Talking Behavioral Finance with Nobel Prize Winner Dr. Richard Thaler (FvF Ep. 192)

In this special live episode of Facts vs Feelings from Carson's Second Quarter Summit in Chicago, Ryan Detrick and Sonu Varghese sit down with Nobel Prize-winning economist Dr. Richard Thaler for a conversation that ranges from NFL draft strategy to retirement savings design to why markets keep producing events that are statistically supposed to be impossible.

Thaler breaks down his "Loser's Curse" research on the NFL draft, explaining why top picks are systematically overvalued and why trading down is almost always the smarter move. Twenty years and a Nobel Prize later, teams have barely improved their ability to predict talent. The better-than-the-next-guy stat went from 52% to 53%.

The conversation covers Bob Shiller's work on excess market volatility, what it actually means when 10-sigma events keep showing up every decade, and why the coming wave of major IPOs is forcing index providers into decisions that are anything but passive.

On the behavioral side, Thaler walks through the three pillars that transformed 401k design: automatic enrollment, target date funds, and Save More Tomorrow and why the UK's approach to retirement mandates got the balance right. He also gets into mental accounting and why a $2 million gain in home equity has almost no impact on spending while a direct deposit hits a checking account and disappears immediately.

Key Takeaways: 

• NFL teams have had 20 years, full quant departments, and AI-powered scouting to improve on Richard Thaler's draft research. Their ability to rank players better than a coin flip moved from 52% to 53%. Tom Brady was picked 199.
• The first pick in the NFL draft is not worth six second-round picks. Trading down is the winning strategy, and trading a pick this year for a pick next year where the going rate is one round works out to roughly a 120% implied interest rate.
• When stocks get added to the S&P 500, the price pops. Andre Shleifer proved it in grad school with a paper called "Do Demand Curves Slope Down for Stocks?" The answer was yes, and it was controversial at the time. Now everyone knows it and the SpaceX IPO is about to test it at a scale the market has never seen.
• Buying an IPO on day one looks exciting and has historically cost investors around 30% in underperformance versus the market over the following three years, according to Jay Ritter's data.
• Making enrollment the default in 401k plans, rather than requiring employees to opt in, had a bigger impact on retirement savings rates than any amount of financial education. Which box comes pre-checked should be irrelevant. It isn't.
• A $2 million gain in home equity produces almost zero change in spending. The same money landing in a checking account gets spent. Mental accounting is not a quirk; it shapes how wealth actually moves through the economy, and you can't model the wealth effect without accounting for where the money sits.

This episode was recorded on 4 June 2026, prior to the SpaceX IPO on 12 June 2026.  Comments and opinions expressed at time stamp 18:40 and beyond regarding SpaceX and its anticipated public offering reflect information available at the time of recording.

Jump to:

0:00 - Live From Chicago Kickoff

0:35 - Sponsor Message From Pimco

1:13 - Welcoming Nobel Laureate Richard Thaler

2:31 - The NFL Draft Loser’s Curse

9:03 - Can You Fire Your Team

10:31 - Why Markets Swing Too Much

18:35 - IPOs Index Rules And Demand Shocks

24:24 - Live T-Shirt Toss Intermission

25:47 - Nudges That Fix Retirement Saving

34:33 - Education Versus Mandates In Policy

38:45 - Fees Transparency And Trust

41:09 - Mental Accounting And The Wealth Effect

45:13 - Final Thanks And Sign-Off

45:42 - Important Disclosures

Connect with Ryan:

• LinkedIn: https://www.linkedin.com/in/ryandetrick/

• X: https://x.com/RyanDetrick

Connect with Sonu:

• LinkedIn: https://www.linkedin.com/in/sonu-varghese-phd/

• X: https://x.com/sonusvarghese?lang=en

Questions about the show? We’d love to hear from you! factsvsfeelings@carsongroup.com

Transcript

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SPEAKER_03 0:01

Welcome to the Facts versus Feelings Podcast. Coming through the north each week with Ryan, Chief Market strategist and Son of Arke. Hello, Chicago! We are honored to be here. This is gonna be so much fun. You're fun at that uh Cubs game last night.

