Nudge: Improving Decisions about Wealth, Health and Happiness


Thaler and Sunstein discuss at length how choices are designed and how we can make better decisions - personal finance, health, relationships, the environment, retirement benefits, organ donations, etc.

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Key Takeaways
  1. Nudge - anything which pushes people slightly in one direction or to make some decision through context and design. Any choice architecture which alters people's behavior in a predictable way without restricting any options. Must be slight and easy to implement. Choice architecture and nudges are everywhere
  2. Choice architect - in charge of setting the context in which people make decisions
  3. Small changes and context can lead to big changes in people's actions and behavior
  4. Libertarian paternalism - impose as low of a cost as possible while nudging people in positive ways. Not an oxymoron as this nudging can be done in such a way that it helps people make better choices without eliminating options
What I got out of it
  1. Designing choices in order to nudge people in positive directions can have amazing outcomes. Often it is not even difficult to implement, it simply requires awareness of our fallibility to these small changes in content and context. A fantastic read
  • There is no such thing as a neutral design. A good rule of thumb is that everything makes a difference
  • Never underestimate inertia and the effect that default options can have on people's decisions (organ donor example)
  • Details two systems of thinking -intuitive / automatic vs. reflective / analytical (pair with Kahneman's Thinking, Fast and Slow)
  • People often use rules of thumb to make faster, easier decisions. Anchoring, availability and representativeness (heuristics and cognitive biases)
  • People do not have accurate models of what randomness looks like
  • People tend to be overly optimistic and over estimate their abilities
  • Framing and default options are very powerful
  • People tend to be happier with their decisions when they have fewer options. Temptations and mindlessness partly help to explain this phenomenon
  • We underestimate our fallibility to arousal when we are not aroused (Hot/cold paradox). When we are not hungry, sleepy, etc. we think we can easily stick to a diet or wake up early
  • People pay less attention to you than you think. People therefore tend to conform to what they think people expect, not what is really true
  • We are heavily influenced by others even if they don't mean to. In groups of 7+, people eat 97% more!
  • People tend to follow what the crowd is doing, the positive instead of negative norm is more influential in changing people's behavior
  • When people asked what their intentions are, they are more likely to act according to their answers (Cialdini describes this consistency factor in his best-selling book, Influence)
  • Certain subtle cues affect the way we behave. For example, the smell of cleaning products while cleaning will make us keep our space cleaner
  • The cases where there is a delay between an action and its benefits (exercise) are more vulnerable to nudges than immediate gratification
  • Generally, the higher the stakes, the less practice we get (mortgages, wives, etc). Great area for positive nudges
  • One learns the quickest when getting clear and immediate feedback
  • Elimination by aspects - determine most important criteria and eliminate anything which doesn't meet this bar
  • Mnemonic device for 6 principles - incentives, understand mailings, defaults, give feedback, expect error and structure complex choices
  • Save more tomorrow - automatic increase in savings rates as pay raises increase
  • Switch from defined benefit to defined contribution retirement plans
  • Speaks of default options for organ donations, voting, health care costs, tragedy of the commons, privatizing marriage, the environment, etc.

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