But I want to start with what I call the “official dogma.” The official dogma of what? The official dogma of all Western industrial societies. And the official dogma runs like this: if we are interested in maximizing the welfare of our citizens, the way to do that is to maximize individual freedom. The reason for this is both that freedom is, in and of itself, good, valuable, worthwhile, essential to being human, and because if people have freedom, then each of us can act on our own to do the things that will maximize our welfare, and no one has to decide on our behalf. The way to maximize freedom is to maximize choice.
You’ve got to admit that’s a lot of choice. In other domains – the world of communications. There was a time, when I was a boy, when you could get any kind of telephone service you wanted, as long as it came from Ma Bell. You rented your phone, you didn’t buy it. One consequence of that, by the way, is that the phone never broke. And those days are gone. We now have an almost unlimited variety of phones, especially in the world of cell phones. These are cell phones of the future. My favorite is the middle one – the MP3 player, nose hair trimmer, and crème brûlée torch. And if if by some chance you haven’t seen that in your store yet, you can rest assured that one day soon, you will. And what this does is it leads people to walk into their stores, asking this question. And do you know what the answer to this question now is? The answer is “no.” It is not possible to buy a cell phone that doesn’t do too much.
We all know what’s good about it, so I’m going to talk about what’s bad about it. All of this choice has two effects, two negative effects on people. One effect, paradoxically, is that it produces paralysis rather than liberation. With so many options to choose from, people find it very difficult to choose at all. I’ll give you one very dramatic example of this, a study that was done of investments in voluntary retirement plans. A colleague of mine got access to investment records from Vanguard, the gigantic mutual fund company, of about a million employees and about 2,000 different workplaces. What she found is that for every 10 mutual funds the employer offered, rate of participation went down two percent. You offer 50 funds – 10 percent fewer employees participate than if you only offer five. Why? Because with 50 funds to choose from, it’s so damn hard to decide which fund to choose, that you’ll just put it off till tomorrow, and then tomorrow and then tomorrow and tomorrow, and, of course, tomorrow never comes. Understand that not only does this mean that people are going to have to eat dog food when they retire because they don’t have enough money put away, it also means that making the decision is so hard that they pass up significant matching money from the employer. By not participating, they are passing up as much as 5,000 dollars a year from the employer, who would happily match their contribution.
So paralysis is a consequence of having too many choices. And I think it makes the world look like this.