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The Tim Ferriss Show

#830: Nick Kokonas and Richard Thaler, Nobel Prize Laureate - Realistic Economics, Avoiding The Winner's Curse, Using Temptation Bundling, and Going Against the Establishment

with Richard H. Thaler, Nick Kokonas

Published October 10, 2025
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About This Episode

Tim Ferriss, Richard H. Thaler, and Nick Kokonas discuss how traditional economics models people as perfectly rational, selfish agents and why that vision breaks down when confronted with real human behavior. Thaler traces the origins of behavioral economics through stories and experiments on loss aversion, fairness, mental accounting, and self-control, showing how these insights improve predictions and policy in areas like retirement savings, pricing, and investing. They also explore the winner's curse in auctions and sports drafts, the power of nudges and temptation bundling, and Thaler's collaborations with Daniel Kahneman and Amos Tversky, including a candid conversation about Kahneman's decision to end his life through assisted dying.

Topics Covered

Behavioral economics Risk and uncertainty Investing Lottery and gambling Entrepreneurship Cognitive biases Mental accounting Retirement savings Choice architecture Personal Development

Disclaimer: We provide independent summaries of podcasts and are not affiliated with or endorsed in any way by any podcast or creator. All podcast names and content are the property of their respective owners. The views and opinions expressed within the podcasts belong solely to the original hosts and guests and do not reflect the views or positions of Summapod.

Quick Takeaways

  • Traditional economic models assume hyper-rational, selfish agents who always maximize utility, but real people use shortcuts, care about fairness, and struggle with self-control.
  • Changing defaults in retirement plans from opt-in to opt-out dramatically increases participation, illustrating the power of choice architecture and status quo bias.
  • Loss aversion and the endowment effect mean people demand more to give up an item than they would pay to acquire it, which reduces trading and slows change.
  • The winner's curse shows that in common-value auctions, the highest bidder is often the one who has most overestimated the asset's value.
  • Fairness considerations can make profit-maximizing moves like surge pricing or post-disaster price hikes backfire by alienating customers.
  • Mental accounting causes people to treat identical dollars differently depending on their source or label, leading to systematic but predictable mistakes.
  • Commitment devices and temptation bundling-like prepaying, deposits, or pairing workouts with enjoyable media-can harness biases to improve habits.
  • Stories and memorable demonstrations (like coin-jar auctions or cashew-nut removal) are what students retain, not formal equations.
  • Big data now allows many lab findings in behavioral economics to be tested and confirmed in real-world environments like retail and online platforms.

Podcast Notes

Introduction and guest backgrounds

Tim introduces the guests and sets context

Richard H. Thaler's background and work[0:17]
• Richard H. Thaler received the 2017 Nobel Memorial Prize in Economic Sciences for contributions to behavioral economics.
• He is a founding principal at Fuller Thaler Asset Management, which uses behavioral finance to manage more than $30 billion in small-cap U.S. equities.
• Thaler is co-author of multiple New York Times bestselling books, including "Nudge" and "Misbehaving."
• His new book is a revised version of earlier work titled "The Winner's Curse: Behavioral Economics Anomalies Then and Now," co-authored with Alex O. Imas.
Nick Kokonas's background and role as co-host[1:55]
• Nick Kokonas is introduced as an entrepreneur, investor, and author, best known as the co-founder of The Alinea Group and reservation platform Tock, which was later acquired by American Express.
• He has past experience trading derivatives in Chicago and now focuses on ventures blending business, technology, and art.
Social media handles and transition to conversation[2:02]
• Tim notes that Richard can be found on X at @R_Thaler and Nick at @NickKokonas.
• Tim frames the upcoming discussion as a wide-ranging conversation with Richard and Nick.

What is economics and the problem with rational agents

Defining economics and its traditional assumptions

Nick's experience entering economics through liberal arts education[2:52]
• Nick describes going to a liberal arts college expecting to study "business" and instead encountering economics as a set of theoretical models.
Thaler's basic definition of economics[3:25]
• Thaler says you cannot talk about behavioral economics without first understanding what economics is.
• He defines economics as two things: people interacting in markets, and what those people are doing.
Shift to mathematical rigor and the maximizing agent[4:02]
• After World War II, economists made models more rigorous and mathematical, gravitating to the easiest models to write-those where agents behave perfectly.
• Most economic models begin with "max," short for maximize, assuming decisions always maximize some objective.
• Examples: the models assume people choose the best route to the golf course, the best house to buy, and the best mortgage.
Economists' envy of physics and the agent construct[5:09]
• Thaler notes economists are jealous of physicists and their precise models, often coming from math, physics, or engineering backgrounds themselves.
• Economists wanted models as accurate as those used to send rockets to space, but unlike rockets, human behavior problems are not so easily solvable.
• In economics textbooks, people are referred to as "agents" rather than people.