SPEAKER_01 0:24

Yeah, it was fun. Thank you all for being here. Good morning.

SPEAKER_03 0:27

This is a special live facts versus feelings from Chicago, Carson's second quarter summit. I know Sono, you have to do uh some promotions right now.

SPEAKER_01 0:38

Yeah, and we have to thank our friends at Pimco. Today's episode is brought to you by Pimco. If you're a financial advisor navigating the fast moving markets, geopolitical shifts of 2026. How are you leading your client conversations? Pimco's advisor forum is built to give you an edge. It's your destination for timely insights, practical advisor playbooks, and accrued interest with Greg Hall. That's a podcast for financial advisors and your clients. All of it's designed to help you turn insights into action. Follow Accrued Interest, that's a podcast. It's on Apple and Spotify. Learn more about the Advisor Forum at Pimco.com.

SPEAKER_03 1:13

So, Sono, you know, we've done close to 200 of these. 200 is coming up. Yeah. 200 is coming up. And we've never had a Nobel Prize winner on. Always a first time. Until now. We are so excited to welcome to the stage Dr. Richard Thaler. All right, it took you 10 minutes to get here. A full 10 minutes. A full 10 minutes. First things first. So one thing I think we all wonder. You see, like I won a Super Bowl. Where do I where do you keep a Nobel Prize? Where do you stash that?

SPEAKER_01 1:44

Is it is it an actual like statue? No, it's a medal.

SPEAKER_00 1:49

It's a medal. Okay. Um I can't tell you. There you go. Speaking of that's a bad first question. You can get an answer. I would sell it for the right price. Oh, right. What is the right price for that?

SPEAKER_01 2:03

I don't know. You know, supply and demand, Sony, supply and demand. And behavioral economics. No, everything you've done, Dr. Taylor, obviously, for most of you know, pioneer in the field of economics and decision making, all of that, introducing psychology into this. First question I have is what is the most favorite or maybe surprising finding you discovered when you got into the field as you were doing your research?

SPEAKER_00 2:30

You know, this is like asking uh which of is your favorite of child. Yeah. Um but I think maybe my my favorite paper is oddly about the National Football League draft. And uh the the reason is that it's a it's a mixture of decision making and organizations and markets. So if you're not an NFL fan, 30 seconds, every year they have a draft of new players. The worst team gets to pick first, they go through the league seven times plus a few other picks. About 40 years ago, uh the coach of the Dallas Cowboys, Jimmy Johnson, asked, how should we think about trades of picks? So these picks are traded. Uh if you have the first pick, how much should you ask from for somebody who wants it? And one of the owner, Jerry Jones is the owner, one of his partners was an engineer, and he took the data from maybe 40 of these trades, and uh my co-author and I interviewed him. And what I gather is he kind of wrote it all down and took out a piece of graph paper and drew a line and then assigned the values on that points. The first pick 3,000 points, and the last pick one, and the curve looks like this: very steep, so 3,000 to 1. Um you can trade that it that's called the chart in NFL circles. Um according to the chart, you can trade the first pick for the eighth and ninth picks or for half a dozen second-round picks. So the chart says the first pick is really, really valuable. And the question we and I I should say the guy who created that chart had no sense that that was value. That was just prices. Right? So you can see this goes right to efficient markets. He's saying these are what the prices are, but he doesn't know whether you get more from the first player than eight and nine or from six second-round players. So that's the question that uh Cade Massey, my former student, now Wharton professor, investigated about 20 years ago, and recently have looked back and so here the the main result of that paper is uh we call the paper the loser's curse.

SPEAKER_02 5:48

Okay.

