WEBVTT - Cass Sunstein on Behavioral Finance and Wealth 0:00:02.040 --> 0:00:06.000 This is Master's in Business with Barry rid Holds on 0:00:06.240 --> 0:00:09.520 Bloomberg Radio. 0:00:09.320 --> 0:00:13.640 This week on the podcast What Can I Say? Cass 0:00:13.840 --> 0:00:21.680 Sunstein is an intellectual force in American jurisprudence, law, behavioral finance, 0:00:21.880 --> 0:00:25.639 public policy. I don't even know where else to go. 0:00:26.480 --> 0:00:34.120 What a fascinating career and really incredibly interesting person. I 0:00:34.159 --> 0:00:37.760 guess life is easy when you're co authors are all 0:00:37.840 --> 0:00:43.360 Nobel laureates or George Lucas. He's just he's just done 0:00:43.440 --> 0:00:47.840 so many amazing things in a career that spans everywhere 0:00:47.920 --> 0:00:54.120 from the Supreme Court to the Chicago School of Business 0:00:54.160 --> 0:00:58.640 and the Chicago School of Law, Harvard Law School, and 0:00:59.240 --> 0:01:05.960 just multiple public policy positions, public service positions for the 0:01:06.000 --> 0:01:09.240 White House, for the Attorney General's Office, for the Pentagon. 0:01:10.080 --> 0:01:15.720 I mean, his influence is just so far reaching and 0:01:15.800 --> 0:01:20.440 fascinating you kind of forget that he also teaches law 0:01:20.800 --> 0:01:26.040 at Harvard. I found this conversation to be delightful, entrancing, 0:01:26.080 --> 0:01:29.920 and fascinating, and I think you will also, with no 0:01:30.000 --> 0:01:34.520 further ado, my sit down with Harvard Laws Cass Sunstein. 0:01:34.959 --> 0:01:37.560 Cass Sunstein, Welcome to Bloomberg. 0:01:37.800 --> 0:01:39.319 Thank you a great pleasure to be here. 0:01:39.680 --> 0:01:42.959 Thank you so much for joining us. So you co 0:01:43.040 --> 0:01:46.679 author two books with two Nobel laureates and you practically 0:01:46.680 --> 0:01:49.160 write a third one with George Lucas. How much fun 0:01:49.240 --> 0:01:49.520 is that? 0:01:50.280 --> 0:01:54.400 Well, I'd say it was amazing. Writing on Star Wars 0:01:54.560 --> 0:01:57.960 was crazy fun, yeah, and also a very unlikely thing 0:01:58.000 --> 0:02:00.880 for a law professor to do. Writing a book with 0:02:00.960 --> 0:02:04.240 Dick Taylor was not crazy fun, but was really fun 0:02:04.280 --> 0:02:05.639 because he's fun. 0:02:06.200 --> 0:02:10.320 There's nobody in the world of economics or behavioral finance 0:02:10.520 --> 0:02:12.840 like Dick Taylor. He's one of my favorite people. 0:02:13.040 --> 0:02:16.280 Agreed, he's unique, and writing with him was a joy 0:02:16.440 --> 0:02:21.040 and a laugh a minute. Writing with Danny Kahneman was astonishing. 0:02:21.320 --> 0:02:24.639 He's the most creative person I've ever met. He's also 0:02:25.160 --> 0:02:28.799 immensely self critical. He's almost as critical of his co 0:02:28.880 --> 0:02:32.400 authors as he is of himself. And it was a 0:02:32.639 --> 0:02:38.440 roller coaster and an incredible learning experience, and his integrity 0:02:38.560 --> 0:02:42.200 and sense of we can do better kept me up 0:02:42.320 --> 0:02:42.919 most nights. 0:02:43.200 --> 0:02:48.480 He supposedly agonizes over every word, every sentence. There. Nothing 0:02:48.800 --> 0:02:52.160 gets published without being looked over nine ways from something. 0:02:51.960 --> 0:02:54.760 That understates that. So you got an email maybe at 0:02:54.760 --> 0:02:58.320 four in the morning saying this chapter is horrible. I 0:02:58.320 --> 0:03:00.400 don't know how we could have written it. The whole 0:03:00.440 --> 0:03:02.600 book is horrible. I don't know why we decided to 0:03:02.600 --> 0:03:05.280 write it. And then two hours later he'd say, I 0:03:05.320 --> 0:03:07.919 see the fundamental flaw and we have to give up. 0:03:08.280 --> 0:03:10.720 And then an hour later, maybe four forty five in 0:03:10.760 --> 0:03:12.760 the morning, he'd say, I might have a way to 0:03:12.800 --> 0:03:15.360 correct the fundamental flaw, but I don't think so. And 0:03:15.360 --> 0:03:17.880 then at five point fifteen in the morning, I'll send 0:03:17.919 --> 0:03:20.040 you a note saying I have a glimmer of an insight. 