Richard Thaler has won a Nobel prize. Perhaps most famous for his book Nudge and the behavioural policy units spawned in the UK and US. This has led to the default on option on UK pensions as being enrolled, with an opt-out option given. This has “nudged” participation in UK private-sector pension schemes from 42 per cent to 73 per cent between 2012 and 2016. That’s quite an impact from “libertarian paternalism”. Video of Thaler at Google Talk below.
His observations on the “irrational” behaviour of man can be neatly seen in this New York Times column.
“This illustrates an important problem with traditional economic theory. Economists discount any factors that would not influence the thinking of a rational person. These things are supposedly irrelevant. But unfortunately for the theory, many supposedly irrelevant factors do matter.
Economists create this problem with their insistence on studying mythical creatures often known as Homo economicus. I prefer to call them “Econs”— highly intelligent beings that are capable of making the most complex of calculations but are totally lacking in emotions. Think of Mr. Spock in “Star Trek.” In a world of Econs, many things would in fact be irrelevant.”
Later in the article he mentioned how cash is the perfect econ gift.
I once gave one of my best friends cash for his birthday. He was in debt, and I was much better paid. I had thought about it long and hard, and decided cash was the most optimal solution.
It wasn’t particularly well received. In fact, I recall he tried to return it almost immediately, something the most ugly jumper from a grand-aunt would not trigger.
I now tend to make a card and sometimes a drawing or poem. Perhaps, much more valuable a higher return on investment for sure.
Still, my friend is now out of debt. Perhaps not wanting to be embarrassed by his friend giving him money ever again.
(In my defence, it’s fairly traditional in Chinese culture to give money on various occasions perhaps that rooted me in this one rational strategy)
(Today, I’d suggest as a gift i. Some shared experience (there’s evidence that experiences → postivity/happiness over objects) ii. Hand made some thing and then iii. Cash only leaving a physical retail object as a distant iv. Sadly, this would likely lead to a global recession if people stopped buying things, so perhaps good that not everyone thinks like this.)
If you'd like to feel inspired by commencement addresses and life lessons try: Ursula K Le Guin on literature as an operating manual for life; Neil Gaiman on making wonderful, fabulous, brilliant mistakes; or Nassim Taleb's commencement address; or JK Rowling on the benefits of failure. Or Charlie Munger on always inverting. Or Ray Dalio on Principles.