Everyone's lost a lot of money on their 401k plans. I've heard some people calling them 201k plans. So it's even more important to get people to be saving more for retirement. Behavioral economics has helped us learn a lot about how to do that.

The reason is they failed to learned the primary lesson we should have learned from when Long Term Capital Management went belly up ten years ago. That is, investments that seem uncorrelated can be correlated simply because we're interested in it.

I think we also have learned the lesson that we have to have better incentive structures.

The money has to be deferred with what they call "clawback," which means they can get it back if I lose it all. So that guy making ten million a year selling credit default swaps, if we're going to keep five million of it in escrow for ten years, and with the right to go back and get it, if he starts losing money, then we're going to give people the right incentives not too take so much risk.

The assumption that everybody will figure out how much they have to save and then will just implement that plan is obviously preposterous.

In a typical 401k plan, when you first become eligible you get a big pile of forms and you're told, fill out these forms if you want to join. Tell us how much amount you've saved and how you want to invest the money. In, under automatic enrollment you get that same pile of forms but the top page says, if you don't fill out these forms, we're going to enroll you anyway and we're going to enroll you at this saving rate and in these investments.

he card companies will often, as a courtesy, honor that credit card, but hit you with a penalty. And you keep swiping your card for $3 at Starbucks for your latté, and you're getting hit with a $25 penalty because it's over your credit limit.