SPEAKER_00 5:49

Uh the first pick is not worth six second-round picks. Uh the high picks are overvalued. And uh trading down is the winning strategy. Even more valuable is if you can trade a pick this year for a pick next year, the rule of thumb in the league is one round per year. So you can trade a second round pick this year for a first round pick next year. We calculate that to be about 120 percent interest rate. Um if you can lend at 120%, do it. Why not?

SPEAKER_03 6:38

Well, as a long-suffering Bengals fan, if you can please help them with the draft this upcoming season, I'd love that.

SPEAKER_00 6:44

Yeah, um you know, I'm available for the highest price. So the the uh so here's the update. Nothing's changed. So we published that paper 20 years ago. Every team in the league has at least one person who knows that paper. Many of the teams have an entire team of quants uh that are doing it. So we thought, okay, maybe they will have learned nothing. So I'll give you one stat. Uh think about what would have to be true for those prices to be right. It would have to be that the league is very good at deciding who the good player is. Okay. Right? So here's one fact to keep in mind Tom Brady was pick 199. And Bears fans, you can think of several first-round picks that uh didn't work out so well. So um for them to be really good at that, uh, we we compute what we call the better than the next guy stat, which is take any position, say quarterback, rank them in the order in which they're picked, and now ask, what's the chance that the nth guy is better than n plus one? So the third is better than the fourth, and so forth. If they're perfect, it's 100%. If they're coin flips, it's 50%. In the old paper, it was 52%.

SPEAKER_02 8:34

Okay.

SPEAKER_00 8:35

Now with AI and the combine and all these quants, it's 53%.

SPEAKER_01 8:44

After all that. And I should say a Nobel Prize, too. Right? And nobody's following your work. But actually, on the topic of sports, while we're here, last Sunday, Saturday, last Saturday, I was sitting and watching the Champions League final between Arsenal and Paris Saint-Germain. PSG, I'm an Arsenal fan, long-suffering Arsenal fan. Arsenal just won the Premier League, which is great. They lost the Champions League final. I was sitting and watching it with my son, doesn't watch a lot of you know sports on TV, you watch it every now and then. And Arsenal's lost, and he's like, you know what, I'm going to support PSG. And here I'm like, no, you can't do that. Right? And but I wanted to ask you, should we fire our teams if they lose?

SPEAKER_00 9:30

Oh, okay. So you yeah, you know, I did this podcast with Jon Stewart, and I accused him of suffering from status quo bias syndrome because he insists on uh rooting for the Mets. And uh, you know, I I told him I think it should be okay to fire your team.

unknown 10:02

Right.

SPEAKER_00 10:03

Now I don't know what and I think certainly think it's okay to fire your dad's team. Okay. Sorry, Sona. But you know, if he wants to go with PSG, you know, maybe Liverpool would be uh a dagger in the heart, but I think, you know, PSG.

SPEAKER_01 10:22

He's an OSU fan, thanks to his granddad, and you know, yeah, well that's a different support. So no, thank you. Go ahead, Roy.

SPEAKER_03 10:31

So I love this conversation about rational versus irrational, right? We work with literally the best financial advisors in the country here at Carson. They all have clients. Some are rational, some aren't. You are the founding father of behavioral finance, behavioral economics. Why is it that you can show someone data that says you should do this, yet we don't? And let me layer on one more. When it comes to markets, I think it's, you know, because people are involved, and they're gonna go that route. We had a six sigma event earlier this year when oil doubled virtually overnight. That is supposed to happen once every 4.2 billion years. Happened a couple months ago. Every year we have these six sigma events that aren't supposed to happen. Is it because humans are just irrational? Or take to take that however you want there.

SPEAKER_00 11:37

So well um yeah. I guess uh we're on the radio. Stuff happens. You can say it.

SPEAKER_03 11:46

We'll bleep it out.

