If you are like most people, then you will believe that you would spot the switch and you would answer with a full hearted “yes”.
But studies suggest many of us actually experience “choice blindness” and wouldn’t notice, or perhaps notice then rationalise the change and end up thinking it’s what we wanted all along. Moreover, this choice blindness can affect choices about saving and investing – as well as wide range of other, day-to-day decisions.
Blind to our choices
Choice blindness refers to the way people can fail to notice if something goes wrong when they make a decision.
It is seen as part of the family of “inattention biases”.
It surprises people as it demonstrates that our preferences aren’t as stable as we often think.
Furthermore, choice blindness reinforces the need in many situations to make educated choices and question our gut instinct – rather than simply accepting what is presented.
The double-date scenario outlined above brings to mind the classic study on choice blindness, published in 2005 by Swedish academics.
In it, participants were shown pairs of faces and asked to choose which one they found more attractive then were passed that photograph to comment on why they made the choice.
However, on some occasions, as this BBC Horizon excerpt illustrates, participants were passed the photograph of the other face. The majority of the participants didn’t notice the switch – even when they were given plenty of time to choose.
Which fund is better?
Confusing the face of a stranger might not sound like the most troubling problem in the world, but choice blindness has been shown to happen in more serious spheres of life.
In September 2013, the paper Choice blindness in financial decision making was published.
In this case, participants were asked to choose a pension fund then explain why once the details of the portfolio allocation were displayed on a screen. Like the experiment with photographs, on some occasions a different allocation was displayed on the screen. And like the experiment with the photographs, the majority of participants didn’t notice the switch – even when they were given plenty of time.
This study is particularly important because it challenges a common assumption in policy making: When it comes to important matters, like retirement, we pay close attention to our choices.
Reduce choice blindness by…
Thankfully, we have one big advantage in everyday life: we live in a stable world in which few people try to trick us.
However, we do have to make complex decisions in everyday life and rationalising “choice blind” outcomes (to end up believing we got what we always wanted) can spell trouble. The example above is an experiment involving confusion around pension funds but it is not too far a leap to imagine an unscrupulous financial advisor taking advantage.
Three tips might help to counter choice blindness colouring our decisions.
First, plan a head and cut that enemy of healthy personal finances – procrastination – by setting deadlines and making a public commitment to stick to your goals.
Second, make a check list ahead of time of what you want – then “tick-off” or rate goods and services against those criteria. This approach is one recommended by Nobel Prize recipient Daniel Kahneman in his book Thinking, Fast and Slow.
Thirdly, don’t automatically take the default option to avoid the decision process altogether – especially when it comes to pension and investment decisions that influence us for years to come. This is because stopping and thinking to make educated choices should also minimise your likelihood of being choice blind.