Perhaps the most enduring talent of human beings is their ability to make bad decisions. Dan Ariely, James B. Duke Professor of Psychology and Behavioral Economics at Duke University, studies irrationality. Ariely, 49, got interested in the topic after switching from physics and mathematics to psychology while earning his undergraduate degree from Tel Aviv University in Israel. The New York native also holds Ph.D.s in cognitive psychology and business administration from the University of North Carolina at Chapel Hill and Duke University, respectively. He’s written six books on his favorite research subject, including last year’s Irrationally Yours: On Missing Socks, Pickup Lines, and Other Existential Puzzles.

Institutional Investor caught up with Ariely last month at the Sohn Investment Conference in New York to learn about his new projects and how market participants can make better decisions with their money.

In your academic work you often focus on trust. Investors place a lot of trust in their financial advisers and in capital markets, but should they be more skeptical? Is there an ideal balance between trust and skepticism when it comes to investing?

Trust is a huge issue. We recently did a study with Franklin Templeton and found that people have tremendous trust in their financial advisers. So the question is, how do advisers keep that trust, and how do they create it if it is missing from a relationship? The way the system works right now when it comes to choosing a financial adviser is that people do a lot of guessing. Some people get a recommendation about who to speak to, but not everyone does, and then you’re just looking around for someone. Financial firms could take the initiative here and be more transparent about who their advisers are and what investors can expect from the process of finding one. Transparency helps to create trust.

On a personal level, once the adviser is speaking to a client or a potential client, there are all kinds of things they can do to help create trust in that relationship. One of the big ones is simply having a conversation about it. But that’s a really difficult thing to do because the person on the other side of the table is sitting there going, “Can I trust this person?” and acknowledging that is always hard for people to do. We have to think more about how to create an environment that is oriented toward helping people; that too creates trust.

You’re also involved in projects aimed at helping people to make rational investment decisions over the long term. How can people overcome making poor choices?

I think one of the bigger problems today is how easy it is to spend money. I see a lot of younger people who get way out of whack with the reality of money because tech enables it. Take Uber: It’s very easy to decide that you want to go somewhere, and the app makes it so you aren’t reminded that you’re paying for that trip. So you take several of those rides per month, and that adds up really quickly. Or you order food from your phone because it is easy and someone else is doing the work of making it, but that also adds up over time. That may not be great for your finances long term because you stop thinking about how much money you’re spending each day. That feeds into all sorts of investment decisions over time.

People are always willing to take money from their future self, but then that puts the future in danger. So we have to work on getting people to think about how much they are really spending and also how they can invest in the future. That will take more of an effort as technology makes spending money easier to do.

What about robo-advisers? Can tech help us save too?

I like robo-advisers for all sorts of reasons, like efficient portfolio rebalancing. But you also have to look at what kind of saving you want to do. An app can help you save cash now, but a real human being acting as your adviser may help you with wealth management by being able to bring in different ideas or insurance that help you reach big goals like retirement or buying a house. It depends on how you approach saving money and what your level of financial knowledge is.

Will money managers and investors ever be totally rational?

No. It used to be that we thought people who take risks were rational because they would get greater rewards, but now we also know that’s not always true. Some people chase greater and greater risks. So it becomes more important to look at what people consider important that really isn’t. We should be looking at how people make mistakes and find ways of stopping them. Or with stocks, there is too much focus on historical performance data. We should be looking to the future of stocks and the companies behind them, thinking about the future opportunities for this stock, whether this company will still be here, et cetera.

We also need to change the way we explain risk to investors. We ask people at the beginning of an investment what their risk attitudes are — conservative or aggressive — and then we set up a portfolio on that idea. But it only goes one way. We never explain to the conservative person that the probable returns of a conservative portfolio may be a lot less that what they think an ideal return should be. Often risk attitudes and return expectations are out of sync. Then investors get mad when they get their annual statement and it’s not what they thought the return was going to be. Money managers don’t want to stick their neck out there about performance early on, but they are going to end up having the conversation at some point. Why do it when everyone is mad?

Do you still get surprised by the findings from your experiments, or are you desensitized to humans’ persistently irrational behavior?

I get surprised a lot. One of the big lessons you learn when you do a lot of experiments is humility. No one who tests a lot of research ideas thinks they’re going to be right every time ­— or at least they shouldn’t. The more experiments you do, the more you’re reminded of how wrong you are.

I recently looked at how people react if they get their salary as a yearly sum or if they get it monthly. I expected that the people with an annual salary would save more because they were only getting paid once, and they did, but that wasn’t the main reason. Instead, they save more because they start thinking about managing money in years right from the outset. An annual salary also affects how long people think the job will last: People focus on long-term stability compared to those who are paid monthly or bimonthly. In real terms, that means they saved 3 percent more than those paid more often because they thought the job would last longer. That’s really striking when you compare it with almost all low-income jobs in the U.S., which are paid hourly. That’s a bad way to pay people if you want to get them thinking about the long term and how much they need to save. There’s more instability in hourly pay.

You recently joined New York–based insurer Lemonade as chief behavioral officer. What attracted you to an insurance start-up?

I’ve been doing research on conflicts of interest for a long time, and when they said they wanted to start an insurance company entirely without conflicts of interest, I thought it was great. There are a lot of embedded conflicts of interest in the insurance business in terms of how policies are sold and who benefits. I am seriously wondering if we can do this successfully. I also want to look at the benefits of a totally digital insurance company to see if people trust it and how we can change risk management.

Insurance companies know how to price insurance — that’s straightforward. But I want to know if we can start building ways of preventing risks. I have a lot of research ideas here. For example, can reminders really help people? We all know that you get a lower price on auto insurance if insurers think you are less likely to speed. What if we started sending reminders to people about speed or remind them of some of the long-term consequences that could result from speeding? I’m interested to know what the results of those kinds of experiments could be.