Three core simplifying assumptions in standard economics

Assumption 1: Perfect rationality and no shortcuts[7:17]
• Rationality in economic models means solving problems the way an economist would, such as optimizing thermostat use for comfort and low cost.
• Thaler contrasts this with real people who often cannot even use their thermostats properly and thus rely on shortcuts instead of full optimization.
• He jokes that instead of "max," real behavior is closer to "meh"-people just do something satisfactory rather than optimal.
Assumption 2: Selfishness and exclusion of fairness[8:18]
• Standard models assume people are selfish, caring mainly about themselves and perhaps immediate family, leaving out altruism and fairness.
• Thaler observes that in reality, people donate to charity and care about being treated fairly, which is not captured in those models.
Assumption 3: No self-control problems[8:55]
• In the standard model, agents have no self-control issues: they eat and exercise the optimal amount for health.
• Thaler remarks that if models were right, people would already be perfectly fit, there would be no need for new weight-loss drugs, and Tim's books on self-improvement would sell half as many copies.
• These optimizing agents would not need any advice on work-life balance or relationships because they are already maximizing.

Are rational-agent models useful at all?

Newtonian vs. quantum analogy and value of simple models[10:46]
• Tim asks whether rational-agent models are just force-fitting rigor to messy reality or if they are analogous to Newtonian physics-useful approximations within limits.
Where standard economics still works: supply and demand[11:00]
• Thaler agrees that some core ideas like supply and demand remain valid: raising prices typically reduces quantity demanded.
• More formal models can add predictive power, but from the 1950s to about the 1990s rational agents got "smarter and smarter," and that became the norm for model quality.
Milton Friedman's "as if" defense[11:55]
• Milton Friedman argued that models need only assume people behave as if they were maximizing, even if they cannot literally calculate it.
• Thaler says much of his career has been debating whether "as if" is truly good enough for describing real behavior.

Origins of behavioral economics and early anecdotes

Cashew nut dinner-party story and self-control

Removing choice can make people happier[13:25]
• As a grad student, Thaler hosted a dinner where guests started overeating cashew nuts; he removed the bowl to protect their appetite.
• Guests thanked him for taking away the nuts, even though he had reduced their options.
• This led to a discussion among economist friends, because according to standard theory, fewer options should never make you better off.
Principle illustrated: sometimes fewer options are preferred[14:18]
• The cashew story suggested that people sometimes prefer to have fewer available temptations to manage self-control.
• This early anecdote seeded Thaler's list of "sacred cows" in economics that did not match observed behavior.

From stories to rigorous demonstrations

Two-part task: showing behavior and modeling it[17:48]
• Thaler explains that behavioral economics had two challenges: empirically showing that people deviate from rational models, and creating rigorous models of those deviations.
• He chooses to focus on empirical demonstrations like retirement savings and loss aversion in the discussion.

Retirement savings, status quo bias, and nudges

Retirement savings behavior vs. economic theory

Standard life-cycle savings theory[18:15]
• Economic theory posits that people plan a desired lifetime consumption path, then choose savings to achieve it, continuously re-optimizing as markets move.
• Thaler notes that there are two Nobel Prizes for such rational savings theories.
Reality: many people don't join retirement plans[18:36]
• In practice, many employees fail to join 401(k) plans even when employers match contributions dollar-for-dollar up to a percentage of salary.
• Economic theory would predict nearly 100% participation in a plan where, for example, a $100,000 earner gets $6,000 if they contribute $6,000.
• Thaler observed that in many companies, only about half of new workers signed up within the first year.

Using default options as nudges

Changing from opt-in to opt-out enrollment[19:36]
• Previously, employees had to fill out paper forms and choose investments to join the retirement plan.
• Thaler and colleagues proposed simply switching the default: employees would be enrolled automatically unless they filled out a form to opt out.
• Economic theory predicted no change, since filling out a form is trivial given the stakes, but empirically the first company to adopt this saw participation among new employees jump from about 50% to 90%.
Defining a "nudge"[21:33]
• Thaler describes a nudge as a feature of the environment that improves decisions without forcing anyone to do anything.
• He confirms Tim's paraphrase of this definition as accurate and notes he likely wrote those words.

Loss aversion, endowment effect, and real-world implications

Early survey on life-saving and risk valuation

WTP vs. WTA for small mortality risks[24:10]
• Thaler's thesis studied the value of saving lives via safer highways, prompting him to ask people how much they would pay to eliminate a 1-in-1,000 chance of quick, painless death from a disease.
• He also asked how much they would require in payment to accept a 1-in-1,000 chance of the same disease with no cure.
• Standard theory says willingness to pay (WTP) to avoid the risk and willingness to accept (WTA) compensation to take it on should be approximately equal, but they were dramatically different.
• Respondents might pay about $1,000 to avoid the risk but say they would not accept the risk for even $1 million, even though they accept similar risks through everyday activities like driving.

