Laurie Santos: Are We Wired To Be Bad With Money? Psychologist Laurie Santos studies human irrationality by observing how primates make decisions — including some not-so-savvy money choices their human relatives often make.

Are We Wired To Be Bad With Money?

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript


It's the TED Radio Hour from NPR. I'm Guy Raz. And today on the show, the money paradox. Ideas around the way money captures all the contradictions of human psychology, and why our brains might actually be built to deal with money very, very badly. So a couple of years ago, a group of psychologists wanted to know why money makes us behave in all sorts of weird ways. So they started with a question...

LAURIE SANTOS: What's makes humans special? What makes us unique?

RAZ: Could you introduce yourself, please?

SANTOS: Yeah. So I'm Laurie Santos. I'm a professor of psychology at Yale University. And I run the Yale Comparative Cognition Laboratory.

RAZ: OK. The question, again.

SANTOS: What makes humans special? What makes us unique? And one of the ways we try to get at that question is to study how other animals think about the world. In particular, how monkeys think about the world.

RAZ: Monkeys?


RAZ: Because they're so similar to us?

SANTOS: Yeah. We study monkeys for a couple reasons. I'm not inherently interested in how monkeys think. I'm really interested in using them as a window to figure out how humans think.

RAZ: And Laurie's work is about looking through that little monkey-shaped window and asking why humans make such big mistakes with money, why we generate recessions and depressions and bankruptcy and Ponzi schemes and credit card debt. Yeah we're, like - we're kind of dumb. Like, we make dumb.

SANTOS: Yeah. And that's kind of the puzzle, right? It's like, sometimes our errors are systematic and predictable even in the face of bad consequences. And that makes them really curious to a psychologist like me. Why is it that we keep doing dumb things in the face of bad consequences?

RAZ: OK. To answer that question, let's head to the TED stage with Laurie Santos.


SANTOS: You know, we're the smartest thing out there. Why can't we figure this out? In some sense, where do our mistakes really come from? And having thought about this a little bit, I have seen a couple different possibilities. One possibility is, in some sense, it's not really our fault. Because we're a smart species, we can actually create all kinds of environments that are super, super accommodated, sometimes too complicated for us to even actually understand, even though we've actually created them.

We create financial markets that are super complex. We create mortgage terms that we can't actually deal with. And of course, if we are put in environments where we can deal with it, it in some sense makes sense that we actually might mess certain things up. If this was the case, we'd have a really easy solution to the problem of human error.

We'd actually just say, OK, let's figure out the kinds of technologies we can't deal with, the kinds of environments that are bad, get rid of those, design things better, and we should be the noble species that we expect ourselves to be. But there's another possibility that I find a little bit more worrying, which is maybe it's not our environments that are messed up. Maybe it's actually us that's designed badly.

RAZ: So to test this theory out, whether the mistakes we make with money are somehow a flaw in our design, Laurie decided to introduce monkeys to money.

SANTOS: It sounds like a strange...

RAZ: Yeah.

SANTOS: ...Concept, right, putting monkeys and money together...

RAZ: Yeah.

SANTOS: ...But it turns out, not so strange.

RAZ: So how do you make a monkey use money?

SANTOS: Well, we weren't sure how we could make monkeys use money when we started these studies. And so we said, well, maybe we could give the monkeys something that worked like money. You know, if we gave them little tokens that worked like coins, would they treat it like money? Would they trade these tokens for food?

RAZ: So you're a monkey, right. And you've got this little metal token, and an experimenter walks up to your cage with a grape. And if you're the monkey...

SANTOS: You kind of nudge over and see what you can do to get the grape. And if the experimenter grabs the token from you, the monkeys quickly learned - aha - I guess I just give them these tokens, and I can get access for food.

RAZ: OK. There you go - monkey money. You give me a token. I give you a grape. And then, just to make it a little more interesting, Laurie and her team created a diversified monkey marketplace.

SANTOS: They picked things like, you know, Fruit Roll-ups and cereal and...

RAZ: 'Cause you think bananas, right?

SANTOS: Yeah. The monkeys do - they like bananas, but grapes are pretty high. Our monkeys are a bit spoiled.

RAZ: So over the course of a day, she'd have different experimenters sell the monkeys food at different prices.

SANTOS: By changing the amount of food that each experimenter gave.

RAZ: So you send one guy into the cage. Monkey gives him one token. Monkey gets one grape. But then, you send in a second guy. Monkey gives him one token. And monkey gets...

SANTOS: ...Two grapes for a token.

RAZ: OK, so two different guys, both charging one token, but one gives you one grape, the other gives you two. So the monkeys can actually learn who got the better deal. And so Laurie's question was...

SANTOS: Do they do the rational thing? So do they go for the most food? Do they go for the best prices? Do they go for the best option even over risk? And the surprising thing was, in all of those cases, the monkeys seemed pretty rational.