SPEAKER_00 11:48

Uh so look, I think there the fact that you know oil doubled, well, um, you know, that that's an old goal, right? So but we seem to have 10 sigma events in the market once a decade. So w, you know, 2000, uh then the financial crisis, um COVID. COVID, and um what's going on now, I don't know. But um it look, my very good friend Bob Schiller, who uh was a co-conspirator in the behavioral finance world, he and I organized a meeting twice a year at the National Bureau of Economic Research. We did that for 30 years. And uh his famous result was that the market was too volatile. And the way he showed that is theoretically the market is the present value of future dividends, right? That's what you get. And if you calculate the ex post-rational present value of dividends, going back to 1870 or wherever good data starts, it's a line that looks like this. It doesn't really change. But prices look like this. Now, what does a rational world look like? The thing the the forecast must be less volatile than the thing you're forecasting. Right? Suppose you're the weather guy in Honolulu. Now, what should your forecast be? It should be 82 every day. Right? Now imagine one day you say 60, one day you say 90, right? That you can that can't be a rational forecast in in a city where the temperature is basically the same all the time. So that was Bob's uh target. Interesting, I convinced Bob that he had written a behavioral paper, uh, and he hadn't framed it that way. Uh it was like a statistical anomaly. Anomaly. Right? This thing is supposed to be less volatile than that thing. And uh he came and gave a talk at Cornell where I used to teach, and we went and took a walk, and uh I converted him. And um and interestingly, he won the Nobel Prize and had to share it with my colleague and golf buddy Gene Fama, and they're the father of efficient markets. Yeah, their views are about as opposite as they can be. And um but uh so I I think markets are more volatile than the theory says they should be, but the the problem is that what when prices look high, I I was quoted somewhere as saying, yeah, the price of, and I don't remember what it was, is stupidly high, but it might go up. Sure. And uh that's the way I feel about a lot of stuff that's happening right now.

SPEAKER_01 15:45

When do we stop calling these, let's say six sigma events, ten sigma events, when do we stop calling it anomalies and just say that's normal?

SPEAKER_00 15:54

No, well, I think they are anomalies. They're uh they're uh they're certainly unusual. We shouldn't be shocked to have surprises. Right. You know, it's just and and they seem to be coming more. It's kind of like climate change. So whether temperatures are going up, uh you can debate. What seems undebatable is that the weather has gotten more volatile. So there are more storms, there are more fires, there are more floods, right? So the wildfires in LA um more stuff like that is gonna happen. Those events will still be anomalies, but they'll be more frequent. And I don't know whether, I mean it's an interesting question, whether uh security markets are going to become more volatile.

SPEAKER_01 17:03

Um because by almost by definition, it's hard for the markets to price tail events. Some of them haven't happened in the past, but it seems like there is because every time something like this happens, the market reacts violently, probably more violently than you expect. Including, you know, recently with the oil price spike, right? It seemed like we were slowly moving into the war. Oil prices are going up, and then the war happened and the oil prices jumped even more.

SPEAKER_00 17:34

Well, it doesn't help that the war is gonna end tomorrow. Sure. And oh wait, no, it's not. So um I mean that one that one is hard, but um, you know, though that's events caused by uh political leaders. We don't need to go there. I mean, the the big uh AI boom and coming IPOs uh that right, nobody that that's the financial system creating its own storm. Sure. And um how we deal with that, I mean, it's interesting to ask whether the structure of capital markets now is better or worse than it was before, or are we I mean here here's a very wonky uh a very wonky question. The big IPOs that are coming, SpaceX, I guess will be the first one, the index providers are all talking about changing their rules. So for years, like the S P 500 was very cautious. You had to be around, you it had you had to wait, I think maybe a year. Right. And you have to be profitable. And you have to be profitable. And you had to have a certain m market cap. And and it was uh a very slow process. Um and a a good friend of mine, Andre Schleifer, uh Harvard professor, a paper he wrote when he was in grad school that was very controversial, showed that when stocks are added to the index, the price pops. We kind of all know that now, but that was that was that was an anomaly. I mean he called the paper, do demand curves slope down for stocks? And uh yes. Um now should they change the rules? Well, uh I think the most interesting aspect of this is there's not going to be any more passive investment strategies. This is an active decision every index provider is making as to whether to change their rules to make room for SpaceX. And now here are some empirical facts. Over time, uh when there's an IPO, on average the price goes up that day. So the initial price is too low. If you buy on that first day, you lose. About, I don't I don't remember, maybe 20 percent.

