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Speaker 1: What does it take to affect a significant career change?

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Speaker 1: How do you shift from a fairly safe, but perhaps

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Speaker 1: someone unsatisfying job into something that you really love. A

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Speaker 1: major career change does require some skills, some hard work,

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Speaker 1: and a little bit of luck. Today we're speaking with

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Speaker 1: Cass Sunstein. He is a professor at Harvard Law School. Previously,

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Speaker 1: he clerked for Supreme Court Justice Thurgood Marshal. He was

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Speaker 1: an attorney advisor in the US Department of Justice. He

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Speaker 1: spent over two decades teaching at the University of Chicago

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Speaker 1: Law School before joining Harvard, but he has also become

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Speaker 1: an author and a student of behavioral economics. So, Cass,

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Speaker 1: let's just jump into this. What was your original career plan?

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Speaker 1: Was the thinking I'm going to go be an attorney

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Speaker 1: and practice law.

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Speaker 2: Yeah, that's what I thought. So I went to law school,

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Speaker 2: I got to clerk for the Supreme Court, and then

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Speaker 2: after that I worked for the Justice Department. And at

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Speaker 2: that point I thought I'd probably work for the Justice

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Speaker 2: Department in a good long time.

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Speaker 1: And so what was the moment where you said, you know,

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Speaker 1: I'm going to play with teaching law and see where

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Speaker 1: that goes. Which is I don't know if I would

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Speaker 1: call that a career change, but certainly a pivot from

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Speaker 1: the practice of law.

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Speaker 2: It was relatively early the law schools come to the

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Speaker 2: Supreme Court to interview the clerks to see if they

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Speaker 2: might be teaching material, and the University of Chicago Law

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Speaker 2: School knocked my socks off. And the way they did

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Speaker 2: that was their energy and engagement with problems that really

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Speaker 2: are intellectually super interesting and are also practically important. So

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Speaker 2: I thought they were all firecrackers there. And then when

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Speaker 2: I was in the Justice Department after a year, I thought,

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Speaker 2: maybe I'll go into teaching. I'll kind of explore Chicago,

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Speaker 2: And I thought this would be not a way of retiring,

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Speaker 2: but a way of doing something that was continuous with

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Speaker 2: my law practice but had a little more theory in it.

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Speaker 1: So you spend twenty years teaching at the University of Chicago,

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Speaker 1: which is known for really fostering the entire field of

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Speaker 1: behavioral economics. You have Dick Faylor there, and you very

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Speaker 1: famously have Eugene Fama teaching there talking about market efficiency.

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Speaker 1: Tell us a little bit about how the University of

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Speaker 1: Chicago Law School affected how you thought about the practice

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Speaker 1: of law.

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Speaker 2: When I got to Chicago, I was surrounded by economists

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Speaker 2: or economics adjacent lawyers who said, almost like it was

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Speaker 2: a prayer, that human beings are rational, they are responsive

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Speaker 2: to his incentives a man. And this was Ronald Coost

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Speaker 2: who got a Nobel Prize, Gary Becker, who got a

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Speaker 2: Nobel Prize, George Stigler who got a Nobel Prize. I

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Speaker 2: knew all of them before they got Nobel prizes. They

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Speaker 2: seemed to me like giants, and I felt like I

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Speaker 2: was two inches tall looking up at these eight foot

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Speaker 2: tall people who were amazing. But though I was only

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Speaker 2: tiny and they were so big, I felt they were wrong.

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Speaker 2: And I was a literature major in college, and I

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Speaker 2: knew Shakespeare and Charles Dickens and Thomas Hardy, and I

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Speaker 2: also knew how economists play tennis, and it isn't fully rational.

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Speaker 2: I would see them and they'd be hitting these fourhands

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Speaker 2: they had no reason to try to hit, and it

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Speaker 2: would go into the net. And I thought, this rationality

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Speaker 2: stuff isn't right. So I started writing papers actually on

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Speaker 2: departures from perfect rationality, and during the writing of one

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Speaker 2: of them, an economist who was a rational choice economists

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Speaker 2: said to me, the paper you're writing is terrible and

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Speaker 2: you shouldn't publish it. It's so awful you'll ruin your career.