So if experimenter started offering more than they were offering on previous trials, the monkeys liked that. They considered it like a sale and would shop more at that human experimenter. And the monkeys also took into account how risky the person was.

If the person did something different from trial to trial, didn't give what they said they were going to give, then the monkeys took that into account on future trials as well.

RAZ: OK, this does not sound dumb to me. This sounds very smart.

SANTOS: This sounds pretty smart. And I guess the message that we got pretty quickly was that the monkeys are smart in lots of the same cases that humans are smart. I mean, these are the sorts of rational things that humans do in their own markets.

What we were really interested in, though, was whether the monkeys would show the same errors that humans show in the markets, too. So are they irrational in the cases where humans are irrational?

RAZ: And so to answer that question, the researchers decided to test out something called prospect theory on the monkeys. And prospect theory, in simple terms, says that humans are wired to avoid risks, specifically losses. Anyway, Laurie's team wanted to figure out if monkeys, like humans, make irrational decisions because they are afraid to lose stuff. So they went back to the monkey lab.

SANTOS: And so here is what the monkeys might face. They might get a choice between an experimenter who looks like he's going to give three pieces of food, but in the end, when the monkey trades with him, he takes one away and give the monkeys only two. So two pieces of food are pretty good, but the monkeys get less than they expect. We'd compared how the monkeys did with this guy versus a different guy, who started off with one piece of food. But that guy would then give an extra one that the monkeys didn't expect.

So if you're being rational, you shouldn't care between the two guys. They each give you two. You just kind of shop at them at chance. Who cares? They're giving you the same amount. But if you're paying attention to their reference point, what you started with, the first guy seems like a bad deal.

You know, he took one away, you though you were going to get three, and you only got two. And what we find is that the monkeys pay attention to what humans pay attention to, which is the status quo. If you're getting less than you expect, it seems like a bad deal even if the overall absolute amount that you get is still pretty good.

RAZ: So, I mean, they become totally irrational.

SANTOS: That's right. Just in the sense that what an economist would say that monkeys should like is just the absolute amount of food they get. It doesn't matter what they thought they were going to get. But we saw an even more striking effect, not with bonuses, but with losses. So these are cases where the monkeys think they're going to get a lot of food, and they get less.

And what we found is that just like humans, the monkeys are averse to losses. So they tend to avoid guys who give them less than they expect even in cases where that guy is, overall, giving them the same amount of food.

RAZ: OK. So, wait, you're saying that monkey part of us, right, that that hasn't changed, it hasn't evolved?

SANTOS: Yeah. I think that is one thing you can learn from our work, is that whatever strategies we're using for money, especially those strategies that we share with monkeys, those kinds of strategies can't be built in for money per se. They're not for markets or for credit cards. They're just strategies that we had sitting around in our primate brain that we're adapting to money. And that might mean that they lead us astray.


SANTOS: What do we know about other old strategies like this? Well, one thing we know is that they tend to be really hard to overcome. You know, think of our evolutionary predilection for eating sweet things, fatty things like, cheesecake. You can't just shut that off. You can't just look at that dessert cart and say, no, no, no. That looks disgusting to me. We're just built differently. We're going to perceive it as a good thing to go after. My guess is that the same thing is going to be true when humans are perceiving different financial decisions.

When you're watching your stocks plummet into the red, when you're watching your house price go down, you're not going to be able to see that in anything but old evolutionary terms. This means that the biases that lead investors to do badly, that lead to the foreclosure crisis are going to be really hard to overcome. So that's the bad news. The question is, is there any good news? I'm supposed to be up here telling you the good news. Well, the good news, I think, is humans are not only smart, we're really inspirationally smart to the rest of the animals in the biological kingdom. We're so good at overcoming our biological limitations. You know, I flew over here in an airplane. I didn't have to try to flap my wings.

I'm wearing contact lenses now so that I can see all of you. I don't have to rely on my own nearsightedness. We actually have all of these cases where we overcome our biological limitations through technology and other means, seemingly, pretty easily. But we have to recognize that we have those limitations. And here's the rub - it was Camu who once said that man is the only species who refuses to be what he really is. But the irony is that in might only be in recognizing our limitations that we can really actually overcome them. The hope is that you all will think about your limitations, not necessarily as un-overcome-able, but to recognize them, accept them, and then use the world of design to actually figure them out. That might be the only way that we will really be able to achieve our own human potential and really be the noble species we hope to all be. Thank you.


RAZ: Laurie Santos runs the Comparative Cognition Laboratory at Yale. Her full talk is at I guess the moral of the story is you never want to give a credit card to a monkey.

SANTOS: That might be a good moral of the story. Whether or not they'd pay you back, I'm not sure. We don't have empirical evidence over it, but my guess is probably look pretty bad.

RAZ: Especially not with a high interest rate, you know.

SANTOS: Exactly. Yep. Yep.

Copyright © 2014 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.