“I’ve heard that hard work never killed anyone, but I say why take the chance?”
—President Ronald Reagan
Many maintain that rising early, getting to work, accomplishing a lot during the day, and getting to bed at a reasonable hour is the route to success in life.
But a body of evidence suggests that human behavioral tendencies to do too much, in some cases, can reduce the likelihood of a good result. At the same time, laziness can produce outcomes that are either negative or positive.
Recognizing and harnessing these predictable human behaviors can improve our lives.
One example is the “behavior gap” in investor behavior. This comes from the observation that while a mutual fund may experience a very nice return over several years, the average return of investors in that same fund is typically much less.1
For example, the Fidelity Advisor Biotechnology Fund I gained a not-too-shabby 13.6% annually over the 10-year period ending May 31, 2017, but its typical investor reaped only a modest 0.7% per year.
Why? At times when the fund had been doing very well, investors bought more shares (buying high), only to sell them when the fund subsequently hit a rough patch (selling low). If investors had been lazy and simply rode out the ups and downs, they would have earned almost 20 times the return than what they received from acting upon their best guesses about the future of the fund.
In another example of behavior affecting financial success, when companies offer a 401(k) retirement plan that requires each employee to sign up (“opt in”), only 20% do so.2 In companies where the default is that each employee is enrolled unless he or she completes a form to decline (the “opt-out” option), 80% of employees participate. Each employee is ultimately free to decide whether to participate. Those who must opt out of the plan are much, much more likely to successfully build a retirement nest egg. Once again, laziness is rewarded.
In a similar vein (no pun intended), come organ donation laws. Some countries allow citizens to become potential donors by opting in (filling out a form to sign up as an organ donor when they get their driver’s licenses) or opting out (by signing a form so that their license will not identify them as a donor). Most countries use the former approach, and most of these have shortages of organs for donation translating into loss of life for those patients who don’t receive an organ in time. When Wales transitioned from opt-in to opt-out, the number of organs transplants doubled and lives were saved.3
Supporters of opt-out systems—be they for retirement plans or organ donations--are quick to emphasize that no one is forced either to save for retirement or donate a liver. Should an individual wish to decline, this can simply and easily be indicated in writing.