In the 21st century, many 401(k) plans offer so many investment choices that employees are said to be too confused to participate.
This proliferation of choices mirrors the growing complexity of the wider world of investing. Where grandpa had dozens of mutual funds to consider, we have thousands and thousands. Separately managed accounts have proliferated. So have exchange traded funds (over 160 new ETFs started trading last year).
Has the proliferation made investors happier or richer? Probably not.
In a recent New Yorker column, James Surowiecki points to a similar trend to unsatisfying complexity on the tech front. Gadgets have to offer all the latest new features or they don't sell. But what buyers want isn't what users want:
The fact that buyers want bells and whistles but users want something clear and simple creates a peculiar problem for companies. A product that doesn’t have enough features may fail to catch our eye in the store. (A cell phone that doesn’t offer a Bluetooth connection, for instance, may be dismissed as underpowered, even though relatively few Americans use Bluetooth headsets.) But a product with too many features is likely to annoy consumers and generate bad word of mouth, as BMW’s original iDrive system did. Intended to give drivers unprecedented control over navigation, temperature, and entertainment through a single device, it was so hard to use that it has been described as “arguably the biggest corporate disaster” since New Coke.Apple tries to solve the problem, Surowiecki observes, by making complexity user friendly:
This is clearly what Apple believes it will be offering with the iPhone: a device with a remarkable range of features, coupled with an uncluttered touch-screen interface. It won’t be surprising if the iPhone succeeds, but it would be understandable if it failed. The strange truth about feature creep is that even when you give consumers what they want they can still end up hating you for it.Even the best efforts at simplifying the complex require more than good engineering and design. Most of the employees in Apple stores are in customer support, not sales.