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At The Money: Cass Sunstein on Shifting Your Career Focus · Masters in Business

• 0:10
  Speaker 1: What does it take to affect a significant career change?
• 0:15
  Speaker 1: How do you shift from a fairly safe, but perhaps
• 0:19
  Speaker 1: someone unsatisfying job into something that you really love. A
• 0:24
  Speaker 1: major career change does require some skills, some hard work,
• 0:28
  Speaker 1: and a little bit of luck. Today we're speaking with
• 0:31
  Speaker 1: Cass Sunstein. He is a professor at Harvard Law School. Previously,
• 0:36
  Speaker 1: he clerked for Supreme Court Justice Thurgood Marshal. He was
• 0:41
  Speaker 1: an attorney advisor in the US Department of Justice. He
• 0:44
  Speaker 1: spent over two decades teaching at the University of Chicago
• 0:48
  Speaker 1: Law School before joining Harvard, but he has also become
• 0:53
  Speaker 1: an author and a student of behavioral economics. So, Cass,
• 0:59
  Speaker 1: let's just jump into this. What was your original career plan?
• 1:03
  Speaker 1: Was the thinking I'm going to go be an attorney
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  Speaker 1: and practice law.
• 1:08
  Speaker 2: Yeah, that's what I thought. So I went to law school,
• 1:10
  Speaker 2: I got to clerk for the Supreme Court, and then
• 1:13
  Speaker 2: after that I worked for the Justice Department. And at
• 1:15
  Speaker 2: that point I thought I'd probably work for the Justice
• 1:18
  Speaker 2: Department in a good long time.
• 1:20
  Speaker 1: And so what was the moment where you said, you know,
• 1:24
  Speaker 1: I'm going to play with teaching law and see where
• 1:27
  Speaker 1: that goes. Which is I don't know if I would
• 1:29
  Speaker 1: call that a career change, but certainly a pivot from
• 1:34
  Speaker 1: the practice of law.
• 1:36
  Speaker 2: It was relatively early the law schools come to the
• 1:40
  Speaker 2: Supreme Court to interview the clerks to see if they
• 1:43
  Speaker 2: might be teaching material, and the University of Chicago Law
• 1:47
  Speaker 2: School knocked my socks off. And the way they did
• 1:50
  Speaker 2: that was their energy and engagement with problems that really
• 1:55
  Speaker 2: are intellectually super interesting and are also practically important. So
• 2:01
  Speaker 2: I thought they were all firecrackers there. And then when
• 2:03
  Speaker 2: I was in the Justice Department after a year, I thought,
• 2:06
  Speaker 2: maybe I'll go into teaching. I'll kind of explore Chicago,
• 2:09
  Speaker 2: And I thought this would be not a way of retiring,
• 2:12
  Speaker 2: but a way of doing something that was continuous with
• 2:15
  Speaker 2: my law practice but had a little more theory in it.
• 2:19
  Speaker 1: So you spend twenty years teaching at the University of Chicago,
• 2:23
  Speaker 1: which is known for really fostering the entire field of
• 2:29
  Speaker 1: behavioral economics. You have Dick Faylor there, and you very
• 2:33
  Speaker 1: famously have Eugene Fama teaching there talking about market efficiency.
• 2:38
  Speaker 1: Tell us a little bit about how the University of
• 2:40
  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
• 2:58
  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
• 3:06
  Speaker 2: who got a Nobel Prize, Gary Becker, who got a
• 3:08
  Speaker 2: Nobel Prize, George Stigler who got a Nobel Prize. I
• 3:11
  Speaker 2: knew all of them before they got Nobel prizes. They
• 3:14
  Speaker 2: seemed to me like giants, and I felt like I
• 3:17
  Speaker 2: was two inches tall looking up at these eight foot
• 3:20
  Speaker 2: tall people who were amazing. But though I was only
• 3:23
  Speaker 2: tiny and they were so big, I felt they were wrong.
• 3:27
  Speaker 2: And I was a literature major in college, and I
• 3:31
  Speaker 2: knew Shakespeare and Charles Dickens and Thomas Hardy, and I
• 3:34
  Speaker 2: also knew how economists play tennis, and it isn't fully rational.
• 3:40
  Speaker 2: I would see them and they'd be hitting these fourhands
• 3:43
  Speaker 2: they had no reason to try to hit, and it
• 3:45
  Speaker 2: would go into the net. And I thought, this rationality
• 3:49
  Speaker 2: stuff isn't right. So I started writing papers actually on
• 3:53
  Speaker 2: departures from perfect rationality, and during the writing of one
• 3:57
  Speaker 2: of them, an economist who was a rational choice economists
• 4:02
  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.
