Economist’s Journey to Nobel: Big Brains podcast with Richard Thaler

Show Notes

It has been a long journey for economist Richard Thaler, from early days struggling to get his research published to being honored with a Nobel Prize in October 2017.

Often dubbed as “one of the founding fathers of behavioral economics,” Thaler has worked to bridge the gap between psychology and economic theory to explain people’s often irrational economic decisions.

Transcript:

Paul Rand: From the University of Chicago, this is Big Brains with Paul M. Rand, conversations with pioneering thinkers that will change the way you see the world.

Paul Rand: It’s the final episode of our first season of Big Brains, and I was thrilled to get to talk with Nobel Prize-winning economist, Richard Thaler for this extra long episode. In 2017, Richard won a Nobel Prize for his pioneering work as one of the founding fathers of behavioral economics, a field that has bridged the gap between psychology and economics, but his academic journey to the Nobel stage has been far from smooth.

Paul Rand: Throughout his career, Richard has faced skepticism from the economic establishment. But after two best-selling books at Cameo and the Oscar-nominated film, The Big Short and his Nobel win, Richard has come a long way from the early years of struggling to get his academic research published. I sat down with Richard at the Booth School of Business for a freewheeling discussion, we covered everything from his moment of discovery, thanks to a bowl of cashews, to working with Selena Gomez and of course, what it’s like to win a Nobel Prize.

Paul Rand: Richard, thank you for being here with us today. It’s an honor to have you.

Richard Thaler: Pleasure to be here.

Paul Rand: On the Big Brains podcast.

Richard Thaler: I’m glad you’re lowering your standards.

Paul Rand: So I’ve heard you tell before a story of how the world became clarity around a bowl of cashews. Can I trouble you to... Is that story what opened your mind to... There’s a different perspective here?

Richard Thaler: Well, I mean, I sometimes say that Newton had his apple, and I had my cashews. So there was... I think it’s only in retrospect that it’s not like some light bulb went off at the time or at least not a big light bulb. There might’ve been like a flash. But I mean, the story goes that when I was in grad school we had some fellow grad students over for dinner and there was some roast in the oven and we were having cocktails and I put out a big bowl of cashew nuts that people started devouring at a rapid rate. And after a few minutes I realized that our appetites were in danger. And so I took the bowl of cashews and hid it in the kitchen and came back and everybody thanked me. ‘‘Thank God you got rid of those cashews. We were going to eat those cashew nuts.’’ And then since it was a group of econ grad students we started analyzing this because that’s what-

Paul Rand: Why are they thanking you for taking away the nuts.

Richard Thaler: Yeah. So the analysis was A, we were happy; and B, we weren’t allowed to be happy because economic theory tells you that more choices are always better.

Paul Rand: Mm-hmm

Richard Thaler: So previously we had the choice, we could eat the nuts or not eat the nuts and now we didn’t have a choice, so we must be worse off, but we’re happy. That’s interesting. So I started a list that later became known as the list and it was just a list of stories like this-

Paul Rand: Okay.

Richard Thaler: Of things people do that... Well, to use the title of my recent book, that economists consider misbehaving because there... It’s behavior that is not predicted by economic theory.

Paul Rand: Can you just explain at the most simplistic level, what is behavioral economics and what did you do that made it worthy of getting a Nobel Prize?

Richard Thaler: There was a former University of Chicago graduate named Herb Simon, who did some work in this area and won the Nobel Prize. He correctly says that the term behavioral economics is... He uses a $20 word here, a pleonasm which is a redundant phrase. And he says, ‘‘Why do you need the adjective behavioral? What other kinds of economics could there be?’’ Presumably economics is about the behavior of consumers and firms that are run by people with employees who are people. And so why do you need that? And then he answers his own question, which is the reason why we need that term is because of the assumptions of what sometimes called standard economics and those assumptions are that people are really smart and no self-control problems. And so economics by design leaves out the behavior.

Paul Rand: You actually theorized and then began doing studies on, there’s economic theory but then when human behavior comes into the equation, some of that economic theory goes out the window. Is that basically it?

