Notes from reading: Nudge by Richard H Thaler

Spent reading Nudge this week. It was recommended to me by Anurag

First half of the book reminds me of content and research papers discussed by  Cialdini in his book Influence and  Kahneman in Thinking fast and slow

Nudge is a conscious kick we an individual need in making decisions. It can be ads simple as buying grocery (nutritional fact) or buying cigarette (it causes cancer).

I like the other examples and stories where it talks about human cues, Status Quo bias  and Social proof in examples of buying house or picking investment portfolio and distributing our wealth.

Other coverage and research paper of our fear of risk aversion {Cialdini has covered it as well} sounds so ridiculous human brain. Like we are more unhappy losing 500$ in bet rather winning 10000$. 🙁

We love taking shortcut steps when it comes to decision making as big us picking insurance plan, retirement plan or even taking loan.  So if we are provided with defaults options in all these choices, most of us will stick to it.

In all the book covers great deal of use cases including savings, Social Security, credit markets, environmental policy, health care, marriage,  subprime mortgage disaster and much more.

Author has made 2 claims via the book:

  1. The first is that seemingly small features of social situations can have massive effects on people’s behavior; nudges are everywhere, even if we do not see them. Choice architecture, both good and bad, is pervasive and unavoidable, and it greatly affects our decisions.
  2. The second claim is that libertarian paternalism is not an oxymoron. Choice architects can preserve freedom of choice while also nudging people in directions that will improve their lives.

Do you know?

  1. One key cause of the subprime mortgage disaster is that countless borrowers did not understand the terms of their loans.
  2. The healthcare plan website for picking medicine and allocating policy was so difficult that many older could not decide which plan to take.
  3. Many countries has default organ donation practice and opt out takes lot of time and most of us never spend time on same.
  4. Your mobile provider gives you few services for first month from on boarding because they know you will never look your bills for this added fees from months onwards.