Resolving the Paradox of Choice using the Pareto Principle
Do you ever spend hours on UberEats wondering what to order? I do. On a day off or on a weekend, I start worrying about dinner at 4 pm. Then I spend the next 3–4 hours trying to figure out what I want to eat. I hope I’m not the only crazy one who does this.
My weekly dilemma illustrates quite well the Paradox of Choice we face in today’s world. Psychologist Barry Schwartz did a great TED talk on this. He starts by stating, as we all know, that freedom of choice is the central dogma of our society today. One can choose when to get married, who to get married to, where to live, what to wear, etc. However, he also points out that the abundance of choice also leads to Choice Paralysis.
This is what happens to me. When I want to order food, I am faced with hundreds of choices and I am under pressure to make the best choice. This paralysis can be seen everywhere. In the grocery store we don’t know what to buy — do we get Sunflower or Sunflower Gold or Sunflower Lite? At work, we don’t know what task to get started on first. What music should we listen to? What movie can we watch today? What Netflix show should we watch? What smartphone should we buy?
There is too much choice. It’s suffocating.
Choice also makes us miserable. If we had only three movies to choose from and we picked one and it turned out bad, then we would blame the producer of the movie. However, if we have a hundred movies and we pick one, and it turns out to be bad, we blame ourselves for making the wrong choice. Further, whatever choice we pick, we are always haunted by the possibility of a better choice. This car is great, but can I get something better for the same price?
Another interesting behaviour I have noticed is that, despite the choices we have, we tend to pick from the same basket of choices. We tend to order from the same restaurant, we buy the same brands, we watch the same kind of movies and TV shows, yet we always try to consider every choice possible. There is a pattern in this and this pattern is captured in the Pareto Principle.
In 1890, Vilfredo Pareto found that approximately 80% of the land in Italy was owned by 20% of the population. Later, Dr Joseph M. Juran, a product consultant, realised that this mathematical grouping could be applied to almost anything! In the US, 20% of patients account for 80% of the expenditure on health. Most businesses get 80% of their revenue from 20% of their customers. Microsoft found that 80% of their system errors could be fixed by solving 20% of the bugs in the system.
You might know this rule as the 80/20 rule.
In general, the Pareto Principle states that 80% of your events come from 20% of the causes.
What’s even more interesting is that the Pareto Principle can be broken down even further. 80% of the 80% events will come from 20% of 20% of your causes. This results in a 64/4 law where 64% of your events will come from 4% of your causes. If you were to break it down even further, it would become 51.2/0.8 and so on.
Recognising the presence of the Pareto principle can help you break the paralysis of choice. The next time you are worrying about what task to do, recognise that 80% of your results will come from 20% of your efforts. Identify the tasks that will contribute to that 80%. In Marketing, I realise that 20% of my efforts will bring 80% of my leads. For example, I know that while running webinars, email invites are going to contribute to 80% of registrations. Hence, I make sure my email campaigns are top notch and are optimised for maximum conversion.
You can also use the Pareto Principle to save time on decision making. I took a look at the restaurants I ordered from on UberEats over the last 6 months. There are 143 listings on UberEats in my area and I ended up ordering more than twice from 34 restaurants and once from 9 restaurants in the 6 month period i.e, 18% of the listings accounted for 80% of my orders on UberEats. The Pareto principle is everywhere!
The Pareto Principle cannot be taken as a given since there are exceptions to this statistical pattern. However, it is a useful rule of thumb in our everyday life where we drown in choices. So, the next time you are confused over a choice, remember the Pareto principle and try to prioritise the choices that will lead to a majority of your desired events.
Footnotes
I still haven’t understood why this pattern appears. What’s so special about 80/20? I don’t know. If you want more intrigue, look up Zipf’s law — a discrete form of Pareto’s principle. It states that for any language, if we were to rank each word by frequency of its usage, the number of times any word is used in a language is equal to (1/rank) x frequency of most common word.
Another famous observation of the Pareto principle is in Income Inequality. It has been shown that 20% of people hold 80% of the world’s wealth. My next post will touch upon this topic.
I’m pushing myself to write to better structure my thoughts and to engage with like-minded people. Liked what you read? Leave a clap and let me know what you think in the comments.