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Speaker 2: But he added, there's someone who's almost as bad and

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Speaker 2: idiotic as you are at Cornell named Richard Thaylor. So

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Speaker 2: he's a young economist who's hopeless, and your paper sounds

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Speaker 2: like his. You should read him, and then you should

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Speaker 2: stop writing your paper. And I did read him, but

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Speaker 2: then I got more excited about writing my paper. That's

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Speaker 2: how it started.

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Speaker 1: So because of criticism of your work from the orthodoxy,

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Speaker 1: you were directed to somebody who was a little less heterodox,

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Speaker 1: a little more out on the fringe. What happened next?

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Speaker 1: Did you reach out to the young Dick thalor or

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Speaker 1: how did you guys connect?

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Speaker 2: I did. I wrote a paper or two, maybe three

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Speaker 2: that were kind of informed by behavioral economics about law.

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Speaker 2: I did write Taylor a kind of fan letter, like

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Speaker 2: writing a rock star. It felt like saying, you know

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Speaker 2: you're great, you're amazing, you're incredible, and if you know

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Speaker 2: failor you won't be surprised to hear. He never responded

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Speaker 2: to my letter, but he did come to the University

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Speaker 2: of Chicago, and I think he reached out to me

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Speaker 2: and said, you want to have lunch, and we hit

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Speaker 2: it off immediately and then started being great friends and collaborators.

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Speaker 1: And one of those collaborations was the book you two

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Speaker 1: co author, Nudge, Improving Decisions about Health, Wealth and Happiness.

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Speaker 1: Tell us a little bit about what that process was like,

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Speaker 1: co authoring a book with Dick Taylor, and what has

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Speaker 1: been the fallouts of this really terrible career ending decision

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Speaker 1: you made.

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Speaker 2: When at one of our first lunches, he said he

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Speaker 2: was writing a paper with an economist lawyer named Christine

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Speaker 2: Joels on behavioral economics at law. And I was very

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Speaker 2: excited about that. And as the weeks went by and

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Speaker 2: then months, they hadn't produced a draft, and I said, Dick,

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Speaker 2: you better do this paper or else I'm going to

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Speaker 2: do it instead, and it won't be as good because

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Speaker 2: it's just me. And he said, why don't you join

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Speaker 2: us and we'll be a threesome. So we wrote the

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Speaker 2: paper together and we had a concluding section called anti

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Speaker 2: anti paternalism, in which we said we were in pro paternalism,

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Speaker 2: but knowing how human beings blunder, we are anti anti paternalism.

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Speaker 2: Now that's very clunky. And then a few years later

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Speaker 2: we did a paper at academic paper on libertarian paternalism.

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Speaker 2: One was a law paper and one was an economics paper,

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Speaker 2: and that was just the two of us, and we

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Speaker 2: were very excited about that, and it turned out a

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Speaker 2: lot of people were interested in libertarian paternalism as a concept.

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Speaker 2: I think a GPS device or a disclosure requirement, or

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Speaker 2: maybe automatic enrollment in some kind of plan. All that

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Speaker 2: preserves freedom of choice, but it's kind of paternalistic. So

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Speaker 2: we wrote these papers, and the interest in the papers

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Speaker 2: motivated us to think maybe we should do a book.

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Speaker 2: And originally it was going to be called Libertarian Paternalism.

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Speaker 2: I don't know if anyone would have bought that book.

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Speaker 2: An editor suggested the name Nudge, and that's what we

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Speaker 2: went with. Dick is, you know, I think the most

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Speaker 2: creative and important force behind the rise of behavioral economics.

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Speaker 2: He's not really mathy, which is good for me because

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Speaker 2: I'm not that good at math. I brought law and

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Speaker 2: policy focus to the book. So we had lunch like

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Speaker 2: all the time about what the chapters would look like,

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Speaker 2: and we planned out the chapters and one would write

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Speaker 2: one chapter, the other would write another chapter, and then

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Speaker 2: we go back and forth like a lot on the editing.

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Speaker 2: I think I was faster at chapter production than Dick was.

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Speaker 2: I think he was better at chapter production production than

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Speaker 2: I was, meaning mine would be quicker, his would be

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Speaker 2: more amazing and complete. And we were in our very

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Speaker 2: good editors of each other. We had a rule that

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Speaker 2: we kind of adopted implicitly early on and explicitly later,

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Speaker 2: which is, if we both didn't find the chapter fun,

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Speaker 2: we wouldn't put it in the book. So we both

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Speaker 2: had to find it really fun. That was our rule

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Speaker 2: of inclusion.

