Nudge

"Excellent perspective and logic you can see in your everyday life. "

"Small changes can have a big improvement. I love the weaving of social psychology into business"

"Whenever you present choices to people, your presentation will affect their decisions. This book is about how choices can be presented to help those who are choosing to make the choices that are best for them. <br/><br/>The authors call this principle <i>libertarian paternalism</i>: libertarian because it is never compulsory, and paternalism because it guides people to make good choices. An example is the ordering of food in a cafeteria line, where placing healthier food first or at eye level may help the students who use the cafeteria to make healthier decisions.<br/><br/>The authors advocate for what they call "RECAP" (Record, Evaluate, Compare Alternative Prices) as an alternative to various situations in which the traditional mantra has been to Just Maximize Choices. RECAP essentially means that whenever people are required to make a complex financial decision (such as a selection of a retirement fund, college loan, or Medicare plan), they should be provided with a brief overview of the differences between the available options.<br/><br/>The first few chapters of this book mention many of the same studies mentioned in other books I've read recently. I like that it often puts them in lists, dedicating only a sentence or two to each. This format has the benefits of (1) not making me re-read lengthy descriptions of studies I've already encountered, and (2) helping to gather and synthesize ideas.<br/><br/><spoiler><br/> * Framing something in terms of losses prevented is more effective than framing it in terms of gains (37).<br/> * Much as people who have difficulty saving money can earmark various amounts for categories such as <i>rent</i> and <i>holiday shopping</i> (using the planning part of their brain to resist in-the-moment-temptation of the acting part of their brain) people who do not spend much could benefit from earmarking some ahead of time for <i>entertainment</i> (allowing the acting part of their brain to relax because the entertainment was planned for ahead of time) (52).<br/> * When one person in a group expresses a strong opinion and the members of that group are switched out over time, a new completely different group will still largely hold to that original opinion (57-8). In selecting which songs to download, people are strongly influenced by what songs others have downloaded before them, going back to the first few downloads in a system (62).<br/> * Extended warranties are a waste of money but remain overpriced because there is no market incentive for them to decrease (80-2).<br/> * Given n options to pick from (such as n types of candy or n investment funds), people will generally divide evenly between the options. If one fund is all stock and one is half-stock-half-bonds, they will generally select equal amounts of both funds. The same is true if one fund is all bonds and the other is half-stock-half-bonds, even though this means a very different underlying allocation (124-6).<br/> * It's possible to get a mortgage in which the only payments are toward the interest (135). Some mortgages come with a "prepayment penalty" that prevents people from paying off their mortgages early (138). In general, the loan market has gotten sufficiently complicated to render outdated the Truth in Lending Act's stipulation that the APR be provided ahead of time to given people a sense of how risky their mortgage is (138-9). The whole industry would benefit from clearer choice architecture, such as requiring that all the fees and interest be presented summed together for each option (139-40).<br/> * Sometimes greater transparency can help to solve problems on its own, without more forced regulation. Requiring companies to publicly disclose their hazardous waste statistics has made them compete to have less hazardous waste (192-3).<br/> * If people could waive the right to sue for medical malpractice, health care costs would be lower owning to a combination of reduced litigation expenses and a reduced number of over-precautionary tests (209-11).<br/></spoiler>"