SPEAKER_01 21:11

Yeah, I think you underperform looking at Jay Ritter is a professor at Florida. I looked at the data, you underperform the market. If you buy on that first day of the IPO by about 30, 34 percent over the next three years.

SPEAKER_00 21:23

Okay, so those are the facts. And uh with those facts, the old rules seem to make sense. Where we running an index are not gonna include something on the first day that's predicted to go down by 25 percent. We're gonna wait until the smoke clears and then add it. Now, that's never been a big deal because we've never had such a huge IPO as what we're talking about now. But is now the time uh to switch and now keep in mind a very small Percentage of the shares are gonna float. So it they'll issue, say, four percent of this gigantic float. As I don't need to tell the people in this room that a lot of people are saying, how can I get some of that? Yes. The most popular question we get right now.

SPEAKER_01 22:43

Yes.

SPEAKER_00 22:43

Yeah. And um if if I could sell them some, I would. Uh but sounds like you'll sell anything for a price. I will. If the price, if the price is right, you know. You should sell. That I mean that gold medal, why not? Right? I don't look at it. Um so uh I think you know, it's interesting, you know, the University of Chicago many years ago created something called CRISP, um, which was uh database of stock prices.

SPEAKER_01 23:25

Yeah, going back into history like last hundred years.

SPEAKER_00 23:27

Starting in 1926. So yeah, it's uh a lot of data. And um we sold it about a year ago to Morningstar. Interesting. So Morningstar now owns Crisp. Why am I bringing up Crisp? Vanguard uses Crisp to create their large cap index.

SPEAKER_01 23:52

Right. It's not the SP 500, like you have the SPY IVV, Vanguard's large cap index follows the Crisp C RSP index. Right.

SPEAKER_00 24:01

And I can tell you there'd be a lot of discussions going on in the faculty lounge right now about what the rule should be. But uh apparently call Joe Mansueto, uh, who's the owner of Morningstar, although I doubt he's making this call. But um yeah, here's uh a business opportunity is for somebody to create an index fund that has the old rules.

SPEAKER_03 24:34

So you mentioned you know things valued a certain we're gonna give you something that probably has no value to it whatsoever, but you're gonna like it anyway. Um of our most popular questions last night is how do I get a shirt? Richard, here's your facts versus few. Okay. And we heard a lot. We heard a lot last night. How do I get one of these? As we wore these. So everyone, we're at the halfway point. Stand up. We've never done something like this. We're literally going to throw t-shirts out to everyone. So stand up, get a break, throw one out. You keep going, you keep going. How many left someone who'll have one? All right. I told you that before. Our podcast is not like other podcasts. I think that's a good one. Now I'm aware not everyone has one. It's okay. We made it a lot. Our friends at Wisdom Tree helped us with this. There's all the all of them are gonna be right outside that door, somewhere out there. So please feel free to get a shirt. But thank you everybody for that.

SPEAKER_01 25:56

And you can exchange if it's not the right size, you can exchange it at the formula too.

SPEAKER_03 26:00

Um, so we have about 20 minutes to go. One thing that I want to point out, I thought this is a fun story. We love stories, anecdotes. You've done incredible work on the idea of nudging people. Like the idea that when you talk to Jon Stewart, by the way, he that it's that Jon Stewart, yes, like the amazing conversation for an hour and a half. You guys, you know, hit a little friction on the idea. You think you can nudge people right away. He wanted a big change to make a change. The story that I loved uh that you talked about, and this is a little gross, but we're all friends. There's an issue in the airport in um Amsterdam. The men, when they used the urinal, well, their aim wasn't very good, if you know what I mean. And they put an image of a fly in there. So it gave them something to aim at. Their aim was 80% better. Just that little nudge really helped clean up. I love that example. What are some other examples of little tiny nudges that we've done, maybe in the world of finance, to really make significant changes down the line? And is that a true story? It's in your book. I mean, that's really happened, the fly story?

