Episode Transcript
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Speaker 1 (00:10):
What does it take to affect a significant career change?
How do you shift from a fairly safe, but perhaps
someone unsatisfying job into something that you really love. A
major career change does require some skills, some hard work,
and a little bit of luck. Today we're speaking with
(00:31):
Cass Sunstein. He is a professor at Harvard Law School. Previously,
he clerked for Supreme Court Justice Thurgood Marshal. He was
an attorney advisor in the US Department of Justice. He
spent over two decades teaching at the University of Chicago
Law School before joining Harvard, but he has also become
(00:53):
an author and a student of behavioral economics. So, Cass,
let's just jump into this. What was your original career plan?
Was the thinking I'm going to go be an attorney
and practice law.
Speaker 2 (01:08):
Yeah, that's what I thought. So I went to law school,
I got to clerk for the Supreme Court, and then
after that I worked for the Justice Department. And at
that point I thought I'd probably work for the Justice
Department in a good long time.
Speaker 1 (01:20):
And so what was the moment where you said, you know,
I'm going to play with teaching law and see where
that goes. Which is I don't know if I would
call that a career change, but certainly a pivot from
the practice of law.
Speaker 2 (01:36):
It was relatively early the law schools come to the
Supreme Court to interview the clerks to see if they
might be teaching material, and the University of Chicago Law
School knocked my socks off. And the way they did
that was their energy and engagement with problems that really
are intellectually super interesting and are also practically important. So
(02:01):
I thought they were all firecrackers there. And then when
I was in the Justice Department after a year, I thought,
maybe I'll go into teaching. I'll kind of explore Chicago,
And I thought this would be not a way of retiring,
but a way of doing something that was continuous with
my law practice but had a little more theory in it.
Speaker 1 (02:19):
So you spend twenty years teaching at the University of Chicago,
which is known for really fostering the entire field of
behavioral economics. You have Dick Faylor there, and you very
famously have Eugene Fama teaching there talking about market efficiency.
Tell us a little bit about how the University of
(02:40):
Chicago Law School affected how you thought about the practice
of law.
Speaker 2 (02:47):
When I got to Chicago, I was surrounded by economists
or economics adjacent lawyers who said, almost like it was
a prayer, that human beings are rational, they are responsive
to his incentives a man. And this was Ronald Coost
who got a Nobel Prize, Gary Becker, who got a
(03:08):
Nobel Prize, George Stigler who got a Nobel Prize. I
knew all of them before they got Nobel prizes. They
seemed to me like giants, and I felt like I
was two inches tall looking up at these eight foot
tall people who were amazing. But though I was only
tiny and they were so big, I felt they were wrong.
And I was a literature major in college, and I
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knew Shakespeare and Charles Dickens and Thomas Hardy, and I
also knew how economists play tennis, and it isn't fully rational.
I would see them and they'd be hitting these fourhands
they had no reason to try to hit, and it
would go into the net. And I thought, this rationality
stuff isn't right. So I started writing papers actually on
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departures from perfect rationality, and during the writing of one
of them, an economist who was a rational choice economists
said to me, the paper you're writing is terrible and
you shouldn't publish it. It's so awful you'll ruin your career.
But he added, there's someone who's almost as bad and
idiotic as you are at Cornell named Richard Thaylor. So
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he's a young economist who's hopeless, and your paper sounds
like his. You should read him, and then you should
stop writing your paper. And I did read him, but
then I got more excited about writing my paper. That's
how it started.
Speaker 1 (04:27):
So because of criticism of your work from the orthodoxy,
you were directed to somebody who was a little less heterodox,
a little more out on the fringe. What happened next?
Did you reach out to the young Dick thalor or
how did you guys connect?
Speaker 2 (04:45):
I did. I wrote a paper or two, maybe three
that were kind of informed by behavioral economics about law.
I did write Taylor a kind of fan letter, like
writing a rock star. It felt like saying, you know
you're great, you're amazing, you're incredible, and if you know
failor you won't be surprised to hear. He never responded
(05:06):
to my letter, but he did come to the University
of Chicago, and I think he reached out to me
and said, you want to have lunch, and we hit
it off immediately and then started being great friends and collaborators.
