We have very strong intuitions about all kinds of things โ our own ability, how the economy works, how we should pay school teachers. But unless we start testing those intuitions, weโre not going to do better.
Dan ArielyWhat people do is they pay the small loans first. Why? Because they enjoy making the number of loans smaller. But of course it is a very ineffective way to pay debt down.
Dan ArielyRainy day savings are incredibly important, because from time to time, bad things happen. And if you're not prepared for that, it's going to be really terrible.
Dan ArielyMoney actually becomes even more difficult than other things because it's very hard to imagine what the benefits are to saving. So, imagine that you see a new bicycle, a new pair of shoes, or something today. You know exactly what you are giving up if you are not buying it, what are you gaining in the future if you are not getting it. So, you are giving up the bicycle today, what is it in the future? What will happen if you send another $1,000 to your retirement fund? What difference will it make? It is very, very hard to figure out.
Dan ArielyWe should teach the students, as well as executives, how to conduct experiments, how to examine data, and how to use these tools to make better decisions.
Dan ArielyWho would you trust right now? Which bank would you trust? Which investment would you trust? Do you really want to put your money; do you want to suffer more of these losses that we just had? You know, these volatility that we see is just unexplainable by any rational standards. Nobody has any clue about how to explain this, and nobody wants to experience that. So, we hold more money back, we don't necessarily want to invest in the market and by default, people are saving more.
Dan Ariely