Richard Thaler: Well-

Paul Rand: Or do you explain it a different way?

Richard Thaler: So here’s the way I would explain it, is that the problem with economics is they use one theory for two different jobs and it’s only suited to one of them. And so the theory is that people choose by optimizing, I’m obviously simplifying all of economics into one sentence, but that’s the essence of it. Constrained optimization, meaning you have to live within your budget, but among all the things you could spend your money on, you choose the bundle that is best and much of economic theory figures out what that means. So for example, how should be people save for retirement? Well, Franco Modigliani won the Nobel Prize for solving the problem of what a rational person would do. It’s called the life cycle theory of saving. And it boils down to let’s say when you graduated from college and start earning money, you figure out how much you’re going to make over your lifetime.

Richard Thaler: How you’d like to smooth consumption during your work years and then after, how much you’re going to have to invest to achieve that, what rate of return you’re going to get, how long you’re going to want to work, blah, blah, blah, many things. And then you do a lot of math and you solve and this is what you ought to do. Okay now that’s a good theory if you want to teach somebody. Suppose we had a workshop for our students. How should you think about this problem now that you’re going to go out and have a real job? That would be the theory you would want to give them. Now there’s something else you might want to do, which is predict what people actually do. And so the problem with economic theory is that they use the same theory for that.

Paul Rand: Along with the prediction side.

Richard Thaler: Right.

Paul Rand: But I was thinking the human behavior side of it.

Richard Thaler: Right. So that theory is problematic because the task is hard in two ways. One is it’s cognitively difficult.

Paul Rand: Mm-hmm (affirmative)

Richard Thaler: It took a Nobel Prize winning... In fact, you could win a Nobel Prize by figuring that out.

Paul Rand: Figure? Okay.

Richard Thaler: Right? But then as soon as you figured it out, you just write, ‘‘Assume in front of all that math and you have a theory of what people do.’’ If it takes a Nobel Prize to figure it out, then maybe not everybody will figure it out. And then the second thing is you have to have the self-control to implement it. And so it’s no accident that one of the fields that I’ve devoted a lot of attention to is retirement savings. Because the economic theory doesn’t do a very good job of predicting what people will do and people need help. In another implication of the standard theory is there’s no need to help anybody-

Paul Rand: Because they’ll make rational choices.

Richard Thaler: Right. They’re doing it right. So, yeah. So my former university of Chicago colleague Cass Sunstein and I wrote a book called Nudge-

Paul Rand: Right.

Richard Thaler: About 10 years ago and it was based on the idea that there were things like the retirement saving strategies that we could create that would help people without forcing anybody to do anything,

Paul Rand: Just nudging them in the right direction.

Richard Thaler: Exactly.

Paul Rand: Okay.

Richard Thaler: And we called our approach, libertarian paternalism, which was a phrase that just rolls off the tongue. We knew it was actually it’s... First of all, it sounds like an oxymoron and we knew it would annoy people, especially libertarian-

Paul Rand: Right.

Richard Thaler: Because libertarians hate paternalism and here, we’re taking their word and attaching it to the thing they hate most.

Paul Rand: Right. Right.

Richard Thaler: So it’s like kosher pork or something. Right? So but we thought that the idea was charming, that it’s libertarian because we don’t force anybody to do anything and it’s paternalistic, not in the usual sense because there’s no coercion but we’re trying to help people. And as we say in the book about 50 times, we try to help people in as defined by themselves. So we’re not trying to get them to do what we think is best, we’re trying to get them to do what they think is best.

Paul Rand: Mm-hmm (affirmative)

Richard Thaler: So if we can help people go to the gym more often or eat healthier or save more or drive more carefully then that’s mostly things that people want to do. And so it’s not about the nanny state, it’s the opposite of the nanny state.

Paul Rand: Right.

Richard Thaler: So we’re often accused of being the nanny state.

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Paul Rand: As you think through what is psychology, what is economics, how they blend together, how do you think about the two and some of your past cohorts that you’ve worked with as well?