0:03:20.120 --> 0:03:23.000 It's probably going to fail, but I'm going to try it. 0:03:23.040 --> 0:03:24.880 And then at five point forty five in the morning 0:03:24.919 --> 0:03:27.560 he says, I have a new draft of the entire 0:03:27.720 --> 0:03:30.400 chapter which was a catastrophe, and I'm sure this is 0:03:30.520 --> 0:03:33.160 very bad too, but it's less catastrophic. 0:03:34.080 --> 0:03:36.360 That sounds like. Just skip to the last one and 0:03:37.120 --> 0:03:39.600 read that. So we'll get into a lot of your 0:03:39.600 --> 0:03:42.520 writings a little later, but before I want to dive 0:03:42.560 --> 0:03:46.040 into your background. You graduate Harvard with a BA in 0:03:46.120 --> 0:03:50.120 seventy five, Harvard Law School in seventy eight. I assume 0:03:50.280 --> 0:03:53.880 the nineteen seventies were very different than the eighties and nineties, 0:03:54.200 --> 0:03:56.680 when so many people at places like Harvard Law. I 0:03:56.760 --> 0:03:59.520 wanted to go to Wall Street. What was that era 0:03:59.800 --> 0:04:02.200 like at an Ivy League law school. 0:04:02.600 --> 0:04:07.080 It was the aftermath of the nineteen sixties, so it 0:04:07.200 --> 0:04:11.760 was later than all the Civil rights and Vietnam stuff, 0:04:11.880 --> 0:04:17.120 but it was like a wave that was starting to recede, 0:04:17.160 --> 0:04:20.719 but extremely visible. So there were people who wanted to 0:04:20.760 --> 0:04:25.040 have great careers and whatever they could find. There were 0:04:25.040 --> 0:04:27.000 people who thought, I want to make the world better. 0:04:27.480 --> 0:04:29.200 There are people who thought, I'm kind of sick of 0:04:29.200 --> 0:04:31.200 people who want to make the world better. I don't 0:04:31.240 --> 0:04:34.800 want to be like that. And there were different categories 0:04:34.839 --> 0:04:37.599 of types. There was a lot of intensity. There was 0:04:37.600 --> 0:04:41.440 a sense that our country had been through something very 0:04:41.760 --> 0:04:45.440 traumatic and thrilling, and the question is in what direction 0:04:45.520 --> 0:04:47.440 were we going to go? It was pre Reagan era, 0:04:48.040 --> 0:04:50.279 and you could kind of see the dawn of the 0:04:50.279 --> 0:04:53.080 Reagan era and some of my classmates, and you could 0:04:53.080 --> 0:04:55.960 see even the dawn of some of the woke stuff 0:04:56.000 --> 0:05:00.680 today and some of my classmates critical race theory kind 0:05:00.680 --> 0:05:03.279 of about to be born, and you could see the 0:05:03.360 --> 0:05:05.720 origins of it there as well as you could see 0:05:05.760 --> 0:05:10.480 the Federal Society, which is the conservative movement that's had 0:05:10.520 --> 0:05:15.640 an amazing influence that the theoretical foundations were kind of 0:05:15.680 --> 0:05:19.080 being laid by twenty somethings in the seventies. 0:05:19.680 --> 0:05:23.200 Interesting, So you clerk for Justice Benjamin Caplan on the 0:05:23.240 --> 0:05:28.880 Massachusetts Supreme Court and then clerk for Justice Thurgood Marshal 0:05:28.960 --> 0:05:31.480 at the Supreme Court of the United States, and this 0:05:31.560 --> 0:05:34.480 is seventy nine eighty. Tell us a little bit about 0:05:34.520 --> 0:05:36.240 what those experiences were like. 0:05:36.960 --> 0:05:41.200 Well, Justice Kaplan on the Massachusetts Supreme Court, he's not 0:05:41.320 --> 0:05:44.680 in the history books, but he could be. He was 0:05:44.720 --> 0:05:50.159 a person who was fair and rigorous, and it's almost 0:05:50.240 --> 0:05:53.920 like there's one word for Caplin, fair and rigorous. And 0:05:54.400 --> 0:05:56.960 he was a little like Daddy Kahneman in the sense 0:05:57.000 --> 0:06:00.960 that he'd obsessed over every word. He also was very 0:06:00.960 --> 0:06:03.920 critical of himself, and he could be very critical of 