At The Money: Cass Sunstein on Shifting Your Career Focus

How do you change careers when you are a highly accomplished, successful attorney? The answer is focus within your profession on what you love doing! Cass Sunstein, professor at Harvard Law School co-author of the new book, “Algorithmic Harm: Protecting People in the Age of Artificial Intelligence” Previously he co-authored “Nudge” with Nobel Laureate Dick Thaler. We discuss his shift in career within the legal profession. . Each week, “At the Money” discusses an important topic in money management. From portfolio construction to taxes and cutting down on fees, join Barry Ritholtz to learn the best ways to put your money to work. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

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• 2:37Barry Ritholtz?

  What does it take to affect a significant career change? How do you shift from a fairly safe, but perhaps somewhat unsatisfying job into something that you really love? A major career change does require some skills, some hard work, and a little bit of luck. Today, we're speaking with Cass Sunstein. He is a professor at Harvard Law School. Previously, he clerked for Supreme Court Justice Thurgood Marshall. He was an attorney advisor in the U.S. Department of Justice. He spent over two decades teaching at the University of Chicago Law School before joining Harvard.

• 3:18Barry Ritholtz?

  But he has also become an author and a student of behavioral economics. So Cass, let's just jump into this. What was your original career plan? Was the thinking, "I'm gonna go be an attorney and practice law"?

• 3:33Speaker 04

  Yeah, that's what I thought. So I went to law school. I got to clerk for the Supreme Court. And then after that, I worked for the Justice Department. And at that point, I thought I'd probably work for the Justice Department a good, long time.

• 3:46Barry Ritholtz?

  And so what was the moment where you said, "You know, I'm gonna play with teaching law and see where that goes"? Which is, I don't know if I would call that a career change, but certainly a pivot from the practice of law.

• 4:02Speaker 04

  It was relatively early. The law schools come to the Supreme Court to interview the clerks to see if they might be teaching material. And the University of Chicago Law School knocked my socks off. And the way they did that was their energy and engagement with problems that really are intellectually super interesting and are also practically important. So I thought they were all firecrackers there. And then when I was in the Justice Department after a year, I thought, "Maybe I'll go into teaching. I'll kind of explore Chicago." And I thought this would be not a way of retiring, but a way of doing something that was continuous with my law practice, but had a little more theory in it.

• 4:45Barry Ritholtz?

  So you spend 20 years teaching at the University of Chicago, which is known for really fostering the entire field of behavioral economics. You have Dick Thaler there and very famously have Eugene Fama teaching there, talking about market efficiency. Tell us a little bit about how the University of Chicago Law School affected how you thought about the practice of law.

• 5:14Speaker 04

  When I got to Chicago, I was surrounded by economists or economics adjacent lawyers who said, almost like it was a prayer, that human beings are rational, they are responsive to incentives, amen. And this was Ronald Coase, who got a Nobel Prize, Gary Becker, who got a Nobel Prize, George Stigler, who got a Nobel Prize. I knew all of them before they got Nobel Prizes. They seemed to me like giants and I felt like I was two inches tall, looking up at these eight foot tall people who were amazing. But though I was only tiny and they were so big, I felt they were wrong. And I was a literature major in college and I knew Shakespeare

• 5:58Speaker 04

  and Charles Dickens and Thomas Hardy. And I also knew how economists play tennis and it isn't fully rational. I would see them and they'd be hitting these forehands. They had no reason to try to hit and it would go into the net. And I thought this rationality stuff isn't right. So I started writing papers, actually, on departures from perfect rationality. And during the writing of one of them, an economist who was a rational choice economist, said to me, "The paper you're writing is terrible and you shouldn't publish it. It's so awful, you'll ruin your career." But he added, "There's someone who's almost as bad and idiotic as you are at Cornell named Richard Thaler.

• 6:41Speaker 04

  So he's a young economist who's hopeless and your paper sounds like his. You should read him and then you should stop writing your paper." And I did read him, but then I got more excited about writing my paper. That's how it started.

• 6:54Barry Ritholtz?

  So because of criticism of your work from...

• 6:59Barry Ritholtz?

  The orthodoxy, you were directed to somebody who was a little less heterodox, a little more out on the fringe. What happened next? Did you reach out to the young Dick Thaler? Or how did you guys connect?