• 4:08
  Speaker 2: But he added, there's someone who's almost as bad and
• 4:11
  Speaker 2: idiotic as you are at Cornell named Richard Thaylor. So
• 4:14
  Speaker 2: he's a young economist who's hopeless, and your paper sounds
• 4:19
  Speaker 2: like his. You should read him, and then you should
• 4:21
  Speaker 2: stop writing your paper. And I did read him, but
• 4:24
  Speaker 2: then I got more excited about writing my paper. That's
• 4:26
  Speaker 2: how it started.
• 4:27
  Speaker 1: So because of criticism of your work from the orthodoxy,
• 4:34
  Speaker 1: you were directed to somebody who was a little less heterodox,
• 4:38
  Speaker 1: a little more out on the fringe. What happened next?
• 4:41
  Speaker 1: Did you reach out to the young Dick thalor or
• 4:44
  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.
• 4:53
  Speaker 2: I did write Taylor a kind of fan letter, like
• 4:56
  Speaker 2: writing a rock star. It felt like saying, you know
• 5:00
  Speaker 2: you're great, you're amazing, you're incredible, and if you know
• 5:03
  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
• 5:08
  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
• 5:14
  Speaker 2: it off immediately and then started being great friends and collaborators.
• 5:19
  Speaker 1: And one of those collaborations was the book you two
• 5:22
  Speaker 1: co author, Nudge, Improving Decisions about Health, Wealth and Happiness.
• 5:28
  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
• 5:35
  Speaker 1: been the fallouts of this really terrible career ending decision
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  Speaker 1: you made.
• 5:42
  Speaker 2: When at one of our first lunches, he said he
• 5:45
  Speaker 2: was writing a paper with an economist lawyer named Christine
• 5:48
  Speaker 2: Joels on behavioral economics at law. And I was very
• 5:52
  Speaker 2: excited about that. And as the weeks went by and
• 5:55
  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
• 6:02
  Speaker 2: do it instead, and it won't be as good because
• 6:05
  Speaker 2: it's just me. And he said, why don't you join
• 6:08
  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
• 6:14
  Speaker 2: anti paternalism, in which we said we were in pro paternalism,
• 6:18
  Speaker 2: but knowing how human beings blunder, we are anti anti paternalism.
• 6:24
  Speaker 2: Now that's very clunky. And then a few years later
• 6:27
  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
• 6:55
  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
• 7:13
  Speaker 2: creative and important force behind the rise of behavioral economics.
• 7:20
  Speaker 2: He's not really mathy, which is good for me because
• 7:22
  Speaker 2: I'm not that good at math. I brought law and
• 7:25
  Speaker 2: policy focus to the book. So we had lunch like
• 7:30
  Speaker 2: all the time about what the chapters would look like,
• 7:33
  Speaker 2: and we planned out the chapters and one would write
• 7:36
  Speaker 2: one chapter, the other would write another chapter, and then
• 7:39
  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.
• 7:47
  Speaker 2: I think he was better at chapter production production than
• 7:51
  Speaker 2: I was, meaning mine would be quicker, his would be
• 7:53
  Speaker 2: more amazing and complete. And we were in our very
• 7:58
  Speaker 2: good editors of each other. We had a rule that
• 8:01
  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,
• 8:09
  Speaker 2: we wouldn't put it in the book. So we both
• 8:11
  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
• 8:32
  Speaker 1: the rational economists playing tennis literally a book Charlie Ellis wrote,
• 8:37
  Speaker 1: Winning the Losers Game. Hey, if you want to win
• 8:39
  Speaker 1: a tennis and you're not a professional tennis player, well
• 8:43
  Speaker 1: just make fewer unforced error. Just hit the ball back
• 8:46
  Speaker 1: over the net. Stop trying to kill it. You're not
• 8:49
  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
• 9:10
  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.
• 9:21
  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
• 9:45
  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
• 9:55
  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
• 10:11
  Speaker 2: a new car recently. If I start to go like
• 10:14
  Speaker 2: towards somebody that I'm about to hit is going to
• 10:17
  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
• 10:43
  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
• 10:57
  Speaker 2: people who are there, and it might have, say, the
• 11:00
  Speaker 2: less healthy stuff there, but you're going to have to
• 11:03
  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
• 11:07
  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
• 11:34
  Speaker 2: going to regret it and maybe sleep on it. And
• 11:37
  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.
• 11:52
  Speaker 1: So what's so fascinating about this discussion is how far
• 11:56
  Speaker 1: afield we are from the traditional practice of law. When
• 12:02
  Speaker 1: did it kind of dawn on you that I went
• 12:06
  Speaker 1: to law school, I clerked at the Supreme Court, I
• 12:09
  Speaker 1: teach law. I'm not really going to be a practicing
• 12:12
  Speaker 1: lawyer anymore. How did that realization come to pass? And
• 12:17
  Speaker 1: did you have to make peace with it or were
• 12:19
  Speaker 1: you very comfortable with that decision?
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  Speaker 2: Well, the good news is there are twenty four hours
• 12:25
  Speaker 2: in a day, and you get to be awake during
• 12:28
  Speaker 2: the majority of them. So I teach administrative law most years.