0:06:03.960 --> 0:06:07.520 his clerks. At one point I was told before I started, 0:06:07.560 --> 0:06:09.640 he's going to take you in the equivalent of woodshed, 0:06:10.120 --> 0:06:12.760 and kind of threatened to fire you. And sure enough 0:06:12.800 --> 0:06:16.719 that happened, and I reacted with fire. I said to him, 0:06:16.760 --> 0:06:21.040 this is unfair. And it was quite an encounter. And 0:06:21.320 --> 0:06:23.240 the next day said are you still mad at me? 0:06:23.480 --> 0:06:26.800 Which was a recognition of my humanity, and I said, 0:06:26.800 --> 0:06:30.239 I still think you were unfair, and we became great friends, 0:06:30.360 --> 0:06:32.200 and I learned so much from him. He had been 0:06:32.200 --> 0:06:35.680 a Harvard professor, maybe the best Harvard professor of his generation, 0:06:36.200 --> 0:06:41.800 and he was an extraordinary judge. Marshall was the historic 0:06:41.920 --> 0:06:46.520 person and larger than life, and full of humor and 0:06:46.600 --> 0:06:51.839 wit and moral commitment that was never drawing attention to itself. 0:06:51.880 --> 0:06:54.560 It was more about the people. It was never about himself. 0:06:55.080 --> 0:06:58.839 And what I learned from Marshall is where lawyers typically 0:06:59.000 --> 0:07:02.880 at least of the supreme level, focus on paper and think, 0:07:03.000 --> 0:07:05.840 you know it was the argument solid is the other 0:07:05.920 --> 0:07:09.840 paper better papers, which lawyer has the better of, the 0:07:09.920 --> 0:07:14.560 argument on precedence, on statutes. Marshall, of course thought about 0:07:14.560 --> 0:07:17.600 all of those things, but he saw behind the paper 0:07:17.680 --> 0:07:21.640 people and that was an enduring lesson for me, that 0:07:21.680 --> 0:07:25.360 there was someone vulnerable or not vulnerable, but who was 0:07:25.480 --> 0:07:28.960 a person who was at risk in a case. And 0:07:29.000 --> 0:07:32.920 he always wanted to know who were those people and 0:07:33.760 --> 0:07:36.280 what were the actual stakes for them? And of the 0:07:36.600 --> 0:07:40.360 thousands or millions of similarly situated they might be investors, 0:07:40.400 --> 0:07:43.480 they might be workers, they might be companies, how would 0:07:43.480 --> 0:07:46.600 they be affected? And more than any justice at the time, 0:07:46.640 --> 0:07:49.160 and I think maybe more than any justice in history. 0:07:49.920 --> 0:07:51.160 That's what he put his finger on. 0:07:51.680 --> 0:07:53.880 So you finish up your clerkship and you go to 0:07:53.880 --> 0:07:56.240 the University of Chicago, where you end up staying as 0:07:56.240 --> 0:07:59.200 a professor for twenty seven years. That's a heck of 0:07:59.240 --> 0:08:02.800 a good run. What made Chicago such a special place 0:08:02.880 --> 0:08:03.640 to teach at. 0:08:04.000 --> 0:08:07.120 I did have something in between, i should say, which 0:08:07.280 --> 0:08:11.800 wasn't like a vacation in Paris or a time being 0:08:11.880 --> 0:08:16.400 a shoplifter. I had at the Department of Justice, where 0:08:16.440 --> 0:08:18.240 I worked for a year in an office called the 0:08:18.240 --> 0:08:21.640 Office of Legal Counsel under both Carter and Reagan, which 0:08:21.680 --> 0:08:25.160 advises the president on the legality of what he proposes 0:08:25.240 --> 0:08:25.480 to do. 0:08:25.760 --> 0:08:28.800 So not like the Solicitor General that's arguing in front 0:08:28.840 --> 0:08:32.520 of the Supreme Court. This is working directly with potus. 