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Speaker 1: Huh, really really interesting. So I'm kind of fascinated by

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Speaker 1: the difference that you identified between on an individual basis,

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Speaker 1: especially with all the unforced errors you were describing amongst

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Speaker 1: the rational economists playing tennis literally a book Charlie Ellis wrote,

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Speaker 1: Winning the Losers Game. Hey, if you want to win

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Speaker 1: a tennis and you're not a professional tennis player, well

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Speaker 1: just make fewer unforced error. Just hit the ball back

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Speaker 1: over the net. Stop trying to kill it. You're not

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Speaker 1: that good. Which is a sort of individual dare I say,

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Speaker 1: nudge versus libertarian paternalism where you're setting up a society

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Speaker 1: wide systematic structure where the default is nudging people into

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Speaker 1: the right choice. So, hey, you have to check on

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Speaker 1: the organ donor box on your license, yes or no.

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Speaker 1: And if you don't check anything, it's going to be yes.

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Speaker 1: You have to put your four oh one k money.

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Speaker 1: It could be in whatever you want, cash, bond stocks.

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Speaker 1: But if you don't check the box, well, here's a

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Speaker 1: target date fund that's seventy thirty, sixty, forty whatever. How

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Speaker 1: do you think about both the individual behavioral options versus

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Speaker 1: system wide nudges?

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Speaker 2: Okay, so it might be a good idea to tell

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Speaker 2: people you're automatically going to be in a savings plan

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Speaker 2: and if you don't want to opt out. Now, note

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Speaker 2: that that's not more paternalistic than saying you're not automatically

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Speaker 2: in a savings plan and if you want to have

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Speaker 2: to opt in. Both have a default which require action,

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Speaker 2: and both are completely free to preserving. In lots of domains,

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Speaker 2: individuals benefit from, let's say, a choice architecture which has

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Speaker 2: a paternalistic feature but also maintains freedom. So I leased

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Speaker 2: a new car recently. If I start to go like

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Speaker 2: towards somebody that I'm about to hit is going to

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Speaker 2: go beat beep, beep, and various unhappy noises or property

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Speaker 2: or if I switch lanes, there are various things that

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Speaker 2: the car will signal to me which are nodges to

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Speaker 2: be more careful or drive more safely, and those are

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Speaker 2: at the individual level. At the system level, we can

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Speaker 2: imagine a grocery store and this isn't going to be

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Speaker 2: very imaginative at all on my part. A grocery store

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Speaker 2: that is full of nudges in the sense that it

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Speaker 2: might have healthy foods at places that are super visible

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Speaker 2: for people, or it might have medicines let's say the

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Speaker 2: relevant population benefits from that are extremely easily accessed by

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Speaker 2: people who are there, and it might have, say, the

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Speaker 2: less healthy stuff there, but you're going to have to

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Speaker 2: do a little work to get there. Or it might

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Speaker 2: be that the less healthy stuff is going to be

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Speaker 2: right there because the grocery shore knows that people really

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Speaker 2: like that. And website design is the same way. Investment

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Speaker 2: offerings have the same characteristic. If you go to a

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Speaker 2: financial advisor, there might be some libertarian paternalism. My financial

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Speaker 2: advisor certainly engages in that. It's implicit you can do

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Speaker 2: what you want, but if you're going to sell everything

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Speaker 2: because the President said something about tariffs, I think you're

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Speaker 2: going to regret it and maybe sleep on it. And

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Speaker 2: that's not just at the individual level. There can be

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Speaker 2: a system of investment advice that is kind of organized

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Speaker 2: for people. This is your neck of the woods, not mine,

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Speaker 2: which is designed to promote better outcomes for savers.

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Speaker 1: So what's so fascinating about this discussion is how far

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Speaker 1: afield we are from the traditional practice of law. When

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Speaker 1: did it kind of dawn on you that I went

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Speaker 1: to law school, I clerked at the Supreme Court, I

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Speaker 1: teach law. I'm not really going to be a practicing

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Speaker 1: lawyer anymore. How did that realization come to pass? And

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Speaker 1: did you have to make peace with it or were

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Speaker 1: you very comfortable with that decision?

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Speaker 2: Well, the good news is there are twenty four hours

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Speaker 2: in a day, and you get to be awake during

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Speaker 2: the majority of them. So I teach administrative law most years.

