Nudge or Sludge? Richard Thaler navigates to a better pension .

sludge builds up if water cannot move

If you’re wondering what the difference is between “nudge” and “sludge” you should have been at yesterday’s pioneering pensions event where Richard Thaler was in conversation with Stefan Lundbergh.

Thaler, who is one of the authors of nudge theory, defined nudge as the slowing down of activity , preventing harm or (sometimes) good.

So sludge could be used helpfully to stop people self-harming by getting into conversations with scammers, but it might also do harm by making it hard for people to visit MoneyHelper and Pensions Wise.

Thaler suspected that rather than nudging and stronger nudging people towards guidance, people were actually getting “sludge”.

Which is interesting.

What’s interesting about nudge?

nudge allows water to circulate properly

We’ve always known about nudge as “the line of least resistance”. Empty a bucket of water over a tarpaulin and it will eventually find a way to escape the tarpaulin and return the water to the river and the sea.

So nudge shapes the journey rather than changing the ultimate outcome. I’m interested in events where people do not follow the natural course of events but rebel or “disrupt”. This is difficult territory for behavioural scientists because the currency of disruption is “conviction” which is the only way to defeat the inexorable progress of a default.

I mention two disruptors as ways that organisations can react to disruption and they show that while nudge in a pensions context is fundamentally paternalistic (trustees know best), it has to be responsive to local issues ( or the nudge becomes sludge).

Let’s take a positive case. Pension Bee found that users of the L&G FutureWorld fund on their platform were complaining to each other and to the Pension Beekeepers, that the fund was investing in fossil fuels, this wasn’t the future world that some of the savers wanted to see. Pension Bee sent all the evidence to L&G and asked them to set up a fossil-free fund for them (and for other clients). L&G agreed, those who were in FutureWorld are now in the Fossil Free Fund, the water still flows off the tarpaulin, but in a different way.

Let’s take a negative case. NOW pensions is a huge master trust with getting on for 2m members (maybe more). It specialises in providing pensions to low earners and recently has become involved in providing pensions to those in the gig economy – specifically Uber. Uber drivers tend to be muslim who are instructed to invest according to Sharia Law in Halal investments. NOW operates a very strong default, there is only one way water flows off the tarpaulin and that’s using the single fund made available to savers. This is not a Halal or Sharia style fund. So disruption came to NOW in the form of angry workers and unions and religious leaders and NOW were disrupted in a very public way – not so good!

You might characterise the difference between Pension Bee and NOW as “nudge v sludge”. The key thing about running a successful proposition is that water flows off the tarpaulin as you intend and if you have no conviction, that it flows as the setters of the tarpaulin devise it to.

So what’s interesting about nudge (to me) is that it can work both ways. Most people want to be nudged, but some people want to nudge back – giving feedback which impacts the initial proposition.


You may remember Winston Smith , “the last man in the world” to be an independent thinker , the man who rebelled against group think , the man who was eventually defeated by Big Brother. Orwell’s dystopian vision suggested a world where the dissenting voice was silenced and where everything was sludge.

We all sometimes think we are Winston Smith!

As I listened to Richard Thaler, I was reminded of the coercive power of default thinking to be used as an instrument of suppression – we think today of Russia but try any number of totalitarian regimes. What happens in these countries is that “conviction”, as expressed by those who do not accept received ideas, meets repression and the results for the disruptor are catastrophic.

I am not accusing Richard Thaler or Stefan or any others who got a lot from a great session , of suppression. But I do suspect that those who promote nudge, are uncomfortable with dealing with outliers – those with conviction. This is how it felt yesterday when I brought conviction up – it was awkward!

Yet there are positive examples – such as Pension Bee – where the agility of the organisation can be responsive to genuine conviction and can deliver alternative ways for the water to leave the tarpaulin!

A fully functioning tarpaulin!

You can watch the presentation here

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to Nudge or Sludge? Richard Thaler navigates to a better pension .

  1. John Mather says:

    I really wish that this debate could measure what matters to the individual.

    Let us suppose that the objective is to provide the living wage (currently £22,000 pa) at age 70 adjusted for inflation for the pension client and his spouse, say 10 years younger

    How would the subscribers to this blog go about designing a model that makes this happen

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