Thank you everyone it’s good to see some of you familiar faces from last night and my dreams I want to start with three questions raise your hand if you know roughly speaking within 10 20 cents the price per gallon to fill your car ok keep your hand up if you know roughly speaking within 10 20 cents the price per gallon to heat your home ya know a couple Liars that’s cool raise your hand if you use a credit card okay just special a little note raise your hand if you use your husband’s credit card where is that woman from the key where she sir why are you keep your hand up to your credit card users keep your hand up if at the end of the month you know exactly what your credit card bill will be okay a few more people it’s impressive most people don’t final question raise your hand if at some point in the last week you promised yourself you were going to wake up the next day and get some exercise okay now keep your hand up if raising your hand is all the exercise you’ve gotten this week so ask these questions to point out how difficult it is to think about money how difficult is to think about change and human nature right the first question essentially what’s the price for a gallon of energy but in one context one framing we know it the other we don’t the second question shows like how if we separate time of consumption from the time of paying for something we’re liable to forget what it is and the third is really about self-control how we can’t keep promises even to ourselves even promises we know are gonna help us live longer and better and I want to talk about these things in the context of money for three reasons number one money is everywhere it’s omnipresent it’s overwhelming and that’s just something we have to accept we’re married to money for better or worse right whether we’re living in scarcity and it’s a constant pressure even if we have abundance alright nobody watches the lifestyles of the frugal and thrifty they think about money and spending it I mean having it right number two money is actually an amazing gift we’ve been given I used to be and the money is evil root source of all evil root of all evil group but actually like I couldn’t realize money like doesn’t make money is divisible all right money is general you can use it for anything it’s storable it’s fungible any ten dollars the same another ten dollars and all of this has given us the opportunity to develop modern society right to specialize you wouldn’t be able to specialize without money we couldn’t be research professors we couldn’t be wine makers we couldn’t be whatever liz is and yeah you in a corner yes and that’s fantastic but those wonderful things about money are also a make it challenging and it becomes challenging because of the third reason why I want to talk about is because it reflects human nature the forces that impact our financial decision-making are the same forces that affect our decision-making in every aspect of our lives and ultimately it’s about human nature and I don’t think you can change human nature but we can do is we can understand human nature and then create systems environments messaging around that human nature so that we take advantage of our human nature instead of being taken advantage of and it’s a challenge it’s not about education and understanding how money works like for me like as listen mention I went to Princeton and then I went to law school in Burning Man two or five times but I went to Princeton and I studied from the best ben bernanke as a professor Alan Blinder the other white guy and I learned I learned about economics I learned how a decision making should work right like it should be about opportunity costs right again money can be anything so when you think about a financial decision you should think about the opportunity costs which is what are you giving up if you don’t spend this money here what could you spend it on now or any time in the future that’s really hard to do and that’s like overwhelming you know that $5.00 Coffee everyone used as an example well that could be five packs of gum or that could be you know a compound interest a million dollar retirement that’s just hard and we don’t even come close to doing that right my co-author did an experiment went to a Toyota dealership said if you don’t spend $30,000 on a Toyota what else can you spend it on people weren’t like oh that’s you know five vacations or I could retire happy earlier it’s a boatload of bubble gum right they couldn’t think of anything and when pressed all they got was well if I don’t buy a Toyota I could buy a Honda so what happens is we can’t think about opportunity costs so we find shortcuts we find value cues we find other ways to make it easier to make these decisions right and what our book talks about and when I like to talk about in greater depth and be more times is what these forces are because when we understand the forces when you understand why people make certain decisions then we can help use that knowledge to help them make better decisions I want to talk about just a few depending how much time I have there’s thing called pain of pain the pain of paying is this concept that when we pay for something when you hand over a $20 bill it stimulates the same region of our brain as physical pain now pain has an evolutionary purpose you put your you know it teaches us to pay attention to what’s happening you put your hand on a stove that burns says oh look at your hand you break your leg that pain says oh go to a doctor in seventh grade you call it Megan flirty say hey you want to go out she says who’s this and you say it’s Jeff and she says Jeff do you become a comedian but we don’t feel pain instead humans we numb that pain right we make it so that we don’t have to think about stuff right and when we don’t think about financial decisions we’re not aware of it then we’re less likely to think about those opportunity costs less likely to think about the things that are important and what’s really you know kind of key and exciting about the pain of paying is you can dial it up or you can dial it down all right there’s a whole spectrum think about paying cash is the most painful cheques then credit cards I mean there are numerous studies credit cards make you spend more tip more and you’re less likely to remember how much you spent not only that but this is one study blew my mind excuse me just credit card paraphernalia like a little Discover Card thing and the Machine even that has the same effect spend more tip more remember less not as strong but still it’s like Pavlovian all right instead of drooling over you know a dinner bell or a dress elbow or jewel over credit cards so this credit card