decision fatigue can exacerbate choice overload, making it harder for individuals to make optimal decisions or resist temptation. Understanding decision fatigue can help individuals manage their decision-making workload, prioritize important choices, and implement strategies to conserve mental energy. By managing decision fatigue, organizations can help individuals maintain decision quality and avoid the negative consequences associated with choice overload.	When managing decision processes or designing workflows, addressing Decision Fatigue can improve decision quality and enhance productivity by prioritizing tasks and implementing breaks, thus mitigating decision fatigue and minimizing errors in workplace settings, consumer behavior, or policy formulation, ultimately promoting well-being and optimizing performance through effective decision management and resource allocation.

Connected Thinking Frameworks

Convergent vs. Divergent Thinking

Convergent thinking occurs when the solution to a problem can be found by applying established rules and logical reasoning. Whereas divergent thinking is an unstructured problem-solving method where participants are encouraged to develop many innovative ideas or solutions to a given problem. Where convergent thinking might work for larger, mature organizations where divergent thinking is more suited for startups and innovative companies.

Critical Thinking

Critical thinking involves analyzing observations, facts, evidence, and arguments to form a judgment about what someone reads, hears, says, or writes.

Biases

The concept of cognitive biases was introduced and popularized by the work of Amos Tversky and Daniel Kahneman in 1972. Biases are seen as systematic errors and flaws that make humans deviate from the standards of rationality, thus making us inept at making good decisions under uncertainty.

Second-Order Thinking

Second-order thinking is a means of assessing the implications of our decisions by considering future consequences. Second-order thinking is a mental model that considers all future possibilities. It encourages individuals to think outside of the box so that they can prepare for every and eventuality. It also discourages the tendency for individuals to default to the most obvious choice.

Lateral Thinking

Lateral thinking is a business strategy that involves approaching a problem from a different direction. The strategy attempts to remove traditionally formulaic and routine approaches to problem-solving by advocating creative thinking, therefore finding unconventional ways to solve a known problem. This sort of non-linear approach to problem-solving, can at times, create a big impact.

Bounded Rationality

Bounded rationality is a concept attributed to Herbert Simon, an economist and political scientist interested in decision-making and how we make decisions in the real world. In fact, he believed that rather than optimizing (which was the mainstream view in the past decades) humans follow what he called satisficing.

Dunning-Kruger Effect

The Dunning-Kruger effect describes a cognitive bias where people with low ability in a task overestimate their ability to perform that task well. Consumers or businesses that do not possess the requisite knowledge make bad decisions. What’s more, knowledge gaps prevent the person or business from seeing their mistakes.

Occam’s Razor

Occam’s Razor states that one should not increase (beyond reason) the number of entities required to explain anything. All things being equal, the simplest solution is often the best one. The principle is attributed to 14th-century English theologian William of Ockham.

Lindy Effect

The Lindy Effect is a theory about the ageing of non-perishable things, like technology or ideas. Popularized by author Nicholas Nassim Taleb, the Lindy Effect states that non-perishable things like technology age – linearly – in reverse. Therefore, the older an idea or a technology, the same will be its life expectancy.

Antifragility

Antifragility was first coined as a term by author, and options trader Nassim Nicholas Taleb. Antifragility is a characteristic of systems that thrive as a result of stressors, volatility, and randomness. Therefore, Antifragile is the opposite of fragile. Where a fragile thing breaks up to volatility; a robust thing resists volatility. An antifragile thing gets stronger from volatility (provided the level of stressors and randomness doesn’t pass a certain threshold).

Ergodicity

Ergodicity is one of the most important concepts in statistics. Ergodicity is a mathematical concept suggesting that a point of a moving system will eventually visit all parts of the space the system moves in. On the opposite side, non-ergodic means that a system doesn’t visit all the possible parts, as there are absorbing barriers

Systems Thinking

Systems thinking is a holistic means of investigating the factors and interactions that could contribute to a potential outcome. It is about thinking non-linearly, and understanding the second-order consequences of actions and input into the system.

Vertical Thinking

Vertical thinking, on the other hand, is a problem-solving approach that favors a selective, analytical, structured, and sequential mindset. The focus of vertical thinking is to arrive at a reasoned, defined solution.

Metaphorical Thinking

Metaphorical thinking describes a mental process in which comparisons are made between qualities of objects usually considered to be separate classifications. Metaphorical thinking is a mental process connecting two different universes of meaning and is the result of the mind looking for similarities.

Maslow’s Hammer

Maslow’s Hammer, otherwise known as the law of the instrument or the Einstellung effect, is a cognitive bias causing an over-reliance on a familiar tool. This can be expressed as the tendency to overuse a known tool (perhaps a hammer) to solve issues that might require a different tool. This problem is persistent in the business world where perhaps known tools or frameworks might be used in the wrong context (like business plans used as planning tools instead of only investors’ pitches).