0:08:33.960 --> 0:08:40.400 Yes, and well, when you say directly, that's true. Except 0:08:40.400 --> 0:08:44.280 the number of meetings I had with President Reagan was zero. 0:08:44.760 --> 0:08:49.160 The number of mediated interactions I had with President Reagan 0:08:49.320 --> 0:08:51.880 was about five. And the amount of work that I 0:08:52.000 --> 0:08:56.320 did for the President was basically every day. So the 0:08:56.360 --> 0:08:59.000 Solicitor General's office argues the cases in front of the 0:08:59.040 --> 0:09:03.280 Supreme Court. The Officer of Legal Counsel resolves conflicts, eg. 0:09:03.480 --> 0:09:06.439 Between the State Department and the Defense Department, or if 0:09:06.440 --> 0:09:09.400 the president says, can I make a treaty? Or can 0:09:09.440 --> 0:09:11.840 I fire the air traffic controllers? Or can I do 0:09:11.920 --> 0:09:15.080 something about civil rights? The Office of Legal Counsel is 0:09:15.080 --> 0:09:19.080 the one that answers that question. And it's I think 0:09:19.120 --> 0:09:22.600 it's at least as interesting as the Solicitor General's office 0:09:23.200 --> 0:09:26.720 because you're not pleading to a court please agree with us. 0:09:27.000 --> 0:09:30.280 You're actually resolving a controversy. And it's kind of in 0:09:30.320 --> 0:09:33.320 between being a judge. You write opinions, kind of like 0:09:33.360 --> 0:09:37.160 a judge, and you are part of a political operation 0:09:37.360 --> 0:09:40.679 that is the executive branch. And if the president wants 0:09:40.720 --> 0:09:43.440 to do something, you're not indifferent to the fact that 0:09:43.480 --> 0:09:46.560 the president wants to do that. But saying no is 0:09:46.600 --> 0:09:50.680 a very honorable tradition in that office. And we said 0:09:50.760 --> 0:09:53.920 no plenty. And one reason you say no is the 0:09:53.960 --> 0:09:56.840 president has an obligation to take care of the laws 0:09:56.840 --> 0:09:59.679 be faithfully executed, right, and that's solemn. 0:10:00.040 --> 0:10:01.800 Do we still do that anymore? If we kind of 0:10:01.800 --> 0:10:02.200 waved that. 0:10:02.240 --> 0:10:07.000 Off, No, that still happens. So under recent presidents, all 0:10:07.080 --> 0:10:10.880 of them, the Office of Legal Consul has occasionally said no. Now, 0:10:10.920 --> 0:10:14.280 in some times, the Office of Legal Console is more 0:10:14.320 --> 0:10:20.839 politically let's say, what's the right word compromise. I want 0:10:20.880 --> 0:10:22.880 to use a softer word, but that's not I don't 0:10:22.920 --> 0:10:23.200 have to. 0:10:23.320 --> 0:10:26.960 I have no ties to the unity, so I could 0:10:27.040 --> 0:10:29.480 drop whatever bombs I want. I know, you need to 0:10:29.480 --> 0:10:30.800 be a touchpec. 0:10:31.960 --> 0:10:34.680 I think it is correct to say that the legal 0:10:34.720 --> 0:10:38.440 independence of the Office of Legal Console varies over time. Okay, 0:10:38.640 --> 0:10:43.880 but by tradition it is not just a lackey. And then, 0:10:44.040 --> 0:10:47.240 as you say, went to the University of Chicago. I 0:10:47.280 --> 0:10:50.600 went there because I was fearful that being a professor 0:10:50.640 --> 0:10:53.720 would be like retiring in your twenties. And I thought, 0:10:53.800 --> 0:10:55.120 that's not what I want to do. 0:10:55.480 --> 0:10:59.480 The last landed gentry in America are tenured professors. 0:10:59.320 --> 0:11:02.960 That's what I was fearful of. So I thought, you know, 0:11:03.000 --> 0:11:05.840 I was in the Justice Department. I had clerked for 0:11:05.920 --> 0:11:10.680 the Supreme Court. I had uh uh career plans and 0:11:10.720 --> 0:11:13.840 the idea of just uh sitting in an office and 0:11:13.880 --> 0:11:17.480 thinking what ideas do I have? That didn't feel really 0:11:17.559 --> 0:11:20.640 like living. It felt more like celtifying. But at the 0:11:20.720 --> 0:11:25.800 University of Chicago, the faculty was full of dynamism and energy, 0:11:26.280 --> 0:11:30.360 and whether they were producing new ideas about the economic 0:11:30.400 --> 0:11:34.400 analysis of law or new ideas about what freedom means, 0:11:34.480 --> 0:11:37.440 or new ideas about the securities law, it was like 0:11:37.920 --> 0:11:42.199 uh uh, it was electric. It was like Paris. And 0:11:42.360 --> 0:11:45.920 the University of Chicago Law School at that time was, 0:11:46.360 --> 0:11:49.880 you know, as lively an intellectual community as you know, 0:11:49.920 --> 0:11:52.200 they say, Vienna at one point was like that, and 0:11:52.240 --> 0:11:56.000 Berlin at one point was like that, and uh, Cambridge 0:11:56.000 --> 0:11:58.400 and Oxford at some points have been like that. Chicago 0:11:58.600 --> 0:11:59.079 was like that. 0:11:59.520 --> 0:12:02.480 Are you still a quote Chicago person? Through and through? 