Richard Thaler: There are two psychologists that were very influential to me, Daniel Kahneman and Amos Tversky.

Paul Rand: Right.

Richard Thaler: And when I discovered their work, I claim I discovered them-

Paul Rand: Mm-hmm (affirmative)

Richard Thaler: They did exist, but anyway, I discovered their research and got very excited about it and-

Paul Rand: What excited you?

Richard Thaler: So what they were doing is showing that when people... In their oldest research what they were showing, was when people make judgements, like how big a city is Chicago, that they use heuristics as they were called rules of thumb.

Paul Rand: Okay.

Richard Thaler: And that the use of these heuristics is reasonable because we use your heuristics that are on average work, but they will make predictable mistakes.

Paul Rand: Okay.

Richard Thaler: So for example, suppose we asked people in Chicago, what’s the population of Milwaukee. And now we in Chicago know that Chicago metropolitan area is about 3 million. We know Milwaukee is smaller. So we make a guess, maybe we guess a million.

Paul Rand: Some number smaller than-

Richard Thaler: Some number are smaller than three. Now, that’s suppose we go and ask people in green bay also to estimate the population of Milwaukee. Well, they know that Milwaukee is bigger than Green Bay and they get some number that’s bigger Green Bay and the prediction is that the people in Chicago will guess the population of Milwaukee to be higher than the people from Green Bay.

Paul Rand: Okay.

Richard Thaler: Now this is an example of a systematic bias. Those two words, systematic bias, that more than the cashews was the big aha moment. Because if there’s systematic biases, then you can make better predictions. I can predict what you will do, and it will be different than the prediction that would come from assuming that you’re going to predict correctly. I read this research, I wrote them a letter and I discovered that they were going to spend a year at Stanford. They were then at the Hebrew university in Jerusalem. And I canaived to spend that year at Stanford as well. I was basically stalking them and we became friends that year. Kahneman and I especially spent a lot of time talking because we had offices geographically close to one another. And my research was very heavily influenced by what they were doing. And that year I taught them economics and they taught me psychology-

Paul Rand: Okay.

Richard Thaler: And Kahneman, and I are best friends to this day. It’s wonderful.

Paul Rand: So what did you do? They said, ‘‘Wait a minute, wait a minute. There’s a whole different way of looking at this’’ Why was it such a breakthrough?

Richard Thaler: Well, I mean, first of all, we should note that I’m 72 and I’ve been thinking about this since I was a graduate student. So it’s not like this was some breakthrough that everybody suddenly realized, ‘‘Here’s the way to do it. In fact, the first couple decades-

Paul Rand: You were challenged on this-

Richard Thaler: And I’m still challenged by that.

Paul Rand: And so what’s the challenge?

Richard Thaler: Well, one challenge, one university of Chicago challenge that goes back to Milton Friedman is just two words, as if. And the argument was, it doesn’t matter if the assumptions of a model are wrong as long as people behave as if they were maximizing, then the theory is fine. And he tells the story of some billiards-player who as if he knew physics and trigonometry and although he couldn’t pass a test in any of those. And my response to that early on the very first paper I wrote, my first behavioral economics paper includes that Friedman line and I point out that, well, first of all, economics is not only about experts. And if you wanted to build a model of the typical pool player in a bar he’s not behaving as if he’s-

Paul Rand: An expert, right?

Richard Thaler: Right. He aims at the ball closest to a pocket and often misses. I’m debating with Milton Friedman sort of because Friedman wasn’t reading anything I wrote, actually nobody was reading anything I wrote and if I could get it published. So I think the first decade or so people were mostly just ignoring what I did. One breakthrough was when I published my first finance paper, which was 1985, it was written with my first PhD student, a guy called [inaudible] who teaches at DePaul.

Paul Rand: Okay.

