You’re standing in line at the grocery store. What do you do? You might check out the impulse items, hello jumbo Snickers bar! More likely you are reaching for your smartphone. The big social media apps, like Instagram, Facebook, Twitter, Snap, etc., have a hold on us. Slowly but surely, the backlash against these harmless diversions is growing. Eric Andrew-Gee in the Globe and Mail writes:

The lesson we’re slowly beginning to learn, though, is that they’re not a harmless vice. Used the way we currently use them, smartphones keep us from being our best selves. The world is starting to make up its mind about whether it’s worth it and whether the sugary hits of digital pleasure justify being worse, both alone and together.

Over the past decade reaching for your smartphone has become our default action when we are bored or we need a hit of dopamine. The fact is that default actions are very powerful. Changing food portion sizes changes the amount that we eat. Changing the default contribution rate affects how much employees save in their retirement plan. David Blanchett writing at The Hill notes:

People with a higher default savings rate tended to save more. When people see a default rate, they become psychologically anchored to that number. When we set the saving rate higher for participants who don’t want to set their own rate, it also raises saving rates for those who do.

That doesn’t mean people are mindless automatons. Many don’t choose the default savings rate. Even those that do may offset these actions with equal and opposite reactions. We humans are complex creatures. In a certain respect we are just scratching the surface of understanding human behaviors now that digital platforms are now on scale with nations and/or major religions.

Using our biology and behaviors against us is not unique to digital platforms. For example, grocery stores have been using strategic layouts and certain scents to get us to buy more for decades. This same architecture is used by the ETF providers us well. As an informed consumer you always need to know the incentives of whomever you are dealing with. Daniel Egan writes:

So please, always consider the incentives of your financial counter-party. Know how they get paid, and what that means about how they’ll optimize their service to you. If you aren’t paying, you aren’t the customer. You’re the product. And generally a company spends time optimizing how to serve its customers, not it’s suppliers.

We can’t spend our every waking moment questioning all of our actions and decisions, otherwise you would never get anything done. Defaults play a crucial role in us getting through our day. However every once in awhile you need to review your defaults to make sure you aren’t letting someone or something make decisions for you, that you wouldn’t make for yourself.

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