0:12:03.480 --> 0:12:08.679 I wouldn't say that. I think that everyone is themselves 0:12:09.960 --> 0:12:13.920 rather than the Chicago person or you know, new Yorker. 0:12:14.720 --> 0:12:18.640 Forgive me for those who consider themselves New Yorkers. There yourself. 0:12:19.040 --> 0:12:25.680 But I was certainly inspired by and influenced by the 0:12:26.000 --> 0:12:31.240 fact that at Chicago there was in his intense curiosity 0:12:31.960 --> 0:12:36.000 and a sense that trying to figure out what's true 0:12:36.800 --> 0:12:39.640 is thrilling and. 0:12:42.440 --> 0:12:42.840 Noble. 0:12:43.800 --> 0:12:46.960 So I saw Gary Becker, who won the Nobel and 0:12:47.160 --> 0:12:50.360 the great Chicago economists, who was almost a law professor, 0:12:50.400 --> 0:12:53.160 who was around all the time, man did he think 0:12:53.240 --> 0:12:56.319 I was full of nonsense? And when he would ask 0:12:56.360 --> 0:13:01.679 me questions in his workshop, the feeling of you are 0:13:01.920 --> 0:13:07.600 wrong was combined with a feeling of respect that I'll 0:13:07.880 --> 0:13:12.120 never forget. He was, you know, a giant, and I 0:13:12.360 --> 0:13:13.160 was a nothing. 0:13:13.520 --> 0:13:15.400 Wait wait, wait, I have to interrupt you here. So 0:13:16.240 --> 0:13:19.520 you come out of clerking not for one Supreme Court, 0:13:19.559 --> 0:13:22.719 but a state and the Supreme Court. Then you are 0:13:22.800 --> 0:13:26.200 serving the White House in the Office General Counsel, and 0:13:26.280 --> 0:13:30.160 suddenly you're a one l being pulled on again, feeling 0:13:30.200 --> 0:13:32.560 that like panic, rise, am I going to get this wrong? 0:13:32.600 --> 0:13:35.679 And being massed in front of everybody, Well, a little 0:13:35.760 --> 0:13:39.600 like that. So I was in my twenties, mind you, 0:13:39.800 --> 0:13:42.280 and I remember a dinner that Dick Posner had for 0:13:42.320 --> 0:13:44.480 me as a newcomer of the University of Chicago, and 0:13:44.520 --> 0:13:47.400 George Stigler, who was also a Nobel Prize guy, was 0:13:47.440 --> 0:13:49.520 there and he asked me what I taught. And I 0:13:49.559 --> 0:13:52.680 was teaching welfare law, and that was when I courses 0:13:52.720 --> 0:13:55.280 in Chicago in Chicago, and it was about the social 0:13:55.320 --> 0:13:59.000 security law and anti poveri law. George Stigler said that 0:13:59.040 --> 0:14:01.200 why would you teach that? There aren't any poor people 0:14:01.200 --> 0:14:04.320 in America. And he had written a paper showing that 0:14:04.360 --> 0:14:06.840 if you earn six dollars a week, or something purporting 0:14:06.880 --> 0:14:09.120 to show I should say, if you have six dollars 0:14:09.200 --> 0:14:12.400 a week, you're going to be fine. And my reaction 0:14:12.559 --> 0:14:15.920 to that was, your name may be Stigler, and you 0:14:15.960 --> 0:14:19.400 may have a Nobell, but I don't believe a second 0:14:19.560 --> 0:14:22.960 that that paper is correct. And he was much smarter 0:14:23.040 --> 0:14:25.760 and more learned than I was, and it was a 0:14:25.880 --> 0:14:32.440 terrible dinner. But I did have, back then maybe now 0:14:34.080 --> 0:14:36.560 a sense that, you know, I'm going to give him 0:14:36.560 --> 0:14:38.640 a best shot, and I didn't have a sense that 0:14:38.880 --> 0:14:43.200 I was necessarily wrong. And I remember Stigler's fierceness, and 0:14:43.520 --> 0:14:47.800 he was Becker was a great man who was respectful 0:14:47.840 --> 0:14:53.080 as well as skeptical. Stigler was contemptuous as well as curious. 0:14:54.040 --> 0:14:57.120 Who was this young fool who was at our dinner party. 