Richard Thaler: And the paper is called, does the stock market overreact. And it confronts the efficient market hypothesis that a phrase coined by Gene Fama that says one component of the efficient market hypothesis is you can’t predict the future from the past in stock prices. So for example, chartists, Gene’s theory would say they can’t possibly be doing anything because all the information that’s available is captured by today’s price. So what [inaudible 00:20:11] and I did was a very simple test. We just took all the stocks in the New York stock exchange and ranked them by their return over the previous five years, from the best to the worst. And then we formed portfolios of these going back to 1926-

Paul Rand: Okay.

Richard Thaler: And took the 50 biggest winners and the 50 biggest losers and then followed them for over a five-year period and follow them for the next five years.

Paul Rand: Okay.

Richard Thaler: Now the theory says neither of those portfolios will behave any differently than the market because you can’t predict the future from the past. And what we had predicted that the losers would outperform the market and the winners would underperform the market. And that prediction was true, it was confirmed. Then we wrote this paper, does the stock market overreact? I mean, we were arguing that these stocks that had managed to be the 50 worst stocks in the last five years, obviously had gone through a period of hard times-

Paul Rand: Mm-hmm (affirmative)

Richard Thaler: But maybe on average, the market is going to be too depressed about those stocks. And if you buy them on average, they’ll go up because some of them are on their way down to disappearing, but on average that portfolio earn very high returns. Now this caused a big ruckus in finance. [crosstalk 00:22:05] Well, people knew it couldn’t be right. And in fact, graduate students here at the university of Chicago were given the assignment of finding [inaudible 00:22:18]programming error, which was the leading hypothesis for-

Paul Rand: The results.

Richard Thaler: Yeah. What else could it be? Because we know that can’t happen.

Paul Rand: My goodness. Okay.

Richard Thaler: And in fact, Fama and Ken French, is frequent co-author also set out to find our programming error and discovered there was no programming error and this set them on a path that led to what started as a three factor model and has gone on to other things. But one of the factors in that model is value and these losers are value stocks.

Paul Rand: Okay.

Richard Thaler: So in some ways their research confirms what we were claiming. Jean always says that he and I agree about all the facts, but disagree about the interpretation.

Richard Thaler: So I would say that these value stocks do well because they’re mispriced, they’re too cheap-

Paul Rand: Okay.

Richard Thaler: And he would say they outperform because they’re risky.

Paul Rand: As I listen to you talk about this part of the success you had is also just playing out perseverance and the ability when you’re challenged, like that could have been to have not pushed forward, especially when you’re younger and creating your own identity and your own career. So that also is quite a telling sign.

Richard Thaler: I’m stubborn, I’m stubborn and I don’t mind to fight. And I mean, look, it’s one reason why I was willing to move from Cornell, which was kind of a warm and fuzzy place and come to the university of Chicago, which in 1995, when I moved here was certainly not a hotbed of behavioral economics in fact, pretty much the opposite. But I thought that this was a way to sharpen my tools. So-

Paul Rand: By having to defend it?

Richard Thaler: Yeah, arguing with Gene Fama is a good way of improving your financial economics. My psychology, such as it was, I would try out on uncommon and diversity. And I insisted that they thought that the psychology was okay and I wanted the same to be true of my economics. So I would debate not in public terms, but informally with Gary Becker, who was a believer and very strict rationality and with Fama about financial markets. And I wouldn’t win all the time but I think later of what I could have said and...

Paul Rand: Got to write the next time.

Richard Thaler: Yeah, well, kept getting better.

Tape: The vast majority of the folks I worked with in the jail needed something else than incarceration.

Tape: How can we ask parents or caregivers to do the hard work of taking care of a sick child, which is the scariest thing in the world while starving?

Tape: Then you [inaudible 00:26:03]really have a way of having the science and policy come together in a way that really speaks to the magic of cities.

Paul Rand: From the university of Chicago. This is Knowledge Applied a new podcast where we’ll go inside the research reshaping everyday life. In our first season, meet the experts who are digging into some of the toughest questions facing cities today. Subscribe on Apple, iTunes, Stitcher or wherever else you listen to podcasts. I really want to know what it feels like getting a Nobel.

