The Effects of Defaults on Decisions

The Q3E's are essentially E's avoiding work or being lazy endorsement. The last one is endowment that when I actually have something that's defaulted, I think about it as if I own it. What's going on in the mind of the decision maker? Is it laziness? Is it trust? Like you just believe in what's being presented to you?

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The decisions we make may be further out of our control than we’d like to imagine. Today we are joined by Professor Eric J. Johnson to discuss choice architecture and its role in financial decision-making. Eric is a decision science expert and the author of the book, The Elements of Choice: Why the Way We Decide Matters. In this episode, we learn about the various factors that impact not only decision-making but the effort required to make a decision. Eric shares his philosophy on free will and shares advice for making important decisions and guiding clients to find the right choice as a financial advisor. Tune in to discover how to minimize the influence of the choice architect and take charge of your decisions!

Key Points From This Episode:

• Introducing Professor Eric J. Johnson and this week’s topic: financial decision-making. (0:00:26)

• The hidden partner that accompanies us when we make decisions. (0:03:42)

• How design choices impact our decisions. (0:04:54)

• The plausible path: what it is and how we choose it. (0:06:00)

• Advice for making important decisions. (0:08:21)

• The impact of recent events on decision-making. (0:10:33)

• How to be your own choice architect. (0:12:15)

• Factors impacting the effort required to make a decision. (0:13:22)

• The impact of default choices and what influences them. (0:16:09)

• How choice architecture can help people find the right choice. (0:20:17)

• The influence of sorting on what people choose. (0:25:18)

• How the order of options being presented and the way they’re described impact decisions. (0:26:54)

• How exponential growth bias influences long-term decisions and how financial advisors can help clients understand the impact. (0:31:45)

• The effectiveness of Netflix as a choice engine, the role choice engines play in educating users, and the value of just-in-time education. (0:35:04)

• The impact of social media on people’s attention and intentions. (0:40:08)

• Eric shares his philosophy on free will and the factors impacting our choices. (0:42:55)

• How to minimize the influence of the choice architect. (0:44:16)

• What financial advisors can do to be most useful to their clients. (0:46:00)

• How Eric defines success in his life. (0:50:12)

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Participate in our Community Discussion about this Episode:

https://community.rationalreminder.ca/t/episode-240-prof-eric-j-johnson-choice-architecture-and-financial-decisions-discussion-thread/22037

Book From Today’s Episode:

The Elements of Choice — https://theelementsofchoice.com/