If people just put away what's left at the end of the month, that's a recipe for failure.
Richard ThalerCredit cards have been extremely profitable to banks. They're profitable not from the fees they collect from the retailers that use the credit cards, that pays the bills, but the real profits come from the interest payments and the charges to users that are unexpected.
Richard ThalerThe 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.
Richard ThalerRecall that people like to do what most people think it is right to do; recall too that people like to do what most people actually do.
Richard ThalerWhen should we nudge and when should we shove, I think, it's a political judgment. Obviously in some situations we need shoves, we need laws. Fraud is against the law, murder is against the law, drunk-driving is against the law. We don't need just nudges.
Richard ThalerThe 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.
Richard Thaler