Richard Thaler: Well, I can tell you the immediate reaction is... Well, I’ll tell you what happened that morning. It’s 4:00 AM and it’s impossible not to know that this is the day because lots of your so-called friends have been sending you emails, hope, good luck, this is going to be your year, blah, blah, blah. So I have heard there are people who set their alarm for 4:00 AM so there’ll be awake. That seems to be a utility minimizing strategy. So I was dead to the world and the only concession I had made to this was to turn the ringer on my cell phone on. And so at 4:00 AM the landline rang.

Paul Rand: Okay. Loudly I’m sure?

Richard Thaler: Well, it’s on my wife’s side of the bed and the headset in the bedroom doesn’t work. So there was some noise she heard and she picks up the landline and it’s dead and that’s it.

Paul Rand: So you just went back to sleep?

Richard Thaler: So I was still basically asleep, but then my cell phone starts ringing and she’s... That’s on my side. She’s trying to wake me up. And so I do manage to answer the cell. Well, I look at the cell phone and it says, Sweden, doesn’t say like some long string of numbers.

Paul Rand: Right.

Richard Thaler: It says Sweden.

Paul Rand: So the whole country is calling you at this moment?

Richard Thaler: Exactly.

Paul Rand: Very impressive.

Richard Thaler: It maybe the king, maybe the king, could be the king.

Paul Rand: Yeah.

Richard Thaler: So it wasn’t the king and it’s some woman with a precisely authentic Swedish accent-

Paul Rand: Okay.

Richard Thaler: Saying that someone from the Royal Academy wishes to speak to you and yeah. Then they tell you the good news. And they take great lengths to convince you that this is not a prank. I don’t know whether anyone has ever done that prank-

Paul Rand: Yeah.

Richard Thaler: I can’t-

Paul Rand: It’d be pretty good one actually.

Richard Thaler: Yeah. I don’t know how much you would have to hate somebody to want to pull that prank-

Paul Rand: Right.

Richard Thaler: And I’m getting the Sweden thing right. Anyway-

Paul Rand: So that was the moment?

Richard Thaler: That was the moment. And you talk to them for a few minutes and they... One of the members of the committee used to be a faculty member here, they put him on-

Paul Rand: Okay.

Richard Thaler: Because I know him.

Paul Rand: That’s legitimate then.

Richard Thaler: And yeah, reassuring me-

Paul Rand: Okay.

Richard Thaler: Okay. So then they say, ‘‘Okay wake up,’’ because it was clear I was still a little bleary, ‘‘And drink some coffee because there’s a press conference in 45 minutes.’’ So I got in the shower and my wife started making coffee and I tried to compose myself. And then there was a press conference in 45 minutes. And the first question from the press was, what are you going to do with the money? And my initial reaction was I had heard lots of Nobel laureates asked this question and-

Paul Rand: tried at this point.

Richard Thaler: Yeah, no, that’s right, Tom Brady. So the funny thing is that to a classical economist, this is a silly question because suppose I went and bought a new car, how would I know it’s this money? And it’s one of the things I worked hard over the years. I mean, according to economic theory, money is fungible. And so unless I deliberately-

Paul Rand: Set aside the money.

Richard Thaler: Set aside, set up a special Nobel Prize account-

Paul Rand: Okay.

Richard Thaler: And then charged things to that there would be no way for me to answer that question. I bought lunch earlier today was that Nobel prize money. And then I said, well, my goal is to spend the money as irrationally as possible. And of all the things I’ve said-

Paul Rand: I showed up everywhere.

Richard Thaler: Yeah. That’s the line. And-

Paul Rand: And you’re pretty good at 5:00 in the morning actually.

Richard Thaler: Well, I don’t know whether that was good or bad, but yeah.

Paul Rand: So If you look now and say, there’s impacts on the world, how the world operates, how people operate within the world, how decisions get made that are based on some of your findings, what do you think of... And you talked about retirement savings and perhaps the ability to influence how people are saving and how they’re encouraged to save. Are there things that you look at and say, ‘‘This is what the work I drove helped really facilitate?’’