SPEAKER_00 26:58

Yeah, well, in fact, um my my wife's a photographer, and there's a big uh uh conference of of uh uh her tribe in Brussels going on right now, and she got uh text yesterday from uh somebody who took a picture of the urinal. There you go. So it's still there. Still there. Okay. And um the friend was saying, didn't your husband do this? And uh she put it, I don't, you know, draw the flies and the urinals. Um so are uh the flies I uh uh I'll take credit for are so that was your idea, the flies? No, no. Oh I just saw it and said, oh wow, that's a great example of a nudge. And uh because okay, so what is a nudge? A nudge is something that affects behavior that economists would say shouldn't. Uh in in my uh book called Misbehaving, I call these supposedly irrelevant factors, SIFs. So you put some target there, it shouldn't, you know, you're when you're standing there, you know what you're supposed to do. Uh by the way, if you have little kids, I've been told throwing a Cheerio in the Wow, I should try that. Can serve the same purpose. Um so when we started transitioning from the old uh defined benefit pension plans to 401ks, um, you know, no nobody really knew how to do it. And um so I started thinking about that and uh testified in Congress. Interestingly, I testified in a committee that was uh chaired by Bill Bradley, whose New York Knicks are having a uh run right now. Um but uh the the question I was asked is are are there ways to design those plans that will make them work better for the users? And when we first started looking at this, the biggest anomaly was many people failed to join the plan even with a big match. So if your company is matching your contributions dollar for dollar and you don't join for a few years, that's throwing money away. Sure. Right? I mean, you could put it into cash and double your money, right? You should do that. So uh how to fix this? Three things that came out of my research are now common in most plans. The first is automatic enrollment. Sure.

SPEAKER_01 30:25

So the default just uh is to enroll.

SPEAKER_00 30:31

So again, talk about supposedly irrelevant factors. Which box is ticked should not matter. But it does.

SPEAKER_01 30:41

In standard economics, in standard economic economics? It doesn't matter.

SPEAKER_00 30:44

Here, I'm gonna match you dollar for dollar on six percent of your pay, but you're gonna have to click a box, right? That that should not affect anything. So join make joining the default. That was step one. Step two is uh what should the default be? Uh these debates were going on during the uh George W. Bush administration, uh so early 2000s. Okay. And his labor department had rules saying you couldn't have a default that could go down in price. So the only default that the labor department would give their stamp of approval to was essentially cash or uh stable value funds, which I used to call um treasury bills with default risk. So you could invest in that. Um but the target date fund, which is now got most of the money, was illegal. Interesting. I didn't know that. Um so that was uh and by the way, the target date fund, which automatically rebalances, helps people because individual investors have negative market timing ability. They buy high and sell low. Whereas a target date fund just by rebalancing does the opposite. So that's better. And then the third was what uh we used to call save more tomorrow. It's now uh called automatic escalation. Uh the default, when we got people to have automatic enrollment, they used 3% as the start. Talk about irrelevant factors. The reason for that is way before we got any laws passed, companies were trying this and they were afraid to try it because they thought they could get sued for enrolling employees without explicit permission. And we got somebody in the Treasury Department to issue a ruling that this would be okay. And the way those things are generally written is you give an example. And the example was suppose a company enrolls people automatically at 3%. And here we are, stuck with 3%. Stuck with 3%. It's still six percent. It's still the most common. If you run a 401k plan, increase the starting level. But the other thing we suggested is if you if we can't do that, just automatically increase the contributions over time. We called that save more tomorrow because people always have more self-control in the future. Um and so the that's probably the most important success of this so-called nudge agenda.

