Nudge: Improving Decisions About Health, Wealth, and Happiness

Reviewed on , book by Richard H. Thaler

My main take-away from Nudge is that you need to consider the “choice architecture” when you present people with a decision. The way you arrange the information greatly influences the answer. If you are designing an employee retirement plan, should the default be 0%, or 10%? Default options matter. They are rarely changed and people are strongly influenced by them to make future decisions. If the default is 10%, people are unlikely to set it to 1%. Small changes, a gentle nudge, in the choice architecture can have massive, compounding effects on the long-term. A fly in the urinal will cause a great deal less pee on the floor, a sad smiley on your energy report will make you consume less energy, and asking people if they’re going to vote, makes them more likely to vote. What you’re building likely will present its users with decisions, how can you set them best up to do this?

Nudge goes through much of behavioural economics (anchoring, status quo bias, loss aversion, ..) which will feel redundant if you’ve read Thinking Fast and Slow, or other works on decision-making. A chapter goes deep into investing and focuses less on the nudge idea and more on investing which feels out of place. The idea of ‘choice architecture’ and gentle nudges I think are powerful, but unfortunately I don’t feel the book does it entirely justice in its less than ideal writing style—hence the lower rating, despite a great take-away.