0:14:57.320 --> 0:14:59.920 But Tick Posner, who was there, who was also a giant, 0:15:00.480 --> 0:15:06.440 was at that dinner. He was kind, so he saw 0:15:06.560 --> 0:15:11.760 I was in trouble because Stigler was so amazingly smart 0:15:11.800 --> 0:15:15.360 and quick. And Posner, who agreed with Stiegler, came to 0:15:15.400 --> 0:15:18.880 my defense and that was the start of a great friendship. 0:15:19.080 --> 0:15:23.280 That's really really quite interesting. And thank goodness there are 0:15:23.320 --> 0:15:26.560 no poor people in America, because just think about how 0:15:26.640 --> 0:15:29.840 uncomfortable would be to see homeless in big cities and 0:15:29.960 --> 0:15:32.960 people unable to pay for medical care. I mean, what 0:15:33.160 --> 0:15:36.000 sort of a country as that sort of thing? Yeah, 0:15:36.440 --> 0:15:37.960 I mean, thank goodness, he was right. 0:15:38.040 --> 0:15:40.720 Yeah, we probably need a progressive income tax or something, 0:15:41.320 --> 0:15:44.240 and jobs programs and educational opportunity. 0:15:44.440 --> 0:15:48.320 So here is the fascinating irony about your career starting 0:15:48.360 --> 0:15:52.040 in Chicago and now you've been at Harvard for quite 0:15:52.080 --> 0:15:54.840 a while, back and forth to public service, but still 0:15:54.880 --> 0:15:57.800 at Harvard Law School for quite a while. It seems 0:15:57.840 --> 0:16:02.360 like those are the endpoints on the intellectual spectrum, at 0:16:02.440 --> 0:16:06.280 least in terms of legal thought. Am I overstating that 0:16:06.400 --> 0:16:07.000 or is that fair? 0:16:07.360 --> 0:16:10.560 It's a great question. So Chicago, when I was there, 0:16:11.120 --> 0:16:15.880 was the center of right of center legal thought. It 0:16:16.040 --> 0:16:20.600 had a very large percentage of the most influential right 0:16:20.640 --> 0:16:24.160 of center people, and they were fantastic and they continue 0:16:24.200 --> 0:16:29.320 to be great friends. Harvard was the place where critical 0:16:29.520 --> 0:16:33.440 legal studies was born. It's kind of not a thing anymore, 0:16:33.560 --> 0:16:37.080 but that was the left of center to law and economics, 0:16:37.120 --> 0:16:39.640 which was the right of center, I thought. Even when 0:16:39.640 --> 0:16:41.920 I was at Chicago, though I wasn't right of center, 0:16:41.960 --> 0:16:46.640 I thought law and economics was extremely important and kind 0:16:46.640 --> 0:16:49.040 of on the right track. And I thought critical legal 0:16:49.040 --> 0:16:54.840 studies was a bunch of adjectives and nouns and not 0:16:54.880 --> 0:16:58.840 really adding up to much. But I admired at Harvard 0:16:59.000 --> 0:17:03.840 the contraditional law of people who were fantastically clear headed 0:17:03.880 --> 0:17:07.639 about the law, for sure. And I admired the students 0:17:07.640 --> 0:17:15.160 at Harvard who were so diverse in terms of intellectual 0:17:15.520 --> 0:17:22.960 interests and intellectual background and politics and everything. Chicago has 0:17:23.000 --> 0:17:26.919 intellectual diversity too, but it's just smaller. So I felt 0:17:26.960 --> 0:17:29.800 that Harvard was a little like New York City and 0:17:30.119 --> 0:17:37.080 Chicago was a little like Boston, smaller, more tightly connected 0:17:37.119 --> 0:17:38.240 everyone to everyone else. 0:17:38.800 --> 0:17:42.880 And I love them both. So you work at Harvard 0:17:42.960 --> 0:17:49.719 with some just legendary professors. Did you overlap with Guido 0:17:49.800 --> 0:17:52.720 Calabrisi when he was I think dean of you. 0:17:52.720 --> 0:17:54.640 You know, he was at Yale, and I know him 0:17:54.760 --> 0:17:58.840 very well and I love him dearly, and he's ninety 0:17:58.880 --> 0:18:02.720 something now, and he was a great influence on me 0:18:03.080 --> 0:18:08.760 and Harvard and Yale often have intellectual interactions that are 0:18:10.200 --> 0:18:14.600 breeding a friendship and Chicago and Yale also, and Calibrazy 0:18:14.840 --> 0:18:19.199 was a founder of economic analysis of law and a 0:18:19.240 --> 0:18:24.160 little more, let's say, focused on poor people and people 0:18:24.160 --> 0:18:27.520 are struggling than Chicago economics. So there's a Yale school 0:18:27.520 --> 0:18:32.240 in Chicago school and Calibrazy. I can't quite say he 0:18:32.320 --> 0:18:35.480 was a mentor, but he feels like that to me. 0:18:35.760 --> 0:18:40.320 And Lawrence Tribe probably the pre eminent constitutional law scholar 0:18:40.560 --> 0:18:43.240 in the country. Is am I again, am I overstating that? 0:18:43.359 --> 0:18:44.720 Or is that a fair I. 0:18:44.680 --> 0:18:47.639 Think it's a little like basketball, and some people like 0:18:47.760 --> 0:18:50.680 Michael Jordan and some people like Lebron James and something. 0:18:51.720 --> 0:18:53.920 And Bill Russell, of course was the greatest winner of 0:18:53.960 --> 0:18:57.480 all time. Tribe was my teacher and oh really, and 0:18:57.600 --> 0:19:00.760 he was maybe of the three the most like Michael Jordan. 0:19:01.640 --> 0:19:08.440 His intellectual athleticism was and is next level, next level. 0:19:08.640 --> 0:19:11.640 And he was when when he was my teacher, he 0:19:11.800 --> 0:19:18.320 was charismatic, he was clear, he was bursting with ideas. 0:19:18.680 --> 0:19:21.720 He was writing his great treatise at the time, and 0:19:22.280 --> 0:19:29.120 it was a bonfire of thinking in a constructive bonfires destroyed. 0:19:29.160 --> 0:19:33.959 Tribe didn't destroy anything, and I thought he was dazzling, 0:19:34.200 --> 0:19:36.840 And he wrote a letter for me, actually for my 0:19:36.880 --> 0:19:40.719 Supreme Court clerkship with Justice Marshall, which I'm very grateful for. 0:19:40.840 --> 0:19:44.760 He's he's still a great friend, and you know he's 0:19:44.480 --> 0:19:47.520 he's in many ways he's different from me in the 0:19:47.600 --> 0:19:52.760 last years. Particularly he's more politically engaged in a way 0:19:52.840 --> 0:19:57.080 that is not my typical style. But I'm full of 0:19:57.119 --> 0:19:58.480 admiration for him. 0:19:58.520 --> 0:20:01.440 Really really quite interesting. So let's talk a little bit 0:20:01.480 --> 0:20:05.560 about this program. What leads to something like this coming about. 0:20:05.600 --> 0:20:09.320 It doesn't sound like your typical law school sort of 0:20:09.720 --> 0:20:11.159 class completely. 0:20:11.359 --> 0:20:15.119 So there has been, as I think everyone's aware now, 0:20:15.520 --> 0:20:19.680 an explosion of work in behavioral economics and behavioral science 0:20:19.800 --> 0:20:23.880 about human behavior. So we know how people depart from 0:20:23.920 --> 0:20:28.160 perfect rationality. So people are often focused on short term, 0:20:28.200 --> 0:20:33.000 not the long term. They're often unrealistically optimistic, their attention 0:20:33.160 --> 0:20:36.640 is limited. They can be manipulated because they'll focus on 0:20:36.640 --> 0:20:39.400 one or two features of let's say a product, rather 0:20:39.480 --> 0:20:42.560 than seven, and that means they'll get two features they 0:20:42.680 --> 0:20:45.840 like and five that they in the long run will despise. 0:20:46.080 --> 0:20:49.280 So we know a lot about that. This has major 0:20:49.320 --> 0:20:55.320 implications for law So with respect to fiduciary obligations, let's 0:20:55.320 --> 0:20:59.240 say a fiduciary, what do they have to tell people 0:20:59.480 --> 0:21:03.800 and what do they have to make clear to people 0:21:04.040 --> 0:21:07.160 and not just tell people? And behavioral science tells us 0:21:07.240 --> 0:21:10.760 a lot about that. If we're thinking about free speech 0:21:10.840 --> 0:21:14.399 law and we're thinking about the marketplace of ideas, behavioral 0:21:14.440 --> 0:21:18.159 science behavioral economics might tell us something about how people 0:21:18.240 --> 0:21:23.120 get confused or fooled. If we're talking about property law, 0:21:23.240 --> 0:21:26.199 toward law or contract law, there has to be a 0:21:26.280 --> 0:21:28.040 sense of how people are