Richard Thaler: Well yeah, let’s continue the retirement saving example since it is something I’ve worked on for a long time. If you say that people aren’t saving perfectly, then you may be able to help them. And so the first idea was we noticed that many people were failing to join 401(k) plans-

Paul Rand: Okay.

Richard Thaler: Even at companies that offer a match.

Paul Rand: Okay.

Richard Thaler: And that’s turning down free money.

Paul Rand: Right.

Richard Thaler: But maybe half of the employees would fail to join right away. Eventually most people got around to joining-

Paul Rand: But the compounding effect is out the window at this point.

Richard Thaler: Yeah, and especially in places with high turnover-

Paul Rand: Right.

Richard Thaler: People may never get around to join. So the way things worked in those days was in order to join, when you were first eligible, you would get a big pile of forms and they’d say, fill out these forms.

Paul Rand: Right.

Richard Thaler: And then you’re being and I suggested why don’t we change the default? And so the top page now in many firms is you’re now eligible for the 401(k) plan, unless you fill out these forms, we’re going to enroll you and we’re going to enroll you at this saving rate and in these investments but you can opt out if you want or you can change it. Now that simple change, which economic theory by the way, predicts will have exactly no effect because the cost of filling out a form is trivial and the amount of money here is-

Paul Rand: We’ll put more money in your pocket if you choose not to do this-

Richard Thaler: Right.

Paul Rand: Short term.

Richard Thaler: So it’s a no brainer to join and people get no brainers right in economic theory. But now companies that do this 90% of the people are enrolled. So it’s a huge effect.

Paul Rand: By that small change of just understanding.

Richard Thaler: Just changing the default.

Paul Rand: Yes. And that happens if I read, you’ve consulted for governments, right? And you’ve helped look at all sorts of programming elements and really helping people help themselves by just thinking through these types of elements.

Richard Thaler: Yeah, that’s right. I mean, so the second step on the retirement saving, we noticed that firms were defaulting people into too low of a rate, like 3%. And so another one of my students, Shlomo Benartzi, he and I devised something we call save more tomorrow. And it’s based on the idea that we all have better self control-

Paul Rand: The next day.

Richard Thaler: For the future.

Paul Rand: Right. Right.

Richard Thaler: We’re planning diets next month.

Paul Rand: Right.

Richard Thaler: Well, it’s already the middle of the month, so maybe the following month, but certainly not tonight. So we invited people to join a program where their retirement rates would increase every year. And I spent years trying to convince some firm to try this. And finally, some from here in Chicago, small firm with 300 employees, tried it and we quadrupled saving rates.

Paul Rand: That’s extraordinary.

Richard Thaler: So now more than half of large companies in the US use those two devices, Automatic Enrollment and Save More Tomorrow or it’s now called Automatic Escalation.

Paul Rand: What are you thinking about next? Is there more in behavioral economics that you want to sink your teeth into? Is there another area you want to explore? What are you working on now?

Richard Thaler: Well-

Paul Rand: Or you just sit back and enjoy it all?

Richard Thaler: Yeah. I will say my life has gotten busier. My email inbox is pretty ugly, but completely coincidentally the Summer, last Summer, so the summer before I got that phone call I had been asked to advise the Swedish government on the design of their social security system.

Paul Rand: Okay.

Richard Thaler: And the reason was I had written a paper about it with yet another one of my graduate students, a Swedish graduate student. And we wrote a paper about it in 2004. And some problems had emerged since and they wondered if we would have a second look.

Paul Rand: Okay.

Richard Thaler: And so we ended up writing another paper. But I had... I was in Stockholm three weeks before that phone call making a presentation at parliament and the paper we ended up writing is titled When Nudges Last Forever.

Paul Rand: Catchy.

Richard Thaler: And what we were interested in was when this... They did a partial privatization of their social security system and they had a default fund and we know defaults are very attractive and but they had 450 options. And when they launched this program, they had this default, but they had a big ad campaign, encouraging people not to take the default and to-

Paul Rand: Pay for the 450-

Richard Thaler: Pick one or a collection of funds-

Paul Rand: Okay.