• 7:12Speaker 04

  I did. I wrote a paper or two, maybe three, that were kind of informed by behavioral economics about law. I did write Thaler a kind of fan letter, like writing a rock star, it felt like, saying, you know, you're great, you're amazing, you're incredible. And if you know Thaler, you won't be surprised to hear he never responded to my letter. But he did come to the University of Chicago, and I think he reached out to me and said, do you want to have lunch? And we hit it off immediately and then started being great friends and collaborators.

• 7:46Barry Ritholtz?

  And one of those collaborations was the book you two co-authored, Nudge: Improving Decisions About Health, Wealth, and Happiness. Tell us a little bit about what that process was like, co-authoring a book with Dick Thaler? And what has been the fallouts of this really terrible career-ending decision you made?

• 8:08Speaker 04

  At one of our first lunches, he said he was writing a paper with an economist lawyer named Christine Joles on behavioral economics of law. And I was very excited about that. And as the weeks went by, and then months, they hadn't produced a draft. And I said, Dick, you better do this paper or else I'm going to do it instead. And it won't be as good because it's just me. And he said, why don't you join us and we'll be a threesome? So we wrote the paper together and we had a concluding section called Anti-Antipaternalism, in which we said, we weren't pro-paternalism, but knowing how human beings blunder, we are anti-antipaternalism. Now, that's very clunky.

• 8:52Speaker 04

  And then a few years later, we did a paper, an academic paper. On libertarian paternalism. One was a law paper and one was an economics paper. And that was just the two of us and we were very excited about that. And it turned out a lot of people were interested in libertarian paternalism as a concept. Think GPS device or a disclosure requirement, or maybe automatic enrollment in some kind of plan. All that preserves freedom of choice, but it's kind of paternalistic. So we wrote these papers and the interest in the papers motivated us to think, maybe we should do a book. And originally it was going to be called Libertarian Paternalism. I don't know if anyone would have bought that book. An editor suggested the name nudge and that's what we went with.

• 9:37Speaker 04

  Dick is, you know, I think the most creative and important force behind the rise of behavioral economics. He's not really mathy, which is good for me because I'm not that good at math. I brought law and policy focus to the book. So we had lunch like all the time about what the chapters would look like. And we planned out the chapters and one would write one chapter, the other would write another chapter. And then we'd go back and forth like a lot on the editing. I think I was faster at chapter production than Dick was. I think he was better at chapter production than I was. Meaning mine would be quicker, his would be more amazing and complete.

• 10:22Speaker 04

  And we were and are very good editors of each other. And we had a rule that we kind of adopted implicitly early on and explicitly later, which is if we both didn't find the chapter fun, we wouldn't put it in the book. So we both had to find it really fun. That was our rule of inclusion.

• 10:41Barry Ritholtz?

  Really, really interesting. So I'm kind of fascinated by the difference that you identified between on an individual basis,

• 10:54Barry Ritholtz?

  especially with all the unforced errors you were describing amongst the rational economists playing tennis. Literally a book Charlie Ellis wrote, Winning the Loser's Game. Hey, if you want to win a tennis and you're not a professional tennis player, well, just make fewer unforced errors. Just hit the ball back over the net. Stop trying to kill it. You're not that good. Which is a sort of individual, dare I say, nudge versus libertarian.

• 11:24Barry Ritholtz?

  Paternalism where you're setting up a society-wide systematic structure where the default is nudging people into the right choice. So, hey, you have to check on the organ donor box on your license, yes or no. And if you don't check anything, it's going to be yes. You have to put your 401k money, it could be in whatever you want, cash, bonds, stocks. But if you don't check the box, well, here's a target date fund that's 70, 30, 60, 40, whatever. How do you think about both the individual behavioral options versus system-wide nudges?

• 12:05Speaker 04

  Okay, so it might be a good idea to tell people you're automatically going to be in a savings plan, and if you don't want to, opt out. Now, note that that's not more paternalistic than saying you're not automatically in a savings plan, and if you want to, you have to opt in. Both have a default which require action, and both are completely freedom-preserving. In lots of domains, individuals benefit from, let's say, a choice architecture, which has a paternalistic feature, but also maintains freedom. So I leased a new car recently. If I start to go like towards somebody that I'm about to hit, it's going to go beep, beep, beep, and various unhappy noises, or a property, or if I switch lanes, there are various things

• 12:50Speaker 04

  that the car will signal to me, which are nudges to be more careful or drive more safely. And those are at the individual level. At the system level, we can imagine a grocery store, and this isn't going to be very imaginative at all on my part, a grocery store that is full of nudges, in the sense that it might have healthy foods at places that are super visible for people, or it might have medicines that, let's say, the relevant population benefits from that are extremely easily accessed by people who are there. And it might have, let's say, the less healthy stuff. There, but you're going to have to do a little work to get there. Or it might be that the less healthy stuff is going to be right there.

