Nudge - Richard Thaler, Cass Sunstein

We make choices all the time. From the most important decisions that define our lifestyle, to the smallest day-to-day decisions. Sometimes we make wrong decisions, and it's normal.

In this summary of the book "Nudge", you will get methods to prepare your mind and make the right and thoughtful decisions.

The truth is that we are constantly being influenced to make certain decisions about where to invest our finances, what to buy at the supermarket, or even how we should live. And we don't even notice.

According to the authors Richard Thaler and Cass Sunstein, "nudge" is about being more in control of your mind, resisting the temptations of your impulsive "me" and having a more enjoyable life that is closer to goals.

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About the book "Nudge"

"Nudge" is a New York Times bestseller written by Richard Thaler (Nobel Prize winner in economics) and Cass Sunstein.

The book, launched in 2008, discusses how we make decisions on a daily basis and how to effectively use the "choice architecture" of our mind.

About the authors Richard Thaler and Cass Sunstein

Richard H. Thaler teaches at the University of Chicago on economics and behavioral sciences. He is also a winner of the Nobel Prize in Economics in 2017.

Cass R. Sunstein is a professor at Harvard Law School. He served in the Obama administration from 2009 to 2012 as administrator of the White House Information Office. He is also a specialist in constitutional law, regulatory policies, environmental law and law and behavioral economics.

To whom is this book indicated?

"Nudge" is recommended for people who want to make better decisions in life, being less impulsive to temptations and planning long-term decisions, taking care of their money, health and happiness.

Main ideas of the book "Nudge"

• If we do not have self-control, all our planning will be taken by our impulse;
• Nudges are stimuli from the outside world that guide us to make an unusual decision;
• The contribution to retirement should increase in proportion to the increase in salary;
• Beginning investors should keep pace with the experienced to learn how to invest in stocks;
• Why health plans are randomly assigned (and why it shouldn't be);
• Although many are adept at the organ donation cause, few are in fact donors (the same for donation to charities);
• Nudges must be aligned with the intentions of the companies and the wishes of the customers.

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Overview: The two "me"

At all times we are influenced by advertisements or product promotions by subtle strategies that sometimes we don't even notice. Of course, there are things that are beneficial for our daily lives, but others that are not so much, and merchandising convinces us that it is.

These strategies directly attack two "me": the Impulsive and the Planner.

Richard Thaler and Cass Sunstein explain in the book "Nudge" that, while one tries to plan his day in the best way (Planner), the other is seduced by the temptations of the outside world, for a more lazy and consumerist life (Impulsive).

Here are some examples that if you don't have self-control, the Impulsive "me" will predominate in your day-to-day:

• When you go to the supermarket hungry, you leave with much more than you should;
• When you go to a store to buy a certain product, but see others with a 70% discount, you take, even if they are superfluous;
• You set 10 alarm clocks, but you always press the 'Snooze' mode to get more sleep... and you are late for the day's appointments;
• You buy a product that is in fashion... Does this product make sense to yourself or arw you just "riding the wave" of others?

But, after all, what would nudges be?

They are stimuli from the outside world that influence us to make a decision. Nudges make it possible for us to get out of the predictable line and make an unconventional decision. However, if we don't control our impulsive self, we can be influenced by just anything, including bad nudges.

Self-control and organization is essential so that we can receive a nudge if it contemplates us, or reject it if it is not beneficial. For that, we must design a scenario of choices.

How do we do it? Here are some tips:

• Know what you like;
• Search for feedback on products, services or even your performance at work;
• Know the degree of difficulty of the consequences of your decision.

Overview: Money

In this part of of the book "Nudge", Richard Thaler and Cass Sunstein give tips on how people can "improve on the difficult tasks of saving, investing and borrowing".

Automatic adherence to retirement plans is effective among young people and new workers. However, as the percentage of contribution is defined by people, it is not so advantageous, say the authors.

