"Both Warren [Buffett] & I insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think. So Warren and I do more reading and thinking and less doing than most people in business." - Charlie Munger

Monday, August 1, 2011

Nudge by Richard H. Thaler & Cass R. Sunstein

I just finished reading Nudge, and I am glad I read it. This book emphasizes the little things ("nudges") that can be done to profoundly affect behavior, with a particular focus on potential applications for these nudges in public policy (health care, tax reform, education reform etc). Nudges are things that we, as a society, should take the time to explore and utilize so as to guide people to make sensible choices (within the context of free choice). An example of a successful nudge at work is the targets (flies, actually) that were painted in the bottom of the men's urinals/toilets in the airport in Amsterdam, which resulted in an 80% reduction in spillage. Such a small update contributes to consistent (and thus major over time) labor and capital savings for the airport, as well as significant improvements in sanitation (and thus health) and the overall user experience. The authors also emphasize the nudging power of "default options" and how every effort should be made to ensure that default options are presented in such a way so as to maximize optimal outcomes.

Thaler and Sunstein are self-professed "libertarian paternalists". They believe in a system of beneficent guidance that does not hinder or interfere with freedom of choice. Their public policy prescription lies somewhere between the Democratic one-size-fits-most mandates and Republic laissez-faire. It is certainly a worthwhile prescription to consider.

The book is dense and pedantic at times, but this is merely a testament to the amount of substantive research and analysis that the writing is based upon. The recommendations set forth by these two authors are steeped in years of dedicated research in the fields of psychology, neuroscience, behavioral science and so forth. This book provides refreshing insights, and will certainly have an effect on the way you think about your own methodology and especially that employed by the government.

As is well-stated on its back cover, Nudge is certainly a worthwhile read for "anyone with an interest in our individual or collective well-being" (I am assuming, or rather hoping, that means most of us).

Here are a couple of websites you can visit, which I read about in the book:

1. The blog associated with the book: http://nudges.org/

2. A website developed in-line with behavioral science to help you achieve your goals. I found this one to be pretty cool: http://www.stickk.com/

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