• 13:34Speaker 04

  Because the grocery store knows that people really like that. And website design is the same way. Investment offerings have the same characteristic. If you go to a financial advisor, there might be some libertarian paternalism. My financial advisor certainly engages in that. It's implicit, you can do what you want. But if you're going to sell everything because the president said something about tariffs, I think you're going to regret it and maybe sleep on it. And that's not just at the individual level. There can be a system of investment advice that is kind of organized for people. This is your neck of the woods, not mine, which is designed to promote better outcomes for savers.

• 14:19Barry Ritholtz?

  So what's so fascinating about this discussion is how far afield we are from the traditional practice of law. When did it kind of dawn on you that I went to law school, I clerked at the Supreme Court, I teach law, I'm not really going to be a practicing lawyer anymore? How did that realization come to pass? And did you have to make peace with it? Or were you very comfortable with that decision?

• 14:49Speaker 04

  Well, the good news is there are 24 hours in a day, and you get to be awake during the majority of them. So I teach administrative law most years. That's kind of my bread and butter law course. I write about constitutional law. I'm not going to say most days, but most months and maybe even most weeks. So I've stayed there. And through all the years, sometimes I think, am I in an area that I understand less well? That is economics than the area that's kind of home, which is law. And if I'm feeling like that, I might start doing law. But I should say the behavioral economics is what I like best.

• 15:33Speaker 04

  It makes me smile, it makes me laugh, it creates a kind of sense of excitement. That law isn't quite there. I love law a lot, I love legal problems a ton. But the behavioral economics stuff seems to me the most exciting intellectual development in the last 50 years. Part of this is it's a little like reading the best Charles Dickens novel that Dickens never wrote. That is, the behavioral economists are so observant of humanity and our foibles. And I think there's comedy and warmth in it. So to see that if you say, you know, 90 people are alive after five years, do you want to have their operation? People, including

• 16:17Speaker 04

  doctors, say, sure. If you tell people 10 are dead after five years, do you want to have the operation? People, including doctors, say, probably not.

• 16:25Barry Ritholtz?

  But it's the same exact set of circumstances. It's 90-10 or 10-90.

• 16:30Speaker 04

  Yeah, exactly. So framing effects are really funny, I think, as well as, you know, usable. And behavioral findings, you know, there's a recent paper out that shows that for certain assets, people have no idea what the right value is. And so their willingness to pay for the assets will be very variable. Because it's not like a shoe where if you see certain prices, you think that's a deal or that's crazy. For certain assets, investors, including sophisticated ones, they just have no idea what the right value is. And that's, that's very important to know. And we're, we keep coming up with streams of

• 17:10Speaker 04

  behavioral findings, which are either small and important, or large and quite fundamental. I was in an international conference in Abu Dhabi not long ago. There were 700 people approximately from all over the world. And the findings they were describing were, you know, felt like a candy store.

• 17:31Barry Ritholtz?

  So, final question. You seem to have very comfortably shifted your focus from traditional practice of law to teaching law, to, to an adjacent field of behavioral economics. What sort of advice would you have for anybody, lawyer or not, who is thinking about a pivot in their career?

• 17:56Speaker 04

  Great. Think, what would make your days better? So if you think of the pivot, imagine how's Monday, Tuesday, Wednesday, Thursday, Friday going to look compared to how it's looking now? If the pivot makes you think, oh, boy, I'm going to be overwhelmed with things I don't understand, I'm going to be anxious, and I'm going to be poor, then maybe hesitate. If it makes you think, gosh, every day is going to be really fun and new and full of discovery and people, maybe if that's what you like, or engagements that are something I've not seen before and they're likely to stand the test of time, then go for it.

• 18:38Barry Ritholtz?

  Huh. Really, really interesting stuff. Thanks, Cass, for all your insight. So to wrap up, if you're thinking about a career change and you have an aptitude towards a particular research area or a skill set, see if you're capable of performing that and earning a living doing it. Be aware merely pursuing your bliss may not pay the bills. You have to have both the skills and the tools and the abilities to earn a living in your new career. If you find you have the aptitude and you're good at it, well, why not go for it? I'm Barry Ritholtz. You're listening to Bloomberg's At the Money.

• 19:59Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume, so writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 20:41Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

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