Tuesday, December 22, 2009


We love to believe that willpower determines our actions. “If I just try harder,” we tell ourselves, “I can lose that last 10 pounds.” Or save $200/month. Or improve our time management.

The problem is, it doesn’t work.

Willpower is important, of course, but there’s more to behavioral change than just trying harder. Think about all the things we know we “should” do: Exercise regularly, eat healthily, max out our retirement accounts, save more, travel, call Mom....

In one study, researchers tried to understand why people weren’t investing in their 401(k)s. In the first example, less than 40% of people contributed to their 401(k). But after they made it automatic—in other words, the day you joined, you’re automatically contributing a small amount to your 401(k)— enrollment skyrocketed to over 90%.

We know we should fill out that paperwork—and it’s probably costing us a lot of money to not be investing— but we just can’t seem to get around to it.

It turns out we “know” we need to do all kinds of things, but we often need the right defaults—a small nudge—to actually change our behavior.

Can you help design the right defaults to help people in pro-social ways?

Source: Ramit Sethi is the author of I Will Teach You To Be Rich. He writes about personal finance, psychology, and entrepreneurship at iwillteachyoutoberich.com.

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