says FinTech you know all these things Apple pay and easy pass and automatic billing and then there’s whatever the future is like the Amazon stores where you don’t have to do anything you know easy paying no that’s terrible now you don’t think about what you’re spending alright so there’s this whole spectrum of levels of pain of paying and we can dial it up or dial it down depending on what we want to have the result Bay I think about if you you might say well the best thing to make the best spending is to have it be really high they feel the pain of paying in all times yes but what if you’re like in a restaurant and you’re paying per bite now you’re gonna value every bite but it’s gonna be a miserable experience alright or maybe you shove a bunch of food in your mouth right the same time you think about retirement savings it’s a huge issue I’ll I’d say in America we have a retirement opcd epidemic but no one knows they’re fat in retirement savings they’ve shown if you make your default option when you sign up at a company that you will give to your retirement people are way more likely to save right because they just don’t want to deal with the pain of thinking about that decision myself that fault is no they won’t the same time retirement savings think about you know management fees all right let’s imagine for fun we all have a million dollar portfolio that’s nice math and million dollars I live in New York that’ll get you a nice studio apartment to share 1% management fee right you never see that fee you never think about if it’s worth it right but what if like at the end of the year instead of just coming in your statements you had to pay your broker ten thousand dollars then you think about that you feel that pain you think is that a good decision so we can twist that pain of paying up and down and there’s so many other biases so many other behavioral principles are come into play with money and life there’s issues of fairness right we’ll pay a locksmith who fumbles around and messes about for and breaks things for an hour pay that locksmith more than one that just opens it in a minute because it looks like they’re doing great and like all we can value it right we think did we know what the effort is all right same time we could put that principle into practice government does a terrible job of showing you what their tax dollars are doing all right there’s we have no idea so we think there’s no effort made but we can design systems Boston they the whole pilot program where everyone’s complaining about potholes on their Street and they never saw any work done because they were like thousands of potholes so they made a website that showed each day we’re fixing five potholes you might not see it but your tax dollars are at work so there are all these ways that we can use all these behavioral principles to our benefit and I really have become a huge convert to the Church of behavioral science and I’m excited about yeah one from those Princeton days where like this doesn’t make any sense in a moment we’re like I’m a real advocate for all the work that we’ve heard about here and everything else because it gives us the opportunity to experiment and learn and it’s not perfect but it holds such promise and I want to quickly tell story of an experiment that my co-author did in Kenya they went there well and improved savings and it’s very poor community they no one had any savings they live week to week so they created these at this mobile app where you could just put money each week into a savings account and that savings count was like in a different town so pain of paying they couldn’t pull the money out they create a few different setups one was just the basic app one was an app and each week you got a text message reminding you to save then you would get a text message but it was made to seem like it came from your children mommy daddy please say from my future then hey they also gave people a coin with you know 24 numbers on it for 20 for each week and each time you saved you made a little strike in the coin you put it up on your mantel then they had a savings system where you would get a ten or twenty percent match right you save $10 will give you $1 or $2 they do the same thing but they use loss aversion loss aversion the idea that we feel a loss more than the we feel the joy of an equivalent pain you lose $10 you definitely win 22 feel the equivalent of motion so they would put the money in your account that $2 and if you didn’t match it they would pull it out so we don’t have time for me to ask what you think was the best system but I’ll tell you just the app made people save more write the app with the text reminder a little bit more the app with 10 or 20% match the 10 or 20% was the same a little bit more 10 or 20% with loss aversion a little bit more the message from the kids the same as that loss aversion so you know use your kids but the most effective one was the coin was a little coin where you scratch off it wasn’t like getting more money it was about understanding human emotion and human nature because when you’re poor and you don’t bring home food and put on the table and you save it there’s no way to see that but if you have something that encourages that dialogue and says I’m doing something for the family in our future then that has an impact and that’s about human nature that’s about our behavior our decision our biases and what I love most about this study as that is not the result they expected but they were open-minded there were scientists they didn’t go in with the bias they said let’s see what happens and then you can build off that that’s why I’m really excited for all the promise that behavioral science holds and and I want to leave you all with one last little behavioral science tidbit I’m working on this website about behave of science we have these things called nerd nuggets and one nerd nugget it is well there’s two on top one is called peak and rule the idea that whatever happens the end of an experience disproportionately colors your view of the experience and to that end this is it what would Batman do what would Batman eat right it’s a it’s a little nerd nugget that says if you put kids in front of a bowl of candy and a poll of that bowl of vegetables they’re gonna eat the candy right but if you say to those kids hey what would Batman eat there you think I’ll Batman strong he’s healthy and he fights crime they use a little improvement towards the vegetables so you can use that for your own families at home just remember Batman was also a billionaire so he probably stole the candy I’d sold it back to the kids at a markup my name is Jeff you guys enjoy the rest of the you