• 12:34
  Speaker 2: That's kind of my bread and butter law course. I
• 12:38
  Speaker 2: write about constitutional law. I'm not going to say most days,
• 12:43
  Speaker 2: but most months and maybe even most weeks. So I've
• 12:46
  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
• 12:54
  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
• 13:01
  Speaker 2: start doing law. But I should say the behavioral economics
• 13:04
  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,
• 13:19
  Speaker 2: I love legal problems a ton, but the behavioral economic
• 13:23
  Speaker 2: stuff seems to me the most exciting intellectual development in
• 13:27
  Speaker 2: the last fifty years. Part of it is it's a
• 13:29
  Speaker 2: little like reading the best Charles Dickens novel that Dickens
• 13:33
  Speaker 2: never wrote. That is the behavioral economists are so observant
• 13:38
  Speaker 2: of humanity and our foibles, and I think there's comedy
• 13:43
  Speaker 2: and warmth in it. So to see that if you say,
• 13:45
  Speaker 2: you know ninety people are alive after five years, do
• 13:48
  Speaker 2: you want to have their operation, People including doctors say sure.
• 13:52
  Speaker 2: If you tell people ten or dead after five years,
• 13:54
  Speaker 2: do you want to have the operation, people including doctors
• 13:57
  Speaker 2: say probably not.
• 13:58
  Speaker 1: But it's the same exist set of circumstances. It's ninety
• 14:02
  Speaker 1: ten or ten ninety.
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  Speaker 2: Yeah, exactly. So framing effects are really funny. I think
• 14:07
  Speaker 2: as well as you know usable and behavioral findings. You know,
• 14:12
  Speaker 2: there's a recent paper out that shows that for certain assets,
• 14:17
  Speaker 2: people have no idea what the right value is, and
• 14:20
  Speaker 2: so their willingness to pay for the assets will be
• 14:25
  Speaker 2: very variable because it's not like a shoe where if
• 14:28
  Speaker 2: you see certain prices, you think that's a deal or
• 14:31
  Speaker 2: that's crazy. For certain assets investors, including sophisticated ones, they
• 14:35
  Speaker 2: just have no idea what the right value is, and
• 14:38
  Speaker 2: that's very important to know. And we keep coming up
• 14:42
  Speaker 2: with streams of behavioral findings which are either small and
• 14:47
  Speaker 2: important or large and quite fundamental. I was an international
• 14:52
  Speaker 2: conference in n Abu Dhabi not long ago. There were
• 14:54
  Speaker 2: seven hundred people approximately from all over the world, and
• 14:58
  Speaker 2: the findings they were described ibang were you know, felt
• 15:02
  Speaker 2: like a candy store.
• 15:05
  Speaker 1: Huh. So final question, you seem to have very comfortably
• 15:11
  Speaker 1: shifted your focus from traditional practice of law to teaching
• 15:16
  Speaker 1: law to an adjacent field of behavioral economics. What sort
• 15:22
  Speaker 1: of advice would you have for anybody, lawyer or not,
• 15:25
  Speaker 1: who was thinking about a pivot in their career.
• 15:29
  Speaker 2: Great, think what would make your days better? So if
• 15:34
  Speaker 2: you think of the pivot, imagine how's Monday, Tuesday, Wednesday, Thursday, Friday?
• 15:39
  Speaker 2: Go I look compared to how it's looking now. If
• 15:43
  Speaker 2: the pivot makes you think, boy, I'm going to be
• 15:46
  Speaker 2: overwhelmed with things I don't understand. I'm going to be anxious,
• 15:49
  Speaker 2: and I'm going to be poor, then maybe hesitate. If
• 15:53
  Speaker 2: it makes you think rush every day is going to
• 15:56
  Speaker 2: be really fun and new and full of discovery and people.
• 16:02
  Speaker 2: Maybe if that's what you like, or engagements that are
• 16:07
  Speaker 2: something I've not seen before and they're likely to stand
• 16:09
  Speaker 2: the test of time, then go for it.
• 16:12
  Speaker 1: Huh, really really interesting stuff. Thanks Cas for all your insight.
• 16:16
  Speaker 1: So to wrap up, if you're thinking about a career
• 16:19
  Speaker 1: change and you have an aptitude towards a particular research
• 16:23
  Speaker 1: area or a skill set, see if you're capable of
• 16:27
  Speaker 1: performing that and earning a living doing it. Be aware
• 16:31
  Speaker 1: merely pursuing your bliss may not pay the bills. You
• 16:34
  Speaker 1: have to have both the skills and the tools and
• 16:38
  Speaker 1: the abilities to earn a living in your new career.
• 16:42
  Speaker 1: If you find you have the aptitude and you're good
• 16:45
  Speaker 1: at it, well why not go for it? I'm Barry Ridults.
• 16:50
  Speaker 1: You're listening to Bloomberg's at the money