SPEAKER_03 34:33

So we're winding down the latest facts versus feelings live from Chicago, second quarter summit with Carson. Um thank you to Pimco for setting this up. Our friends of Pimco, Richard, this has been amazing. Sono, we have about 10 minutes. So it's funny, guys. We have a bunch of questions. We literally haven't asked any of them. We're just we're just making it real. Hopefully, this is more fun.

SPEAKER_01 34:51

The the nudge and the 401k, and especially for advisors sitting here, because we are always in this, you know, Ryan, you mentioned something earlier, like we can show all the data, or financial advisors can show their clients all the data and say, you know what, now go make your decision. Hopefully you make the best decision. The other is, you know what, we're going to nudge you to be a better investor. And there's a third option, which is, you know, like in the 401k case, maybe the government could shove it down, you know, all of us and make a rule saying every company needs a 401k, every company needs to put 6% in as a match and put it in a target date front. Like the sh-I think the shove approach. Curious, how do you balance that? Even as a financial advisor, how do you balance out education for the client versus designing a choice architecture where they become better investors?

SPEAKER_00 35:45

Yeah, so this is a topic of some controversy.

SPEAKER_03 35:50

I think we like controversy on this podcast, so feel free.

SPEAKER_00 35:54

So I think um what they did in the UK was a pretty good solution. Uh so they passed a law that said that um every company with more than, and I don't know what the number is, say 10 or 20 employees has to offer the equivalent of a 401k plan uh and automatically enroll employees, but they can opt out.

SPEAKER_02 36:28

Okay.

SPEAKER_00 36:29

Okay, so the mandate is on the employer, um, not on the employee. Okay and they created sort of a default uh administrator. So if you don't want to go hire one of the uh T-Row or Fidelity or whatever to run this plan, and a lot of the big companies don't want to run small plans. Sure. So uh so they created this thing they call NEST. Uh and the way they started was the first year the uh saving rate was 1%. And that was just let's, you know eats them into it. Get yeah, the camel's nose under the tent, right? And then they've gradually gone up to 80%. So opt-out rates have been less than 10%. Wow. So to me, that's about right. So it's it's a mandate on the firms to make that as an option, not a mandate on the employees, but you get 90% of them in. The 10% of who are opting out, some of them will have a good excuse. And and uh if not, you know, mandates, I I mean, we're not gonna go into this, but I think the biggest mistake they made when they were designing uh ACA Obamacare was to have a mandate. And I blame the economists because the economists said without a mandate, then the the people will not join. Um so it turns out, so I was saying we don't need a mandate, just automatically enroll. Most people want health care. And then we got to run the experiment because the Supreme Court said the mandate was illegal, so they got rid of it, and it didn't unravel. And meanwhile, people hated the mandate, and you know, so they hate the mandate, although they love the product. Anyway, that's the world we live in.

SPEAKER_03 39:02

So every financial advisor in this room has to deal with one thing when it comes to clients or many things, but this one's certain. Fees, right? The idea of fees. They're fees. How are some ways, and I know you've done a lot of work on this, um, that you can help justify fees from a financial advisor's point of view versus just something that's transactual and mathematical?

SPEAKER_00 39:20

Oh well, I mean, g give your services away, you know. I think that that would be a good way to do it. Yeah. I don't know. Anybody I don't have a uh no, you know, I'm I am involved in a money management firm that has my name on it, Fuller and Thaler. Uh we charge for our funds. Um I I think if your fees are reasonable and transparent, then you know, I I don't think you need to be embarrassed about them. What I really hate is hidden fees, like, you know, I'm not staying in this hotel. I live two miles from here. So I stayed in my own bed last night. But when you get to a hotel and they tell you there's a resort fee and it's fifty dollars, and you know, where's the resort? Uh so uh I I'd say make your fees transparent and reasonable, and um then if they complain, say go find somebody else.

unknown 40:42

Yeah.

