Self-control is always easy… in the future
Did you succeed today in keeping the promises you made yourself yesterday? For many people the answer is “no”. Self-control comes in limited supply.
How to improve self-control?
Behavioral economics provides assistance in this respect. For example by having a solution in place before the problem even arises. A famous example is Save More Tomorrow: contracts of new employees include the default that future wage increases will contribute to the employee’s pension plan rather than her savings account. Such default clearly contributes to the pension savings rate and channels the self-control of spending. Other examples of this kind are often referred to as nudges.
Nudges are pieces of information or ways of presenting information for people to make better decisions, even when judged by themselves. The addition “even when judged by themselves” is important. For example to disguish nudging from plain manipulation. Nudges in many cases are pre-defined rules of how you will act, leaving less room for shortsighted thinking at the moment of truth.
Algorithms to the rescue
The book Algorithms to Live by covers a related topic, but looked at it from the other side. The question addressed is: what can we learn from computer science to improve our daily life and decision making? As it turns out: a lot, with some points of attention. The most important I think is the following: Digitization is a means, not a goal in itself.
The capabilities of current technology allow to reach out to an audience much larger than before. The long tail clients can be introduced to investing without leaving their comfy couch. They merely have to click “yes” when receiving a prospective teasing message. That’s great. Yet, the algorithms that generate the decisions or proposals will determine even more the success of digitization. The algorithms should not be “cold” and “artificial” in the negative sense of the word. The algorithms should embed logic that mimics actual decision making. The algorithms should generate proposals people can relate to.
Relevance to your business
The relevance for your business is obvious: people do not stick to a plan if it defies who they are. Eternal investors are our common goal. We address the emotional component of investing in each part of the digital wealth management process.
”Digitization is a means, not a goal in itselfBrian Christian
Brian Christian holds a degree from Brown University in computer science and philosophy, and an MFA in poetry from the University of Washington. A Visiting Scholar at the University of California, Berkeley, he lives in San Francisco.
Thomas L. Griffiths is the Henry R. Luce Professor of Information Technology, Consciousness and Culture, and director of the Computational Cognitive Science Lab at Princeton University His focus is on inductive problems, such as probabilistic reasoning, learning causal relationships, acquiring and using language, and inferring the structure of categories.