Speaker 1 (05:19):
And one of those collaborations was the book you two
co author, Nudge, Improving Decisions about Health, Wealth and Happiness.
Tell us a little bit about what that process was like,
co authoring a book with Dick Taylor, and what has
been the fallouts of this really terrible career ending decision
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you made.
Speaker 2 (05:42):
When at one of our first lunches, he said he
was writing a paper with an economist lawyer named Christine
Joels on behavioral economics at law. And I was very
excited about that. And as the weeks went by and
then months, they hadn't produced a draft, and I said, Dick,
you better do this paper or else I'm going to
do it instead, and it won't be as good because
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it's just me. And he said, why don't you join
us and we'll be a threesome. So we wrote the
paper together and we had a concluding section called anti
anti paternalism, in which we said we were in pro paternalism,
but knowing how human beings blunder, we are anti anti paternalism.
Now that's very clunky. And then a few years later
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we did a paper at academic paper on libertarian paternalism.
One was a law paper and one was an economics paper,
and that was just the two of us, and we
were very excited about that, and it turned out a
lot of people were interested in libertarian paternalism as a concept.
I think a GPS device or a disclosure requirement, or
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maybe automatic enrollment in some kind of plan. All that
preserves freedom of choice, but it's kind of paternalistic. So
we wrote these papers, and the interest in the papers
motivated us to think maybe we should do a book.
And originally it was going to be called Libertarian Paternalism.
I don't know if anyone would have bought that book.
An editor suggested the name Nudge, and that's what we
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went with. Dick is, you know, I think the most
creative and important force behind the rise of behavioral economics.
He's not really mathy, which is good for me because
I'm not that good at math. I brought law and
policy focus to the book. So we had lunch like
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all the time about what the chapters would look like,
and we planned out the chapters and one would write
one chapter, the other would write another chapter, and then
we go back and forth like a lot on the editing.
I think I was faster at chapter production than Dick was.
I think he was better at chapter production production than
(07:51):
I was, meaning mine would be quicker, his would be
more amazing and complete. And we were in our very
good editors of each other. We had a rule that
we kind of adopted implicitly early on and explicitly later,
which is, if we both didn't find the chapter fun,
we wouldn't put it in the book. So we both
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had to find it really fun. That was our rule
of inclusion.
Speaker 1 (08:14):
Huh, really really interesting. So I'm kind of fascinated by
the difference that you identified between on an individual basis,
especially with all the unforced errors you were describing amongst
the rational economists playing tennis literally a book Charlie Ellis wrote,
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Winning the Losers Game. Hey, if you want to win
a tennis and you're not a professional tennis player, well
just make fewer unforced error. Just just hit the ball
back over the net. Stop trying to kill it. You're
not that good. Which is a sort of individual dare
I say, nudge versus libertarian paternalism where you're setting up
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a society wide systematic structure where the default is nudging
people into the right choice. So, hey, you have to
check on the organ donor box on your license, yes
or no. And if you don't check anything, it's going
to be yes. You have to put your four oh
one k money. It could be in whatever you want, cash,
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bond stocks. But if you don't check the box, well,
here's a target date fund that's seventy thirty, sixty, forty whatever.
How do you think about both the individual behavioral options
versus system wide nudges?
Speaker 2 (09:38):
Okay, so it might be a good idea to tell
people you're automatically going to be in a savings plan
and if you don't want to opt out. Now, note
that that's not more paternalistic than saying you're not automatically
in a savings plan and if you want to have
to opt in. Both have a default which require action,
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and both are completely free to preserving. In lots of domains,
individuals benefit from, let's say, a choice architecture which has
a paternalistic feature but also maintains freedom. So I leased
a new car recently. If I start to go like
towards somebody that I'm about to hit is going to
go beat, beep, beep, and various unhappy noises or property
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or if I switch lanes, there are various things that
the car will signal to me which are nodges to
be more careful or drive more safely, and those are
at the individual level. At the system level, we can
imagine a grocery store and this isn't going to be
very imaginative at all on my part. A grocery store
that is full of nudges in the sense that it
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might have healthy foods at places that are super visible
for people, or it might have medicines. Let's say the
relevant population benefits from that are extremely easily accessed by
people who are there, and it might have, say, the
less healthy stuff there, but you're going to have to
do a little work to get there. Or it might
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be that the less healthy stuff is going to be
right there because the grocery shore knows that people really
like that. And website design is the same way. Investment
offerings have the same characteristic. If you go to a
financial advisor, there might be some libertarian paternalism. My financial
advisor certainly engages in that. It's implicit you can do
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what you want but if you're going to sell everything
because the President said something about tariffs, I think you're
going to regret it and maybe sleep on it. And
that's not just at the individual level. There can be
a system of investment advice that is kind of organized
for people. This is your neck of the woods, not mine,
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which is designed to promote better outcomes for savers.