Richard Thaler: Among the 450. And actually the ad campaign won, two thirds of the people formed their own portfolio.

Paul Rand: Okay.

Richard Thaler: So but since then, new people enter the system each year when they get their first job. And now almost no one is-

Paul Rand: Picking.

Richard Thaler: Picking, do it yourself. 99% are taking the default.

Paul Rand: Okay.

Richard Thaler: So we wondered, what about those three and a half million people who chose to be, do it yourselfers back in 2000? And what we’ve discovered is 97% are still doing it-

Paul Rand: Still choosing their funds.

Richard Thaler: Yeah.

Paul Rand: Okay.

Richard Thaler: Almost no one new does that, but if that’s what you started out doing, you’re still doing it. So that nudge of the ad campaign 18 years ago is still influencing people.

Paul Rand: One of the things that... And do you have children?

Richard Thaler: I do have three children.

Paul Rand: Three children. How have your children responded to having their father gained such International recognition?

Richard Thaler: I would... Obviously my kids were happy about this as were my grandchildren, though I will say that I have two grandchildren who are teenage girls.

Paul Rand: Okay.

Richard Thaler: And I think it’s fair to say that neither of them were as impressed with the Nobel Prize as with my movie appearance with Selena Gomez.

Paul Rand: How could that be any different. Yeah.

Richard Thaler: So especially the younger one keeps asking me, ‘‘So is Selena texting you?’’

Paul Rand: That was a good, fine moment actually. I’ve imagined that it’s not many of your peers can say they’ve had such an experience.

Richard Thaler: Yeah, no. And I don’t know how many of my peers turn the opportunity down because they called me a week before we filmed it. So I’m thinking there was a long list of people who said, ‘‘What.’’ And I did insist that we rewrite the script because it didn’t get all the finance right.

Paul Rand: Okay.

Richard Thaler: And in fact, we shot it on Monday and on Friday at noon, I had said, ‘‘No, I’m not going to do this.’’ And they were paying Selena Gomez a lot of money-

Paul Rand: Okay.

Richard Thaler: Unlike me. And they were not happy about that. And so we finally came to an agreement that I would fly down on Sunday and have dinner with Adam McKay, who was the writer and director and that we would rewrite this two minute scene. And then it helped that I wasn’t any good at memorizing lines. So, and he started at Second City, so he was comfortable with improv.

Paul Rand: Okay.

Richard Thaler: So everything I say in that scene was me winging it.

Paul Rand: Okay.

Richard Thaler: And there’s a little sequence about the hot hand in basketball that I introduced in about the fifth take.

Paul Rand: Yes.

Richard Thaler: And he’s a big basketball-

Paul Rand: And he like that.

Richard Thaler: He like that and I could see he liked it so I used that-

Paul Rand: Okay.

Richard Thaler: In all the subsequent takes. And Selena, I will say was good at memorizing lines-

Paul Rand: Okay.

Richard Thaler: But her job was to explain what a collateralized debt obligation was and I think it’s fair to say that she didn’t know what any of those three words meant. So we worked together-

Paul Rand: Okay.

Richard Thaler: She had the good looks and I had the basket, so...

Paul Rand: And now I’m sure she has a much better performing retirement account.

Richard Thaler: Let’s just say she’s making a lot of money.

Paul Rand: Okay.

Richard Thaler: So I’m not sure she’s 25 yet. So I think she’ll be fine.

Paul Rand: She’s going to be fine.

Richard Thaler: She’ll be fine. Yeah. And if she gets in trouble, she can text me, I’ll help her out.

Paul Rand: That sounds... That’s very kind of you. Well, it’s been an absolute delight talking with you. Thanks for sharing your stories. And you’ve given us a lot to continue thinking about. It’s been a delight.

Richard Thaler: Thank you. It’s been a pleasure.

Paul Rand: Thank you.

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