How a ‘self-nudge’ could help you make better money and life decisions

These past 18 months at home, staring blankly into Zoom windows while my dogs stare blankly at me, I found myself pondering that age-old philosophical question: What really is the difference between humans and animals? 

Rousseau said our desire for self-improvement sets us apart from all other beasts. Nonsense, wrote Gertrude Stein: “The thing that differentiates man from animals is money.”

Maybe they’re both right, and the true mark of human hubris is our striving to get better at spending, saving and investing. 

Several Nobel prizes have been awarded for proving this point. The subtitle of every work of behavioral economics could be: “How dumb are you? Let us count the ways.” Giants of the field, like Daniel Kahneman and Richard Thaler, have identified hundreds of cognitive biases that trip us up over money and life decisions. I’ve interviewed both of them over the years, and always ask variations on, “what can we do about this as individuals?” Their somewhat pessimistic answer, generally speaking, is not much. 

I am oversimplifying a bit. In “Nudge,” Thaler and Cass Sunstein argued for policies that leverage our various psychological shortcomings to our own advantage. If the mind’s GPS is a lousy navigator, nudges like auto-enrollment in 401(k)s aim to reroute us off the path of least resistance and onto the road to prosperity. Making the default a better option is an example of what they call “choice architecture.”