SPEAKER_03 40:43

Well, we have a couple more minutes. Sona, you can wrap it up. I'll just say, you know, from I know Sona feels this way myself. Um Barry's out here, Grant's out here. Uh we we really love working with all of you, right? Our research team. Uh, it's so much fun to get to do things like this, and we hear from you all the time. Uh it's a true honor. You know, we're not always going to be right, we're always we're wrong, but we're gonna be honest, upfront, actionable. So please just keep reaching out your regular ways. Um, we we we're here for you, and it's a true honor to get to work with all of you every single day. So, Sonu, it looks like we have about four minutes to begin with.

SPEAKER_01 41:14

I'll just second that first of all. Thank you for everything you do. We love working with all of you. And a lot of it is actually related to everything Dr. Taylor's research is on. And I'll finish up with that last question. Is uh standard economics theory would say money is fungible, right? Total wealth is what matters, but everyone sort of buckets things. You know, I'm gonna say for my kids' college in this bucket, I'm gonna do something, I need to remodel a bathroom, I'm gonna put that in some other bucket, say for retirement, other bucket. A lot of your research has looked into that. Talk about, I and I know a lot of advisors here use bucketing, that's literally on the back of you know, uh your research. Talk about that. Why individuals don't treat money money as fungible?

SPEAKER_00 42:03

Yeah, so you know, I think there's a great clip you can find online of Dustin Hoffman and Gene Hackman talking about their days as starving artists, and um Dustin Hoffman has asked Hackman to loan him some money. And they're in Dustin Hoffman's apartment, and Hackman says, you know, you you don't need any money. I saw in your kitchen you have these jars, and they all have money in them. Oh, you don't need any money. And Hoffman says, Yeah, but there's no money in the food jar. Right? So we we call that mental accounting, and you can argue whether that's smart or stupid. Um I mean Hoffman says that he learned that from his parents, and you see versions of that all around the world uh with various devices. I so I think look, firms do this too, right? All firms have budgets, and sometimes they're stupid. You know, sometimes like you can't I I'm looking for a CFO right now. No, you can't buy a new computer because the equipment budget is spent for this year. So I'm not sure what you're supposed to do for the next six weeks, but right, so uh that kind of budgeting can be dumb and it can be smart, and but I think uh one place where economists have been very resistant to this is in macro. People talk about a wealth effect. You can't talk about a wealth effect empirically without looking at mental accounting. Because essentially money in 401k plans has no effect on consumption.

SPEAKER_01 44:29

And the wealth effect is you know what stock prices have gone up, so I'm going to spend more or save less.

SPEAKER_00 44:34

Right. So the the marginal propensity to consume, uh if you remember that phrase, how much do you spend if something goes up? Retirement money for a 50-year-old, a zero effect. Uh home equity, zero. And that remains for your lifetime. Uh even people who are living in Chicago and then retire to Florida, they take the $2 million in home equity they have in Chicago and buy a $2 million house in Boca Ratan or whatever. So we can't talk about wealth effects without saying where the money is. And if you get money that shows up in your checking account, that gets spent.

SPEAKER_03 45:29

Right. Well, Dr. Thaler, this was amazing. Um, we really truly appreciate this. Get home safely for the long, long ride home.

SPEAKER_00 45:36

Yeah, Uber's got good drivers.

SPEAKER_03 45:39

But this was the latest episode of Facts versus Feelings, live from Chicago. Uh talking, what do I call it? Talking markets in the economy with Behavioral Economics with Dr.

SPEAKER_01 45:53

Taylor.

SPEAKER_03 45:54

Here we go. Everyone, thank you so much. We appreciate it. I think information provided on Facts versus Feelings with Sunovar Geeks and Ryan Dietrich are for general information only and are not intended to provide specific advice or recommendations for any individual. The statements and opinions of show guests may not be reflective of CWM LLC or its affiliates. Past performance is no guarantee of future results. All indices are unmanaged and may not be invested in directly. Investing involves risk, including possible loss of principal. No strategy assures success or protects against loss. To determine what may be appropriate for you, consult with your attorney, accountant, financial, or tax advisor prior to investing. Guests on facts versus feelings are not affiliated with CWM or LLC.