Hence, they present the ' Save More Tomorrow ', which is an architecture system of choices. This program suggests that participants synchronize the increase in contribution with the increase in salary.

Thaler and Sunstein also argue that the government should do its part, just not interfering with such private sector programs. Thus, "reducing barriers to the adoption of programs".

Another tip is to invest part of your savings in stocks and bonds. For you who are new to this business, or are interested in joining, the authors recommend that you follow the asset allocation decisions of experienced investors.

Finally, borrowing could be simpler, if people had greater decision-making power and control over themselves. Hence, they end up being exploited by mortgage and credit card interest.

In this case, it is recommended that people be very alert. This is because, when it comes to loans, people's biggest weaknesses "can cause serious problems".

Overview: Health

Here, problems that society faces with health plans, environmental impacts and low adherence to organ donation are portrayed.

How to solve each case? Well, we'll talk next!

Health insurance

The authors Richard Thaler and Cass Sunstein say that society does not receive any kind of preparation to understand complex health plans, especially for the elderly. A possible nudge would be to stop using health plans at random.

If someone hires a bad plan, without knowing what it contemplates, will end up spending a lot more on medication and extra exams. The idea would be to implement an intelligent adherence that would meet the needs of those who hire.

Organ donation

Although many support organ donations, few are actually donors. For example, in many states in the USA, the choice to be a donor is not mandatory, which ends up being "beaten" by many citizens.

According to the book "Nudge", an idea of implementation, however not easy, would be in the same way that voting is a duty in Brazil, even if the person who chose to be a donor could reconsider his decision.

This would at least encourage people to take action on the problem.

What about "saving the planet"?

Sustainability and pollution prevention measures have been a recurring issue today. But we are still far from desired.

Why?

Although there are incentives, they can be misaligned. When this happens, the authors claim that the government should collect taxes or fines from polluters. It is more than talking about, it is applying actions to prevent.

"What if people could find out daily how much energy they consumed?"

Richard Thaler and Cass Sunstein also expose this "ambitious idea" as a way for people to save energy - and money.

Overview: Variations and objections

In the last part of the book "Nudge", the authors expound several tips. Many of them are involved in encouraging the feeling of charity in people.

Richard Thaler and Cass Sunstein make the point that many people are willing to donate, but few actually do. Implementing institutional charitable measures can be the solution for this, such as:

• Create the ' Donate More Tomorrow ' program, with a model similar to 'Save More Tomorrow';
• Charitable debit card, where banks would create this modality so that the money deposited there would be transferred to a charity;
• Automatic income tax return;
• For those who want to quit smoking, there are institutions that encourage such a decision. They create an account and, for six months, the smoker deposits the amount related to what he would spend on cigarettes.

But while there may be really useful nudges for the population, some may take advantage of their own goals and take advantage of it. And bad nudges can come both from the private sector (which cares about maximizing profits and not the well-being of the consumer), as well as public (which respond to its voters).

The solution to this would be to balance the desires, aligning the incentives of both parties, institutions and consumers.

What do other authors say about it?

Paula Marques and Ricardo Cayolla, from "The Super-Human Age", say that human beings make decisions using very little the rational way, as they are emotional and end up being driven by impulses.

For the author of the book "The Dumb Things Smart People Do With Their Money", Jill Schlesinger, people should not invest their money in what they do not know. You must have good planning and a thorough knowledge of where you are going to invest.

Finally, in "The Power of Habit", Charles Duhigg teaches you how to apply your habits to achieve your life goals and shows the science behind this practice.

Okay, but how can I apply this to my life?

• Take care of your impulsive thoughts. What you want is not always what you need;
• If you are interested in entering the investment world, start by following up with experienced investors. Investing is a way to control your money;
• Pay attention to health plans when hiring, if they really meet your needs;
• Preserve the environment by polluting less and saving energy;
• Be a giver and encourage others to be, too. Help the next.

Did you like this summary of the book "Nudge"?

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