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Speaker 2: That's kind of my bread and butter law course. I

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Speaker 2: write about constitutional law. I'm not going to say most days,

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Speaker 2: but most months and maybe even most weeks. So I've

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Speaker 2: stayed there and through all the years. Sometimes I think,

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Speaker 2: am I in an area that I understand less well

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Speaker 2: that is economics, than the area that's kind of home,

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Speaker 2: which is law. If I'm feeling like that, I might

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Speaker 2: start doing law. But I should say the behavioral economics

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Speaker 2: is what I like best. It makes me smile, it

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Speaker 2: makes me laugh, It creates a kind of sense of

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Speaker 2: excitement that law isn't quite there. I love law a lot,

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Speaker 2: I love legal problems a ton, but the behavioral economic

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Speaker 2: stuff seems to me the most exciting intellectual development in

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Speaker 2: the last fifty years. Part of it is it's a

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Speaker 2: little like reading the best Charles Dickens novel that Dickens

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Speaker 2: never wrote. That is the behavioral economists are so observant

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Speaker 2: of humanity and our foibles, and I think there's comedy

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Speaker 2: and warmth in it. So to see that if you say,

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Speaker 2: you know ninety people are alive after five years, do

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Speaker 2: you want to have their operation, People including doctors say sure.

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Speaker 2: If you tell people ten or dead after five years,

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Speaker 2: do you want to have the operation, people including doctors

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Speaker 2: say probably not.

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Speaker 1: But it's the same exist set of circumstances. It's ninety

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Speaker 1: ten or ten ninety.

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Speaker 2: Yeah, exactly. So framing effects are really funny. I think

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Speaker 2: as well as you know usable and behavioral findings. You know,

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Speaker 2: there's a recent paper out that shows that for certain assets,

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Speaker 2: people have no idea what the right value is, and

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Speaker 2: so their willingness to pay for the assets will be

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Speaker 2: very variable because it's not like a shoe where if

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Speaker 2: you see certain prices, you think that's a deal or

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Speaker 2: that's crazy. For certain assets investors, including sophisticated ones, they

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Speaker 2: just have no idea what the right value is, and

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Speaker 2: that's very important to know. And we keep coming up

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Speaker 2: with streams of behavioral findings which are either small and

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Speaker 2: important or large and quite fundamental. I was an international

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Speaker 2: conference in n Abu Dhabi not long ago. There were

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Speaker 2: seven hundred people approximately from all over the world, and

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Speaker 2: the findings they were described ibang were you know, felt

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Speaker 2: like a candy store.

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Speaker 1: Huh. So final question, you seem to have very comfortably

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Speaker 1: shifted your focus from traditional practice of law to teaching

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Speaker 1: law to an adjacent field of behavioral economics. What sort

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Speaker 1: of advice would you have for anybody, lawyer or not,

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Speaker 1: who was thinking about a pivot in their career.

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Speaker 2: Great, think what would make your days better? So if

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Speaker 2: you think of the pivot, imagine how's Monday, Tuesday, Wednesday, Thursday, Friday?

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Speaker 2: Go I look compared to how it's looking now. If

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Speaker 2: the pivot makes you think, boy, I'm going to be

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Speaker 2: overwhelmed with things I don't understand. I'm going to be anxious,

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Speaker 2: and I'm going to be poor, then maybe hesitate. If

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Speaker 2: it makes you think rush every day is going to

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Speaker 2: be really fun and new and full of discovery and people.

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Speaker 2: Maybe if that's what you like, or engagements that are

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Speaker 2: something I've not seen before and they're likely to stand

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Speaker 2: the test of time, then go for it.

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Speaker 1: Huh, really really interesting stuff. Thanks Cas for all your insight.

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Speaker 1: So to wrap up, if you're thinking about a career

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Speaker 1: change and you have an aptitude towards a particular research

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Speaker 1: area or a skill set, see if you're capable of

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Speaker 1: performing that and earning a living doing it. Be aware

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Speaker 1: merely pursuing your bliss may not pay the bills. You

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Speaker 1: have to have both the skills and the tools and

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Speaker 1: the abilities to earn a living in your new career.

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Speaker 1: If you find you have the aptitude and you're good

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Speaker 1: at it, well why not go for it? I'm Barry Ridults.

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Speaker 1: You're listening to Bloomberg's at the money