Thinking Money: The Psychology Behind Our Best And Worst Financial Decisions
Why is it so much more fun to spend than save? Can we re-wire our brains to make smarter financial decisions?
If you've ever made a financial decision you regretted the next day, you're not alone. In fact, as the emerging field of behavioral economics reveals, you're practically hard-wired to overspend, an activity that lights up the brain's pleasure centers.
Thinking Money: The Psychology Behind Our Best and Worst Financial Decisions uses a mix of humor, on-the-street interviews and provocative insights from innovative thinkers to explore why we spend, save (or don't), and how we think about money. Host Dave Coyne travels from Wall Street to Main Street, and from Yale to the Santa Barbara wine country, to find out how our brains and the marketplace maneuver to get us to spend money we shouldn't. A mix of fascinating theory and practical takeaways, Thinking Money releases to public television stations on October 16, 2014 (check local listings for air times).
Behavioral economists have found we all have a natural desire to buy things even though our long-term futures depend on saving, not spending. An unrealistic optimism about our future wealth a bias towards overconfidence combined with an illusion of invulnerability make us not just poor savers, but more susceptible to fraud and risky investments. In the documentary, we learn these natural biases tend to affect us most when we are dealing with complex, long-term decisions.
Time after time our emotional brain triumphs over our rational brain, a fact we can blame on our biology. "The rational brain simply rationalizes what the emotional brain has already decided to do," says noted Stanford neuroeconomist Dr. Baba Shiv. "The only long-term solution for this is to make saving more sexy . . . for the brain."
Thinking Moneyexplores an array of challenging ideas and findings that have profound implications for our financial behavior, including:
- How Americans' increasing financial fragility has led to an explosion of "downmarket" and predatory sources of credit. There are now more payday loan stores in America than all the McDonald's, Starbucks and Targets combined;
- Why too many choices can be paralyzing when it comes to small decisions, and big ones;
- How having a good "nudge" especially one with an unpleasant consequence attached to it can help you achieve your financial goals;
- In what way "confirmation bias," the tendency for us to search for evidence that confirms what we already believe and disregard evidence that doesn't, impacts our financial decisions; and
- How employers are using "choice architecture" and "the power of defaults" to help us put money into savings.
Fascinating experiments provide insights into the way our brains influence our behavior. A horizontal wine tasting in a Cal Tech fMRI machine reveals that our brains are intoxicated by price the more we think something costs, the better we like it. Two tables of jam bottles in a supermarket show that customers are initially attracted to a wide variety of choices, but are more likely to actually purchase when offered fewer options. And, in a Stanford virtual reality lab, a startled Dave Coyne gets to "meet" an older version of himself in an experiment designed to overcome our procrastination by creating empathy for the retirees we will eventually become and for whom we need to be saving today.