Yet, within those very series of decisions one can discover several common decision-making flaws made not only by me (and no doubt other harried hotel guests), but by 401(k) investors, too. 

Let's start with how I framed my quest for lodging. I started by looking at the primary and secondary hotels recommended by the meeting organizers. That quest did two things. First, it anchored my pricing expectations at $300 a night. Second, it framed the search in terms of the apparent scarcity of available rooms. Both of these factors led me to book the room in the haunted hotel without the usual due diligence. Upon finding the ghostly place, I was immediately attracted to the $160 per night room rate. Normally I would have slept on the decision and researched the hotel the next morning, especially since it's not a "name" brand facility. But, by framing the search in terms of scarcity, I consciously decided to forgo the usual background checks and quickly booked the room. I was afraid if I waited until morning, the inexpensive rooms would be booked by some itinerant wedding party celebrating the vows to two life-long Cubs' fans. Nope, I wasn't going to wait and risk losing the place. 

When I did do my due diligence – mostly out of habit and curiosity rather than expecting to find anything – I figured no ghost would scare me away and stuck with my plans. In reality, I stuck with my plans because I had already booked the room. Had I not booked the room, I would have probably searched for another hotel. 

This is how people make decisions. It's irrational, but it's true. This is what behavioral finance is all about. It helps explain why people do stupid things (like traveling through a blizzard to watch a college basketball game, but only if you've already bought the tickets – a story attributed to Richard Thaler from his Cornell days). 

Irrational decision-making like this infects 401(k) plans (you can read about this in "Plan Sponsor Alert: Behavioral Finance Reframing Future of 401(k)," FiduciaryNews.com, Oct. 1, 2013). In the old days, when Modern Portfolio Theory ruled the roost, the solution was to "change the participant" (usually through some sort of education). That never worked, no matter how intense the brainwashing technique. Then came behavioral finance. This field of study accepted that you couldn't change the participant. It concluded it's easier to change the plan.

Changing plan formats, redesigning option menus and otherwise reframing how the 401(k) plan is introduced and explained was discussed in many of the breakout sessions during the annual meeting of The Academy of Behavioral Finance and Economics. While most of the sessions focused on current and preliminary research, my session was one of the very few that emphasized taking that research and applying it to the real world. In a sense, my job was to condense what the academics were saying, translate it into language a normal person could understand and act on, and they translate that common vernacular (and keep its overall tenor) back into the jargon the academic researchers could understand.

This is the kind of challenge I love and I eagerly accepted it. And not without some modicum of success. The day before as a member of the audience, I was surprised to listen to John R. Nofsinger, Ph.D., Professor of Finance at Washington State University and author of "The Psychology of Investing", (5th Edition, Pearson, 2014) give much of the same presentation I intended to give the very next day. Of course, he gave it using the same language of the academics as it was originally written. That was OK. He lives that language as does the bulk of the audience. 

Needless to say, I spent the bulk of that evening reworking my presentation. I decided to go the Full Cialdini (as in Robert Cialdini, the much read writer of using behavioral techniques to influence people's decision-making). The next morning in the actual presentation, perhaps to bring home the point (and also because it was in Chicago), I "went Oprah" and invited members of the audience to participate in my first stunt. I wondered for a moment if this would be the first time some of these academics might have seen their advanced theories depicted in such a plebian light. In either case, the presentation seemed to have been received loud and clear. Nofisnger later told me I had "an interesting and effective way of presenting technical scholarly research in an easy to understand and engaging manner." He particularly enjoyed how I used "everyday decisions, like movie picks, to demonstrate the behavior before translating it to 401(k) choices." 

I've written many times on the impact of behavioral finance on 401(k) plans. I think most practitioners understand this impact. The most common question I get, though, is "how do I translate the knowledge of behavioral finance into the language of the common man." I guess my answer is to use those same behavioral finance techniques to describe how to use behavioral finance techniques in 401(k) plans.

I'll bet you'll have more than a ghost of a chance to be successful.

See also:

• Why 'one portfolio' is the top choice for 401(k) investors
• ING: Plan participants don't always act in their own best interest
• 3 ways to solve the biggest 401(k) problem