Thaler & Thaler

Late in October of 2017 the news that the year’s’ Nobel prize in economics was to be awarded to University of Chicago Professor Richard Thaler definitely caught us off guard: just a week before the decision was made public, while taking part in an ICO workshop we announced our project — the Thaler.One fund and Thaler token: an easily convertible cryptocurrency with an underlying value guaranteed by international property assets. Confessions time: when selecting the name, in early September, we wanted to reference the historic Thaler (or Taler), a European coin that had a fixed weight in sterling silver and was in its day accepted as one of the first international means of payment.

© Thaler.One

Truth be told, we were somewhat ignorant of Richard Thaler’s extensive research on behavioral economics. Immediately after the Swedish Central Bank made the announcement we knew that it begged the inevitable question: so, did you guys choose the name on purpose, or what? And, as a follow up: so, what was the underlying meaning? The honest answer to the first question would be ‘no’ — this proved to be one of those strange if not unfortunate coincidences. Personally I took it as a sign that we were on the right track — a conclusion that, in line with Richard Thaler’s research, can be labeled as ‘irrational’. Still, it made us think whether a connection could be made between his body of work, especially the ‘nudge’ concept, and our task at hand: the successful introduction of our Thaler security token during the upcoming token generation event (TGE). In short: we think a connection there is.

In their groundbreaking book ‘Nudge: Improving Decisions about Health, Wealth, and Happiness’, published in 2008, Richard Thaler and co-author Cass R. Sunstein put forward the idea that people can be incentivised to make smarter choices without taking away their freedom of will, our basic right to decide for ourselves. The trick is that the ‘smart moves’ must be the ones we are offered by default, like when healthy foods are made more visible in stores and cafeteria and junk food is kept out of site in harder-to-reach places. In this instance the consumer can still select any food he or she wants but is nudged towards the healthier choice. And Thaler’s research proves that many will seize on the opportunity to make the right move though, of course, there will also be those who go for the nachos. After all, few people get a midnight craving for celery sticks. The same principle of influencing choice architecture — the ways in which choices can be presented to consumers while influencing decision-making — is also applicable to economic behaviour.

One of the conclusions originated by Richard Thaler as part of his ongoing study of less-than-rational behaviour in real-live human beings (as opposed to the ‘rational human robots’ of classical economic theory) is that we will continue to see the decline in the average IQ in economic decision making in the foreseeable future. If one takes a closer look at the rollercoaster ride the valuation of Bitcoin has enjoyed since early 2017 one can come to the conclusion that the future is now. What other way to explain the reason people persist in trying to inflate the price of an asset with no guaranteed redeemable value? Saying that this is due to plain ‘greed’, one of the foremost human emotions, just doesn’t cut it, nor does the hypothetical assumption that this is due to increased demand from traders in illicit goods. The stock market has for decades offered an attractive playing field for greedy risk-takers, while providing at least one advantage: even the worst stock or bond has a liquidation value. If — or when — most of today’s cryptocurrencies fall & fail it will be in complete meltdown mode.

While this thesis is not really up for debate, most people will probably continue to play along with the not quite rational hope that they’ll be able to get off the rollercoaster before it comes crashing down… There are those who believe that the value of cryptocurrency will continue to grow indefinitely, can it? Money is just a means of investing, not a long-term investment in itself. And wishful thinking multiplied by speculative fervour (AKA ‘blind greed’) rarely produces good results. The real-life application of Richard Thaler’s research has proven that we can also be ‘nudged’ towards a pattern of more rational behavior. To accomplish this, we need to be offered a better choice by default. The Thaler.One team believes that digital shares backed by tangible assets, including the Thaler token we plan to issue, is the choice for a smarter future — one in which investors’ decisions are not entirely determined by speculation on an unregulated market. We won’t go so far as to try and guess who will win this year’s Nobel in economics but it’s a safe bet that he won’t be named ‘Joe Bitcoin’.