Predictably Irrational

The IHT featured a brilliant article on keeping too many options open.

The writer argues that having too many options open actually allows for irrationality to seep into decisions. A copy of the entire article can be found here.

1. People find it let go of options like you don't even know how a camera's burst-mode flash works, but you persuade yourself to pay for the extra feature just in case.

2. People act irrationally when they have more options. In investing, I've prefered to put as low as Rs. 20,000 in 4 separate stocks equally, although I knew that stock A was better than stock B, C or D. While I call it diversifying my risks, value investors call me 'dumb'. A better thing would have been discard the 3 inferior options.

3. Closing a door on an option is experienced as a loss, and people are willing to pay a price to avoid the emotion of loss.

Thanks to Anand Dugar for posting this article on Lollapalooza