Mug experiment demonstrating endowment effect

Design of the Cornell coffee mug study[27:08]
• With Kahneman and Knetsch, Thaler ran experiments where Cornell coffee mugs were placed on every other desk in a classroom and randomly assigned.
• Students with mugs were asked if they would sell at a list of prices starting at $10, while students without mugs were asked at what prices they would buy.
• The mugs were ordinary campus mugs; participants had possessed them for only about 30 seconds, so there was no sentimental value.
Findings: people value what they own more[28:33]
• On average, sellers demanded about twice as much to give up a mug as buyers were willing to pay to acquire one.
• The intuitive explanation is that once people have an item, they dislike giving it up more than they value acquiring it, reflecting loss aversion and the endowment effect.
Consequences: less trade and status quo bias[29:20]
• Thaler notes that this asymmetry means there is much less trading and change than classical theory would predict, because people hold onto what they have.
• He connects this to resistance to change in areas like housing and infrastructure, where status quo bias and loss aversion contribute to NIMBY attitudes and costly building constraints.

Fairness, pricing, and market psychology

Fairness experiments with prices

Snow shovel price-gouging scenario[31:38]
• Kahneman and Thaler asked people whether it is fair for a hardware store to raise the price of snow shovels from $20 to $30 after a blizzard.
• Most people judged this as unfair, but business school students were much more likely to endorse the price increase as acceptable based on what they had learned in microeconomics.

Fairness applied to surge pricing and auctions

Uber surge pricing and extreme scenarios[32:38]
• Thaler says surge pricing can be acceptable but needs limits; he gives a hypothetical where Uber charges $5,000 on 9/11 for rides out of New York and asks how long the company would survive afterward.
• He argues that such extreme pricing would be disastrous for Uber's reputation, regardless of short-term revenue, illustrating that fairness concerns affect business viability.
Nick's restaurant reservations and deposits[33:54]
• Nick describes how asking diners to put down even a $5 deposit on reservations reduced no-show rates from around 14% to under 3% at his restaurants.
• He recounts being criticized by Northwestern economists who suggested auctions for peak-time reservations, while he argued that psychology and fairness shaped customer behavior and loyalty.

Nudging vs. exploitation and real-world design

Principles of nudging and potential misuse

Nudges have always existed and can be used for good or ill[34:44]
• Thaler emphasizes that nudging is not new, citing the biblical serpent nudging Eve toward the apple as an early example.
• He distinguishes his aim in "Nudge"-using behavioral principles to help people make better decisions-from those who design environments to take advantage of people.
Casinos, online gambling, and gamified investing[36:36]
• Thaler notes that casinos are designed to maximize betting and channel customers into games with the worst expected outcomes for them.
• He mentions the rise of online gambling, in-game betting, and platforms like Robinhood that make investing feel like casino gambling.
• Simplifying and gamifying these products makes it extremely easy and tempting to bet, using the same behavioral insights that can also be used to help people.

Teaching decision-making, stories, and the Winner's Curse

What students remember from decision-making courses

Stories over formulas[46:07]
• Thaler taught decision-making for about 40 years and notes that people do not think they need such a class, similar to how they might dismiss a class on breathing.
• Former students contact him decades later and what they recall are stories and demonstrations, not formulas or abstract concepts.

The Winner's Curse classroom demonstration

Coin jar (or jelly bean) auction exercise[47:56]
• In class, Thaler brings a jar of coins (or equivalent like jelly beans) worth, say, $75 and auctions off the contents to students.
• Students do not know the exact amount, only that the high bidder gets whatever is in the jar.
• He consistently makes money as the auctioneer because someone typically bids more than the jar's actual value-e.g., $100 or $150 for $75 of coins.
Origin of the Winner's Curse in oil lease auctions[48:31]
• The Winner's Curse concept originated with engineers at ARCO bidding on oil leases in the Gulf of Mexico.
• ARCO found that the leases they won tended to contain less oil than their geologists had estimated, despite believing they had top-notch experts.
• They realized winning was not random; auctions they won were those where they had overestimated value the most, so the high bid often implied overpayment.
ARCO's response: publish the insight[51:32]
• Given the Winner's Curse, ARCO could have exited the business or bid lower and win less often, but instead they chose to publish a paper explaining the phenomenon.
• Publishing the analysis made the problem common knowledge among competitors, which is legal, unlike explicit collusion.
Example of overreacting: editor who stopped bidding at book auctions[53:21]
• Thaler recounts that an editor who had acquired the 1992 version of "The Winner's Curse" later refused to bid on Thaler's book "Nudge" because he had read The Winner's Curse and decided "I can't bid."
• Thaler humorously suggests that in that particular case, the editor's blanket aversion to auctions may have been a mistake.