Speaker 1 (11:52):
So what's so fascinating about this discussion is how far
afield we are from the traditional practice of law. When
did it kind of dawn on you that I went
to law school, I clerked at the Supreme Court, I
teach law. I'm not really going to be a practicing
(12:12):
lawyer anymore. How did that realization come to pass? And
did you have to make peace with it or were
you very comfortable with that decision?
Speaker 2 (12:22):
Well, the good news is there are twenty four hours
in a day, and you get to be awake during
the majority of them. So I teach administrative law most years,
that's kind of my bread and butter law course. I
write about constitutional law. I'm not going to say most days,
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but most months and maybe even most weeks. So I've
stayed there and through all the years. Sometimes I think
am I in an area that I understand less well,
that is economics, than the area that's kind of home,
which is law. If I'm feeling like that, I might
start doing law. But I should say the behavioral economics
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is what I like best. It makes me smile, it
makes me laugh, It creates a kind of sense of
excitement that law isn't quite there. I love law a lot,
I love legal problems a ton, but the behavioral economic
stuff seems to me the most exciting intellectual development in
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the last fifty years. Part of it is it's a
little like reading the best Charles Dickens novel that Dickens
never wrote. That is the behavioral economists are so observant
of humanity and our foibles, and I think there's comedy
and warmth in it. So to see that if you say,
you know ninety people are alive after five years, do
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you want to have their operation? People including doctors say, sure.
To tell people ten or dead after five years, do
you want to have the operation? People including doctors say,
probably not.
Speaker 1 (13:58):
But it's the same exist set of circumstances. It's ninety
ten or ten ninety.
Speaker 2 (14:03):
Yeah, exactly. So framing effects are really funny. I think
as well as you know usable and behavioral findings. You know,
there's a recent paper out that shows that for certain assets,
people have no idea what the right value is, and
so their willingness to pay for the assets will be
(14:25):
very variable because it's not like a shoe where if
you see certain prices, you think that's a deal or
that's crazy. For certain assets investors, including sophisticated ones, they
just have no idea what the right value is, and
that's very important to know. And we keep coming up
with streams of behavioral findings which are either small and
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important or large and quite fundamental. I was an international
conference in n Abu Dhabi not long ago. There were
seven hundred people approximately from all over the world, and
the findings they were described ibang were you know, felt
like a candy store.
Speaker 1 (15:05):
Huh. So final question, you seem to have very comfortably
shifted your focus from traditional practice of law to teaching
law to an adjacent field of behavioral economics. What sort
of advice would you have for anybody, lawyer or not,
(15:25):
who was thinking about a pivot in their career.
Speaker 2 (15:29):
Great, think what would make your days better? So if
you think of the pivot, imagine how's Monday, Tuesday, Wednesday, Thursday, Friday?
Go I look compared to how it's looking now. If
the pivot makes you think, boy, I'm going to be
overwhelmed with things I don't understand. I'm going to be anxious,
and I'm going to be poor, then maybe hesitate. If
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it makes you think rush every day is going to
be really fun and new and full of discovery and people.
Maybe if that's what you like, or engagements that are
something I've not seen before and they're likely to stand
the test of time, then go for it.
Speaker 1 (16:12):
Huh, really really interesting stuff. Thanks Cas for all your insight.
So to wrap up, if you're thinking about a career
change and you have an aptitude towards a particular research
area or a skill set, see if you're capable of
performing that and earning a living doing it. Be aware
merely pursuing your bliss may not pay the bills. You
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have to have both the skills and the tools and
the abilities to earn a living in your new career.
If you find you have the aptitude and you're good
at it, well why not go for it? I'm Barry Ridults.
You're listening to Bloomberg's at the money