Setting an aspiration level tends to exaggerate differences right around that aspiration level while ignoring differences above or below. Satisficing isn’t a perfect, but it isn’t supposed to be perfect or optimal or mistake free instead it’s supposed to help us simplify complex decisions to something manageable.
Limiting our search
By limiting our search and by satisficing, we can make a decision that’s good enough. Satisficing can particularly help us when the world is structured in our favor and we are more likely to use status pricing or another heuristic we are overwhelmed, fatigued or otherwise have impaired processing.
For example let’s stay in the domain of car purchases but moved to Germany. There customers of a major manufacturer can create a car to their exact specification. They log into a computer program and choose the interior color exterior color, the steering wheel even the type of rearview mirror in the style of gearshift knob.
There are 67 decisions in all, some involving a list of more than 50 possible options and others involving only a few options. The manufacturer helps simplify the process by indicating a default option at the top of each list and incidentally this default is almost always the cheapest option. Let me emphasize this: the manufacturer has structured the computer program so that its default options are usually in the consumer’s interest.
The decision scientists Jonathan Levav and his colleagues work with the manufacturer to vary the way the computer program presented these decisions. Some people began with relatively complex choices, others began with relatively simple choices, but they all faced the same choices, just in different orders.
Even though the order in which decisions are presented shouldn’t influence real-world choices especially for something as important as a car purchase it does. People start off carefully considering each option they spend more time and are less likely to choose the defaults, but as they move through the computer program they can’t process all the information so they get faster and start picking the default option.
And does this matter? Yes. In one study of 450 real-world car buyers the people who started off choosing expensive and complex features, interior and exterior colors in the engine, created cars that cost about €1500 more on average when compared to those people who ended by making the same decisions.
A heuristic approach to choice
So as people make this series of choices, they move from a more analytic approach to a more heuristic approach, they become more and more likely to pick the default option. Those people who use the default options for the expensive features ended with less expensive but still high quality cars.
We also become more likely to you satisficing when we can’t focus our attention on the important features of a decision. There’s been quite a lot of work on the idea of unconscious decision-making: that we might make better decisions when we are not consciously deliberating on her alternatives. This idea has been studied in a variety of domains from, yes, car purchases to apartment rentals to simple consumer choice.
Most experiments share a similar flavor: if you are a participant you come to the laboratory sit in front of a computer screen and see a series of statements describing the features of two options: car A has good gas mileage car B has six cupholders. Those features are presented in a long list and some features would be more useful for your decision like, gas mileage and some would be less useful, like the cupholders.
Too many choices distract people
One of the cars is objectively better than the other, based on the features presented. After you saw all of the features on the list you’d either been given the opportunity to deliberate on your decision for some time, perhaps 15 minutes, or would be distracted from that decision by another task, such as solving crossword puzzles, then you get to indicate what option was better.
The key finding is that when people are distracted they are often more likely to choose the objectively better option, conversely active deliberation on the decision seems to lead to more mistakes. The phenomenon of unconscious decision-making has attracted both attention and criticism.
On the one hand it fits our intuitions, we often advise her friends to relax and think about something else before making a tough decision, but on the other hand there’s an ongoing debate about why this phenomenon might work, if it does. Let’s approach this phenomenon from the lens of bounded rationality, suppose that there were two cars each with 12 features any saw each of those features one after another in a long list.
Forgetting details can be good for decision-making
You can’t remember everything in that list, that’s beyond the scope of most people’s memory. So what happens when you’re distracted? You forget and what you forget are the minor details the unimportant factors the cupholders. Forgetting can be a very good thing. If distraction causes us to lose the less relevant information, but still hold onto the most important features, then we might indeed make better decisions.
Bounded rationality is an extraordinarily important idea. In some way it’s at the very core of behavioral economics. We aren’t omniscient foresighted and economically rational, we are just human simple and flawed trying to make her way through a complex world. Bounded rationality argues that we won’t make optimal decisions but that we can make decisions that are good enough, so embrace your limitations.
Real life heuristics
Suppose you are a hiring manager who needs to find the best candidate for an important position. Now it’s hard enough to hire the best person, but let’s make this problem even harder. Let’s suppose that you are sitting at a table at a job fair and let’s further suppose there is a line of a thousand people sneaking away from the table. When each person steps up to the table you need to interview them and then make an up or down decision on the spot.
Either hire them or let them walk away where they’ll be hired to another job and lost your company. What is the probability that you could hire the single best person out of that thousand and how can you maximize your chances? This is known as the best choice problem and it turns out to have a simple elegant and encouraging solution. You should interview and reject the first 367 people in line and then choose the first person who is better than the best so far.
Why is this? hen you start interviewing people you don’t know what the best person might look like so you should spend some your time searching determining the quality of candidates without choosing one. Then when you have enough information you can satisfice, pick the first candidate who is better than what you’ve seen so far. This two-step process maximizes your chances of picking the best person.
Good enough and resource effective
Now, why reject the first 367? Not more not fewer?! That quantity is 1000 divided by e the fundamental mathematical constant in fact it gives you a 36.7% or one over e chance of finding. That person that seems pretty good. As a final message simplify as much as you can but not too much. When you’re making decisions about matters in the real world, about matters with which you are familiar, about matters that are stable and predictable since simplifying can help you make much better decisions.
It’s often much better to try to identify the few most important factors in the decision rather than to spend energy and time it into find all factors that play into a decision and when the stakes are small or you are under time pressure or you just don’t have much information than a satisficing approach can help you make a decision that’s good enough and let you move on to more important decisions.
Benjamin Franklin wasn’t the only great thinker of the ages to make decisions by listing pros and cons, Charles Darwin did it to one time when he was deciding to get married to Emma Wedgwood. He listed the pros, a constant companion family life and conversation children and he listed: of the kinds a loss of freedom financial pressures.
The list was strongly weighted toward the more numerous negative consequences in many of the positive consequences were tense with concern such is the expense and anxiety of children. But in the end Darwin made a simple decision: he married Emma and they remain happily married with 10 children for the rest of his days.
We aren’t rational. We are boundedly rational. We use simple rules called heuristics, because those rules help us make decisions that are good enough most of the time.