Richard H. Thaler New York Times bestselling co-author of Nudge: Improving Decisions About Health, Wealth, and Happiness Misbehaving: The Making of Behavioral Economics The Winner's Curse: Behavioral Economics Anomalies, Then and Now .
My co-host for this conversation is Nick Kokonas
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Timestamps:
[00:00:00] Start.
[00:02:33] First principles: What is economics, really?
[00:04:18] The “max” assumption and agents as optimizers.
[00:06:41] Rationality in models: Solving problems like an economist would.
[00:07:29] “Meh” vs “Max” — shortcuts instead of optimization.
[00:08:06] Selfishness, fairness, and self-control in economic models.
[00:10:08] Milton Friedman’s “as if” defense.
[00:12:36] The cashew nuts story: Origin of behavioral economics.
[00:14:02] Removing choice and status quo bias.
[00:17:31] The case for Americans needing forced savings.
[00:19:34] Academic resistance: Psychologists laughing at economic theory.
[00:24:37] Loss aversion: Disease cure experiment.
[00:27:04] Endowment effect: Coffee mug experiment.
[00:29:45] Restaurant reservations and the power of deposits.
[00:31:05] Fairness research: Snow shovels and blizzards.
[00:32:50] Uber surge pricing and the 9/11 thought experiment.
[00:34:37] Behavioral economics in one sentence.
[00:35:00] Nudges: 401(k) auto-enrollment case study.
[00:37:46] The fly in the urinal and nudge durability.
[00:39:07] Lakeshore Drive lines: Making safety easy.
[00:41:30] Choice architecture: Good nudges vs. malicious nudges.
[00:42:40] Online gambling and Robinhood’s gamification.
[00:45:51] Lessons learned from teaching decision-making for 40 years.
[00:46:52] Winner’s curse: The jar of coins demonstration.
[00:49:04] ARCO engineers discover the winner’s curse in oil bidding.
[00:50:11] Writing papers as competitive strategy.
[00:52:31] Amos Tversky’s note: People learn through stories.
[00:53:44] Overconfidence: Amazon River and CFO predictions.
[00:55:59] NFL draft: 53% success rate (barely better than coin flips).
[00:57:12] Trading down in the draft as optimal strategy.
[00:59:26] Applying behavioral insights to daily habits.
[01:01:04] The law of one price and restaurant deposit resistance.
[01:02:39] Being a chef doesn’t automatically make you a good businessperson.
[01:03:33] Sports analytics: The three-point shot revolution.
[01:04:29] Michael Jordan vs Steve Kerr: 50% three-point shooting.
[01:05:56] Finding $20 bills on the street.
[01:06:35] Mental accounting: Money in jeans feels like a windfall.
[01:07:50] Obama stimulus: Lump sum vs. spread out payments — why does it matter?
[01:09:58] Airline baggage fees: “There’s a guy who owns that.”
[01:11:43] Sunk cost fallacy: The dessert we don’t need.
[01:12:37] Nick’s $500 wine example and building Tock on sunk costs.
[01:14:41] Richard’s daughter and the baseball/concert tickets experiment.
[01:16:05] Temptation bundling: Using cognitive biases for self-improvement.
[01:19:06] Big data and natural experiments in the real world.
[01:19:50] Mental accounting in action: Premium gas during the financial crisis.
[01:22:34] Amazon’s hundred-PhD economics department.
[01:23:48] The pragmatic reason Richard invented behavioral economics.
[01:25:47] Strategy: Corrupt the youth, not change old minds.
[01:27:06] The behavioral economics summer camp running since 1994.
[01:28:12] The “Anomalies” column in Journal of Economic Perspectives .
[01:29:44] Citations matter: Writing articles people can understand.
[01:30:31] Availability bias: Homicides vs. suicides.
[01:31:47] Kahneman and Tversky: The reason for everything.
[01:33:11] Systematic bias vs. random errors.
[01:34:08] Amos’ dinner trap: Everyone you know is dumb, except your models.
[01:37:19] Michael Lewis’ The Undoing Project .
[01:38:11] Daniel Kahneman’s assisted suicide decision as peak-end rule applied to life itself.
[01:45:11] What keeps Richard going?
[01:46:44] Why the updated version of The Winner’s Curse should appeal to economists and everyday humans.
[01:49:58] Parting thoughts.
*
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