The Screen Has a Side
Some nudges help us save. Others help someone else.
Last year I was in the US on holiday in June. The tipping culture has become more in your face since my last visit in 2012. The screen at McDonald’s asked me for a tip. I had ordered on the touch screen myself. No one had served me anything, and the default was twenty percent.
Those prompts are spreading. They have taken over checkout screens across America, and the 2026 World Cup is sending crowds straight into them. In most of the world a tip is not automatic, so a machine asking for one feels strange. Such prompts arrive at the moment of payment, when there is no time to think.
That prompt is a nudge. Richard Thaler, the economist who won the Nobel Prize for this work, set a simple test for a good one. It should leave the person choosing better off by their own measure. The tip screen on a self-service machine does not. It anchors high, it asks in front of other people, and it works for the seller. At a table with a waiter the tip goes to a person who served the meal. At the machine, no one did, and no one knows where the money goes.
Thaler also built the other kind. With Shlomo Benartzi, an economist at UCLA, he designed Save More Tomorrow. Workers agreed in advance to raise their saving rate with each pay rise, automatically, so no one had to decide again. For those who joined, saving rates rose from 3.5 percent to 13.6 percent over 40 months. This is the same kind of nudge as the tip screen. This time it helped the saver instead of the seller.
This is not a discussion about tipping as a whole, but the effects of these nudges are real, as they influence our behaviour and how we spend.
The same tool runs through investing. Some apps are built to make people trade too much. Trading excessively is not what builds wealth. Brad Barber and Terrance Odean, two finance professors, studied more than 66,000 households from 1991 to 1996. The ones who traded most earned about 11.4 percent a year while the market returned about 17.9 percent. The apps did not exist then. The behaviour they reward is the same behaviour that cost those traders.
There is a quieter version. Automatic enrollment in a retirement plan helps our future selves with the least effort from our present selves. The worker who would have saved nothing now saves something. But the default rate matters. Set it at three percent, and it rescues the non-saver while quietly capping the one who would have chosen ten. A better default climbs on its own, lifting the rate a little each year, so the least effort still means saving more.
Defaults stick. When Sweden stopped pushing people to choose their pension funds, close to 99 percent of new savers ended up in the default by 2016. A low default is meant to keep low earners from dropping out. But it costs the saver who would have done more.
Singapore never needed a nudge to get the money in. Central Provident Fund (CPF) contributions are compulsory, up to 20 percent of a worker’s pay, with more again from the employer. Where other countries nudge people to save, the law here already did it. The nudge only appears at the other end, when the money comes out.
From 65, CPF members choose a CPF LIFE plan for their monthly payouts. Anyone who does not pick is placed in the Standard Plan, which pays a level amount. There is also an Escalating Plan that raises the payout about two percent a year to keep up with prices. They suit different lives. Doing nothing still picks a plan.
Some nudges get us to act. Some get us to sit still. Neither tells us who benefits. The test is simple. Who gains if we accept the suggested answer? If we do, leave it alone. If someone else does, give our own answer, even if that answer is zero.
Daniel Kahneman, who won the Nobel Prize for his work on how people judge and decide, wrote that we are “blind to our blindness.” The screens will keep coming. Notice each one, and ask who gains.
This article is for educational purposes only and does not constitute financial advice. Please consult a qualified professional before making investment decisions.