Peter Principle

The Peter Principle was first described by Canadian sociologist Lawrence J. Peter in his 1969 book The Peter Principle. The Peter Principle states that people are continually promoted within an organization until they reach their level of incompetence.

Straw Man Fallacy

The straw man fallacy describes an argument that misrepresents an opponent’s stance to make rebuttal more convenient. The straw man fallacy is a type of informal logical fallacy, defined as a flaw in the structure of an argument that renders it invalid.

Google Effect

The Google effect is a tendency for individuals to forget information that is readily available through search engines. During the Google effect – sometimes called digital amnesia – individuals have an excessive reliance on digital information as a form of memory recall.

Streisand Effect

The Streisand Effect is a paradoxical phenomenon where the act of suppressing information to reduce visibility causes it to become more visible. In 2003, Streisand attempted to suppress aerial photographs of her Californian home by suing photographer Kenneth Adelman for an invasion of privacy. Adelman, who Streisand assumed was paparazzi, was instead taking photographs to document and study coastal erosion. In her quest for more privacy, Streisand’s efforts had the opposite effect.

Compromise Effect

Single-attribute choices – such as choosing the apartment with the lowest rent – are relatively simple. However, most of the decisions consumers make are based on multiple attributes which complicate the decision-making process. The compromise effect states that a consumer is more likely to choose the middle option of a set of products over more extreme options.

Butterfly Effect

In business, the butterfly effect describes the phenomenon where the simplest actions yield the largest rewards. The butterfly effect was coined by meteorologist Edward Lorenz in 1960 and as a result, it is most often associated with weather in pop culture. Lorenz noted that the small action of a butterfly fluttering its wings had the potential to cause progressively larger actions resulting in a typhoon.

IKEA Effect

The IKEA effect is a cognitive bias that describes consumers’ tendency to value something more if they have made it themselves. That is why brands often use the IKEA effect to have customizations for final products, as they help the consumer relate to it more and therefore appending to it more value.

Ringelmann Effect

The Ringelmann effect describes the tendency for individuals within a group to become less productive as the group size increases.

The Overview Effect

The overview effect is a cognitive shift reported by some astronauts when they look back at the Earth from space. The shift occurs because of the impressive visual spectacle of the Earth and tends to be characterized by a state of awe and increased self-transcendence.

House Money Effect

The house money effect was first described by researchers Richard Thaler and Eric Johnson in a 1990 study entitled Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice. The house money effect is a cognitive bias where investors take higher risks on reinvested capital than they would on an initial investment.

Heuristic

As highlighted by German psychologist Gerd Gigerenzer in the paper “Heuristic Decision Making,” the term heuristic is of Greek origin, meaning “serving to find out or discover.” More precisely, a heuristic is a fast and accurate way to make decisions in the real world, which is driven by uncertainty.

Recognition Heuristic

The recognition heuristic is a psychological model of judgment and decision making. It is part of a suite of simple and economical heuristics proposed by psychologists Daniel Goldstein and Gerd Gigerenzer. The recognition heuristic argues that inferences are made about an object based on whether it is recognized or not.

Representativeness Heuristic

The representativeness heuristic was first described by psychologists Daniel Kahneman and Amos Tversky. The representativeness heuristic judges the probability of an event according to the degree to which that event resembles a broader class. When queried, most will choose the first option because the description of John matches the stereotype we may hold for an archaeologist.

Take-The-Best Heuristic

The take-the-best heuristic is a decision-making shortcut that helps an individual choose between several alternatives. The take-the-best (TTB) heuristic decides between two or more alternatives based on a single good attribute, otherwise known as a cue. In the process, less desirable attributes are ignored.

Bundling Bias

The bundling bias is a cognitive bias in e-commerce where a consumer tends not to use all of the products bought as a group, or bundle. Bundling occurs when individual products or services are sold together as a bundle. Common examples are tickets and experiences. The bundling bias dictates that consumers are less likely to use each item in the bundle. This means that the value of the bundle and indeed the value of each item in the bundle is decreased.

Barnum Effect

The Barnum Effect is a cognitive bias where individuals believe that generic information – which applies to most people – is specifically tailored for themselves.

Anchoring Effect

The anchoring effect describes the human tendency to rely on an initial piece of information (the “anchor”) to make subsequent judgments or decisions. Price anchoring, then, is the process of establishing a price point that customers can reference when making a buying decision.

Decoy Effect

The decoy effect is a psychological phenomenon where inferior – or decoy – options influence consumer preferences. Businesses use the decoy effect to nudge potential customers toward the desired target product. The decoy effect is staged by placing a competitor product and a decoy product, which is primarily used to nudge the customer toward the target product.

Commitment Bias

Commitment bias describes the tendency of an individual to remain committed to past behaviors – even if they result in undesirable outcomes. The bias is particularly pronounced when such behaviors are performed publicly. Commitment bias is also known as escalation of commitment.

