After suffering a loss in a round, normal participants invested only about 40% of the time, while the target group continued investing about 85%

Normal participants became more conservative over time, investing in fewer rounds as the game progressed

Normal participants invested about 60% of the time overall, while the fear-free target group invested about 85%

Normal participants performed better because their fear helped them avoid bad bets

It forces people to immediately cut their current spending by a large amount

Once enrolled, saving increases happen automatically (autopilot), exploiting inertia in people's favor

Savings increases are timed with pay raises, so people never feel their spending is being cut

People commit to saving more in the future (not today), taking advantage of the fact that self-control feels easier for future decisions

From an evolutionary perspective, a fast fear response made sense (low cost of false positive vs. fatal cost of false negative), but this same mechanism works against us in financial markets

Fear drives people to ignore bargains in the stock market, especially after they have just suffered a loss

Our brain's emotional system (X-system) reacts about three times faster than the logical system (C-system), so fear overrides rational analysis

Fear is always irrational and has no useful purpose in any situation

Automatic, fast, and largely unconscious

Always producing the correct answer in modern environments

Based on mental shortcuts (heuristics)

Deliberate, effortful, and logical

Nine out of ten either could not save, chose not to, or saved too little

About one half

About half a percent felt they were saving too much

About one third were saving through a 401(k), but only about 1 in 10 were saving enough

That people plan to make good choices in the future (bananas) but give in to temptation in the present (chocolate)

That most people prefer chocolate over bananas at all times

The concept of present bias -- self-control is not a problem in the future, only when temptation is right in front of us

That people make unhealthy food choices because they lack nutritional knowledge

Heuristics produce systematic and predictable errors when applied to problems they were not designed for

The brain has not had enough evolutionary time (10-40 thousand years) to adapt to modern complexity

Heuristics were always flawed -- they never worked well

The modern environment is very different from the ancestral environment in which the brain evolved

The intuitive system always gives the right answer

Humans spend about 95% of their time under the control of the intuitive system

System 2 (reasoning) requires a lot of cognitive resources and energy

The brain outsources most processes to the energy-efficient intuitive system to save effort

People who check their portfolios frequently are exposed to many short-term losses, which trigger their loss aversion

Stocks always lose money, so it is rational not to invest

Because losses hurt more than equivalent gains feel good, frequent observation of temporary dips makes stock investing feel painful

On a daily basis the chance of observing a loss is close to 50/50, but on a yearly basis positive returns are much more likely

It leads to procrastination: we plan to save/exercise/diet "starting tomorrow," but when tomorrow comes, we postpone again

People always prefer smaller rewards over larger ones

People are equally impatient about choices between "today vs. tomorrow" as they are about "one year vs. one year and a day"

People tend to give disproportionately more weight to immediate rewards compared to future rewards, even when waiting would be clearly better