Rule of Thumb #2: Use Behavioral Lenses to Innovate and Adapt to Changes

Last night I had a good dinner and conversation with a long-time friend and colleague. We talked about the recently passed Secure Act 2.0 and potential behavioral implications and impacts on the ecosystem and players.

For those unfamiliar with Secure Act 2.0, this legislation covers finance and retirement-related considerations. Just to give some examples without covering the breadth, the Act includes items such as whether employers must provide automatic savings rate escalators in their plans, what escalator caps might be, how student debt might be addressed in the context of savings, and changes in the future age at which retirement savings of an individual must start to be withdrawn.

Each of these changes have potential behavioral implications. Let’s take just one of five behavioral angles I cover at Cornell in my applied behavioral economics courses, namely choice architecture. Defaults are an important tool within the realm of choice architecture and have shown to have big impacts on people’s choices (Carroll et al., 2009; Johnson and Goldstein, 2003; Johnson et al., 2012). Has your company done a behavioral audit on the implications to constituents of specific defaults, such as default values, structure, and outcomes? What if people don’t accept defaults? What happens then in the customer experience? Have you thought about implications to your company? Should your company make any changes?

We also have to acknowledge that consumer choices are often not made in isolation. For example, by increasing the age at which people are required to take minimum distributions from retirement, how might this affect other choices? For example, what impact might it have on how people think about claiming Social Security? Thinking architecture, such as how people construct their preferences using a mixture of fast and slow thinking processes (Payne et al., 1999), is another behavioral angle to consider.

Where does this leave us? In the case of Secure Act 2.0, one way to look at this is in terms of an exogeneous event that constituents have to react to (e.g., employers, advisors, platforms, systems providers, investment managers). However, there will also be those that look at this as an opportunity. There will be some players that will be way more agile than others and able to capitalize on both important behavioral implications and operational tactics.

But this discussion isn’t limited to Secure Act 2.0…

Whether facing an exogeneous event or proactively working an important business problem, here are three strategies informed by behavioral economics that companies and individuals can use:

  • To avoid blindspots with group decision making, consider setting up a Red Team to approach problem and think way outside of the box (Cass Sunstein discusses Red Teaming in his book, Wiser). My twist would be that you might consider setting up a Behavioral Red Team or a Red Team with behavioral economics advisor embedded within.
  • Anchoring is a powerful force that inhibits change. Use a whiteboard exercise to think about ideal approaches to solving a problem. Maybe it can be part of a Spring-cleaning or offsite event for your company.
  • Use behavioral lenses to examine the problem. A choice architecture lens, such as the way defaults are used, is one such lens. But there are other lenses out there, such as the way information is framed. (See Shu et al. for an example of reframing savings decision using pennies and potentially heterogenous treatment effects on people with different income levels).


  • Carroll, Gabriel D., James J. Choi, David Laibson, Brigitte C. Madrian, and Andrew Metrick. “Optimal defaults and active decisions.” The Quarterly Journal of Economics 124, no. 4 (2009): 1639-1674.
  • Johnson, Eric J., and Daniel Goldstein. “Do defaults save lives?.” Science 302, no. 5649 (2003): 1338-1339.
  • Johnson, Eric J., Suzanne B. Shu, Benedict GC Dellaert, Craig Fox, Daniel G. Goldstein, Gerald Häubl, Richard P. Larrick et al. “Beyond nudges: Tools of a choice architecture.” Marketing Letters 23, no. 2 (2012): 487-504.
  • Payne, John W., James R. Bettman, David A. Schkade, Norbert Schwarz, and Robin Gregory. “Measuring constructed preferences: Towards a building code.” In Elicitation of Preferences, pp. 243-275. Springer, Dordrecht, 1999.
  • Shu, Stephen, Hal Hershfield, Richard Mason, and Shlomo Benartzi. “Reducing Savings Gaps Through Pennies Versus Percent Framing.” (Working Paper 2022).
  • Sunstein, Cass R., and Reid Hastie. Wiser: Getting beyond groupthink to make groups smarter. Harvard Business Press, 2015.

Rule of Thumb #1: Adopt a Portfolio Approach When Implementing Behavioral Science Initiatives

While I will address return on investment (ROI) considerations in a future post, probably one of the first rules of thumb I have is to use some degree of portfolio thinking and management processes for implementing behavioral science initiatives.

Research indicates that seemingly promising behavioral interventions sometimes do not work, and it can be hard to predict what will actually work (Milkman et al., 2021). Additionally, some studies indicate that there can be strong wisdom-of-crowds versus individual forecasting performance effects, such as average forecasts outperforming 96% of individual forecasts (DellaVigna and Pope, 2018).

It can be difficult to predict which projects will be successful. There are risk-return tradeoffs and innovating in this space requires process and discipline (which could also result in undesirable outcomes, such as if managers are overly loss averse and fail to innovate).

So based on these premises, some strategies for companies looking to implement behavioral science include:

  1. Look for quick wins opportunistically (e.g., when getting started), while also being realistic.
  2. Recognize that it can be hard to predict results ex-ante.
  3. Develop behavioral intervention generation, vetting, and project portfolio management processes. (This last point is very loaded. I will likely have future posts on different dimensions of just this point. However, one example of portfolio management can be picking several lower-risk projects along with a higher-risk project that could pay off to a much greater extent, e.g., financial or social good).