First-Principles Thinking

First-principles thinking – sometimes called reasoning from first principles – is used to reverse-engineer complex problems and encourage creativity. It involves breaking down problems into basic elements and reassembling them from the ground up. Elon Musk is among the strongest proponents of this way of thinking.

Ladder Of Inference

The ladder of inference is a conscious or subconscious thinking process where an individual moves from a fact to a decision or action. The ladder of inference was created by academic Chris Argyris to illustrate how people form and then use mental models to make decisions.

Goodhart’s Law

Goodhart’s Law is named after British monetary policy theorist and economist Charles Goodhart. Speaking at a conference in Sydney in 1975, Goodhart said that “any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.” Goodhart’s Law states that when a measure becomes a target, it ceases to be a good measure.

Six Thinking Hats Model

The Six Thinking Hats model was created by psychologist Edward de Bono in 1986, who noted that personality type was a key driver of how people approached problem-solving. For example, optimists view situations differently from pessimists. Analytical individuals may generate ideas that a more emotional person would not, and vice versa.

Mandela Effect

The Mandela effect is a phenomenon where a large group of people remembers an event differently from how it occurred. The Mandela effect was first described in relation to Fiona Broome, who believed that former South African President Nelson Mandela died in prison during the 1980s. While Mandela was released from prison in 1990 and died 23 years later, Broome remembered news coverage of his death in prison and even a speech from his widow. Of course, neither event occurred in reality. But Broome was later to discover that she was not the only one with the same recollection of events.

Crowding-Out Effect

The crowding-out effect occurs when public sector spending reduces spending in the private sector.

Bandwagon Effect

The bandwagon effect tells us that the more a belief or idea has been adopted by more people within a group, the more the individual adoption of that idea might increase within the same group. This is the psychological effect that leads to herd mentality. What in marketing can be associated with social proof.

Moore’s Law

Moore’s law states that the number of transistors on a microchip doubles approximately every two years. This observation was made by Intel co-founder Gordon Moore in 1965 and it become a guiding principle for the semiconductor industry and has had far-reaching implications for technology as a whole.

Disruptive Innovation

Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.

Value Migration

Value migration was first described by author Adrian Slywotzky in his 1996 book Value Migration – How to Think Several Moves Ahead of the Competition. Value migration is the transferal of value-creating forces from outdated business models to something better able to satisfy consumer demands.

Bye-Now Effect

The bye-now effect describes the tendency for consumers to think of the word “buy” when they read the word “bye”. In a study that tracked diners at a name-your-own-price restaurant, each diner was asked to read one of two phrases before ordering their meal. The first phrase, “so long”, resulted in diners paying an average of $32 per meal. But when diners recited the phrase “bye bye” before ordering, the average price per meal rose to $45.

Groupthink

Groupthink occurs when well-intentioned individuals make non-optimal or irrational decisions based on a belief that dissent is impossible or on a motivation to conform. Groupthink occurs when members of a group reach a consensus without critical reasoning or evaluation of the alternatives and their consequences.

Stereotyping

A stereotype is a fixed and over-generalized belief about a particular group or class of people. These beliefs are based on the false assumption that certain characteristics are common to every individual residing in that group. Many stereotypes have a long and sometimes controversial history and are a direct consequence of various political, social, or economic events. Stereotyping is the process of making assumptions about a person or group of people based on various attributes, including gender, race, religion, or physical traits.

Murphy’s Law

Murphy’s Law states that if anything can go wrong, it will go wrong. Murphy’s Law was named after aerospace engineer Edward A. Murphy. During his time working at Edwards Air Force Base in 1949, Murphy cursed a technician who had improperly wired an electrical component and said, “If there is any way to do it wrong, he’ll find it.”

Law of Unintended Consequences

The law of unintended consequences was first mentioned by British philosopher John Locke when writing to parliament about the unintended effects of interest rate rises. However, it was popularized in 1936 by American sociologist Robert K. Merton who looked at unexpected, unanticipated, and unintended consequences and their impact on society.

Fundamental Attribution Error

Fundamental attribution error is a bias people display when judging the behavior of others. The tendency is to over-emphasize personal characteristics and under-emphasize environmental and situational factors.

Outcome Bias

Outcome bias describes a tendency to evaluate a decision based on its outcome and not on the process by which the decision was reached. In other words, the quality of a decision is only determined once the outcome is known. Outcome bias occurs when a decision is based on the outcome of previous events without regard for how those events developed.

Hindsight Bias

Hindsight bias is the tendency for people to perceive past events as more predictable than they actually were. The result of a presidential election, for example, seems more obvious when the winner is announced. The same can also be said for the avid sports fan who predicted the correct outcome of a match regardless of whether their team won or lost. Hindsight bias, therefore, is the tendency for an individual to convince themselves that they accurately predicted an event before it happened.

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