Thinking, Fast and Slow

by Daniel Kahneman

Save More Tomorrow is a financial plan that firms can offer their employees. Those who sign on allow the employer to increase their contribution to their saving plan by a fixed proportion whenever they receive a raise. The increased saving rate is implemented automatically until the employee gives notice that she wants to opt out of it. This brilliant innovation, proposed by Richard Thaler and Shlomo Benartzi in 2003, has now improved the savings rate and brightened the future prospects of millions of workers. It is soundly based in the psychological principles that readers of this book will recognize. It avoids the resistance to an immediate loss by requiring no immediate change; by tying increased saving to pay raises, it turns losses into foregone gains, which are much easier to bear; and the feature of automaticity aligns the laziness of System 2 with the long-term interests of the workers. All this, of course, without compelling anyone to do anything he does not wish to do and without any misdirection or artifice.

Great for people and Banks