In summary, to effectively implement behavioral science initiatives, it is important for companies to recognize the unpredictable nature of these interventions and adopt a portfolio approach that includes a process for generating, vetting, and managing projects in order to maximize return on investment and/or other outcome goals of the organization.


  • Milkman, Katherine L., Dena Gromet, Hung Ho, Joseph S. Kay, Timothy W. Lee, Pepi Pandiloski, Yeji Park et al. “Megastudies improve the impact of applied behavioural science.” Nature 600, no. 7889 (2021): 478-483.
  • DellaVigna, Stefano, and Devin Pope. “Predicting experimental results: who knows what?.” Journal of Political Economy 126, no. 6 (2018): 2410-2456.

Applied Behavioral Economics Series 2023

In 2023, I’m going to experiment with series of short posts and mixed media that will try to appeal to those that are thinking of starting behavioral economics initiatives or trying to take things to the next level. I have a unique background to bring this type of content as I have worked in the commercial world for more than 30 years while also having an academic research and teaching background in behavioral economics. I will try to leverage an intersection between what I implement as a behavioral economics advisor in the commercial world and what I teach experientially in the classroom.

Current LinkedIn connections and prior students may also feel free to join an Applied Behavioral Economics slack channel. We can use to this as a way to share ideas, post questions, or potentially arrange informal meetups. Please send me an email at or if your organization is on an approved domain (e.g., you should be able to join using the following link: (link valid for 30 days).

Howard Marks’ Memo Spotlights Major Shift in Investing Approach, Raises Behavioral Considerations

Howard Marks has written a quite a remarkable memo that will be impossible for me to do the proper justice on. However, here are few key highlights from his memo:

  • He shares perspectives having been in investing for 53 years.
  • He has seen two major sea changes during that time.
  • One sea change included the evolution of the bond market in the late 70s and most importantly, a shift in investor mindset to thinking about risk and return (which was not the way investors thought about investments back then).
  • The second sea change had to do with macroeconomic policy and use of interest rate controls to not only control inflation but also feed a market fueled by declining interest rates (and turbo charged by leverage) resulting in four decades of 10.3% growth when looking at the S&P 500.
  • The third sea change he sees is where we are now. While I definitely oversimplify (you need to read the memo), the fuel of declining interest rates are unlikely to be a tailwind at our backs as compared to the prior 40 years. If you believe some of these perspectives, it seems as though many investors will need new investment strategies (e.g., rebalancing of portfolios from equity to credit instruments).

As a behavioral finance person, I see some perils of using fast, autonomous thinking and the need to try to use more slow, reflective thinking. I also see the role of inertia. Like many other people, my portfolio is heavily tilted to equities. How can people both re-think and maneuver? At the same time, how can they leverage behavioral principles and avoid biases of anchoring, such as to the past? Potentially we can use behavioral tools like whiteboard exercises to re-imagine paths to go forward. We can potentially use behavioral tools to address issues associated with forecasting, prediction, and risk. There is also the need for personalized solutions. And if there is a sea change (or if we at least need to prepare for one), there is also a need to think about how to distribute solutions to the masses. There are behavioral implications lurking. How will individual investors manage? How will the finance community and its distribution networks address such behavioral considerations? There are definitely behavioral issues to consider and address, and it will be interesting to participate in the debates and also work on block-and-tackle solutions.

Update on Behavioral Economics Advisory

A short update separate from my academic work: I expect to have a somewhat rare opening in 2023-2026 to take on a behavioral economics advisory relationship with a new client in retirement, wealth management, or investment management. Please feel free to contact me to discuss further.

Working Draft of Artificial Intelligence (AI) Notice for University Classes

Based on the recent ChatGPT events that have rocked the world, here’s a baseline working draft of an AI notice that I will use in some of my classes at Cornell. It presumes that AI will be used more and more over time and that as teachers we’ll have to figure out how to balance the performance and educational integrity tradeoffs.

“Students may use artificial intelligence (AI) technologies for support purposes with their writing assignments and projects (e.g., fine-tuning language) but not for writing fundamental ideas (e.g., constructing major portions of a paper). Students are required to disclose (in an appendix) use of any artificial intelligence (AI) technologies in their writing assignments and final projects, including enumerating any key steps, substantive queries used, and the purpose of key steps and queries. Students may be subject to disciplinary action if found to have violated this code of conduct.”

Talk at Hong Kong University of Science and Technology on Behavioral Finance

In March 2023, I will be guest speaking to DBA students at Hong Kong University of Science and Technology about implementing behavioral finance initiatives in corporations, an area that I have worked in for more than a third of my three-decade-some working career. Much thanks to Prof. Anirban Mukhopadhyay for inviting me. While the details are still to be worked, I plan to cover a number of case studies relative to retirement, FinTech, wealth management, and investment management firms. In addition to covering some perspectives on implementing behavioral insights teams, I also plan to provide some behind-the-scenes perspectives on applied research studies, such as the one Hal Hershfield, Shlomo Benartzi, and I worked on with Acorns (linked here at Marketing Science).

While organizations and companies have come a long way in terms of implementing behavioral economics, we are still in a relatively early phase with some organizations falling behind or missing out. 2023 will be a big year of change for me. Will it be for you? Please feel free to reach out to explore possibilities. Perhaps we can help one another in either academic (e.g., I have two new behavioral courses under development) or corporate settings.