going to react to what 0:21:28.080 --> 0:21:30.479 the law is doing. So if the law has a 0:21:30.480 --> 0:21:32.960 default term, let's say that you have to perform in 0:21:33.000 --> 0:21:37.160 a reasonable time, and let's say the company that's doing 0:21:37.200 --> 0:21:40.320 the performance thinks a reasonable time means maybe next year. 0:21:41.240 --> 0:21:43.879 What does the law do about that? And so there 0:21:43.640 --> 0:21:47.520 are are zillion questions. Algorithms in AI are kind of 0:21:47.560 --> 0:21:50.399 top of mind now for the law to try to 0:21:50.560 --> 0:21:54.720 figure out that have a behavioral feature, and that's that's 0:21:54.800 --> 0:21:57.120 kind of what we're doing with our program. 0:21:57.119 --> 0:22:02.280 That sounds really interesting, assuming since you co authored Nudge 0:22:02.280 --> 0:22:07.000 with Dick Thaylor, which came first working with Sailor or 0:22:07.080 --> 0:22:11.600 the program on behavioral economics and public policy. 0:22:11.760 --> 0:22:14.800 I'll tell you a story. Before I met Faylor, I 0:22:15.080 --> 0:22:21.120 was overwhelmed the best way by the work of conomin University, 0:22:21.359 --> 0:22:24.919 a failure. So I thought, this is the thing, and 0:22:24.960 --> 0:22:27.400 I started to work on some papers, one of which 0:22:27.440 --> 0:22:31.280 was called behavioral analysis of law. And then Taylor came 0:22:31.320 --> 0:22:34.919 to the University of Chicago and we started having lunch together, 0:22:35.600 --> 0:22:38.600 and I started working with him when he was working 0:22:38.640 --> 0:22:41.200 on a paper with a law professor named Christine Joels 0:22:41.200 --> 0:22:43.720 that I thought was going too slowly, and I said, 0:22:43.800 --> 0:22:46.320 if you don't write that paper, I'm going to write 0:22:46.400 --> 0:22:49.840 my paper and it might steal your thunder. It won't 0:22:49.840 --> 0:22:52.720 be as good as yours, but it'll be earlier. And 0:22:53.680 --> 0:22:56.919 Dick said, you know, this was a fantastic moment for me. 0:22:56.960 --> 0:22:58.880 He said, why don't you join us? And we wrote 0:22:58.920 --> 0:23:02.880 it together. So I was intrigued by the behavioral stuff 0:23:03.520 --> 0:23:06.400 before I met fayalor after I met Faylor, I had 0:23:06.400 --> 0:23:10.000 a the world's best partner on this stuff. And then 0:23:10.400 --> 0:23:15.480 when I went to Harvard our program that followed, and 0:23:15.800 --> 0:23:18.520 some of it involves nudges, some of it has nothing 0:23:18.520 --> 0:23:20.240 to do with nudges, but all of it has to 0:23:20.280 --> 0:23:21.480 do with behavioral science. 0:23:22.080 --> 0:23:26.520 So you also co wrote Noise with with Danny Kahneman. 0:23:27.400 --> 0:23:33.280 It seems that there's a theme in all your books, nudge, noise, sludge. 0:23:33.800 --> 0:23:39.120 You're constantly looking at the decision making process, and not 0:23:39.240 --> 0:23:42.800 just from an academic perspective, but how it affects people 0:23:42.840 --> 0:23:45.119 in the real world, how it affects organizations, how it 0:23:45.160 --> 0:23:49.200 affects individuals. Tell us a little bit about the integration 0:23:49.480 --> 0:23:53.440 of behavioral finance and behavioral economics with law. 0:23:54.320 --> 0:23:59.199 Okay, well, let's talk a little bit about groups, shall we. 0:24:00.920 --> 0:24:03.680 If you get a group of like minded people together, 0:24:04.440 --> 0:24:07.879 they typically end up thinking a more extreme version of 0:24:07.920 --> 0:24:10.760 what they thought before they started to talk. So if 0:24:10.800 --> 0:24:12.800 you get a group of people who tend to think, 0:24:12.880 --> 0:24:18.199 you know, we ought to invest in X. Take your pick, soap, 0:24:18.320 --> 0:24:20.520 there's new kind of soap, we ought to invest in X. 0:24:20.600 --> 0:24:23.879 That's the average view soap. Everyone needs to be clean 0:24:24.480 --> 0:24:27.480 and with climate change, soap it's going to be crazy 0:24:27.560 --> 0:24:31.879