Overconfidence and poor forecasting

Confidence interval experiments[54:47]
• Thaler describes asking people for 90% confidence intervals on quantities like the length of the Amazon River, finding the true values fall inside their intervals only about 60% of the time.
• He notes that people know they lack precise knowledge but still choose intervals that are too narrow, reflecting systematic overconfidence.
CFO forecasts of stock market returns[57:02]
• Thaler cites colleagues at Duke who survey CFOs about expected S&P 500 returns, asking for 80% confidence intervals.
• The realized market return falls within these intervals only about a third of the time, again showing severe overconfidence.
• He notes the task is impossible-no one can predict the market precisely-but a calibrated answer would admit wide uncertainty, such as a range from down 10% to up 20%.

Winner's Curse in sports drafts and Moneyball-style analytics

NFL draft and trading down

Applying Winner's Curse to player selection[59:18]
• Thaler co-wrote a paper applying the Winner's Curse to the NFL draft, arguing that teams overvalue top picks.
• He explains that if teams had a very high first pick, a better strategy is often to trade down for multiple later picks whose combined expected value is greater.
• He gives examples where teams, such as the Chicago Bears, traded up to draft quarterbacks that later underperformed, highlighting systematic misvaluation.
Empirical measure: "better than the next guy" statistic[1:02:26]
• Thaler and his co-author ranked players within each position by draft order and then checked how often a higher-drafted player turned out better than the next one.
• If teams were perfect evaluators, the higher pick would be better 100% of the time; random guessing would yield 50%.
• In reality, the figure was around 53%, only slightly above chance, suggesting that all the scouting and effort barely beat a coin flip.

Behavioral insights in coaching and team management

Coaching, playing experience, and decision quality[1:02:58]
• Thaler observes that being a great player does not necessarily translate into being a great decision-maker as a coach or general manager.
• He links behavioral economics with sports analytics, referencing Michael Lewis's "Moneyball" as a parallel movement documenting inefficiencies in sports decision-making.

Three-point shot and slow adoption of obvious math

Advantage of three-pointers was obvious yet underused[1:04:48]
• The NBA introduced the three-point shot about 40 years earlier; many players could hit 40% from three while teams made about 50% of two-point shots.
• Thaler notes that 0.4×3 > 0.5×2, making three-point shots more efficient, yet it took decades for teams to fully exploit this advantage.
• He cites Daryl Morey of the 76ers as someone who capitalized on this insight, joking that Morey became rich and famous by being first to do this simple calculation.

Mental accounting, sunk costs, and everyday irrationality

What is mental accounting?

Contrast with standard economic view of money[1:07:39]
• Standard economics treats wealth as a single aggregate W with no labels; it should not matter where money sits or how it was obtained.
• Thaler's mental accounting concept observes that people mentally separate money into categories, and how they acquired it affects how they spend it.
Windfall money in a pocket[1:08:57]
• He gives the example of finding three $100 bills forgotten in a pair of jeans; people experience this as a windfall and might splurge on a nice meal.

Policy example: structured tax refunds

Lump sum vs. spread-out refunds[1:09:40]
• During the financial crisis, policymakers debated whether to deliver stimulus via lump-sum tax rebates or spread-out payments.
• Economists argued it should not matter because only total W counts, but Thaler notes that mental accounting means the format affects how people treat and spend the money.

Organizational budgets and misallocated ownership

Airline baggage fees and internal stakeholders[1:11:26]
• Thaler recounts talking to the CEO of an airline to argue for eliminating change fees and baggage fees before COVID.
• The CEO explained that baggage fees generated about a billion dollars annually and that there was an internal manager who "owned" that revenue stream and resisted eliminating it.
• Thaler likens this to beverage managers in restaurants who mentally own a particular revenue category, even though from an economic perspective all dollars are the same.

Sunk cost fallacy in everyday life and business

Definition and dessert example[1:13:38]
• Thaler defines the sunk cost fallacy as allowing past, irrecoverable expenditures to affect current decisions.
• Example: ordering a $30 dessert, realizing one is full and doesn't need more calories, yet feeling compelled to eat it because "we paid for it."
Wine and reservation deposits as sunk costs[1:15:58]
• Nick admits he will happily drink a bottle of wine now worth $500-600 that he already owns but would not pay that amount to buy the same bottle, acknowledging this as a sunk-cost-related inconsistency.
• He describes deciding to implement deposits for his cocktail bar The Aviary after forcing his family to attend a movie in a downpour simply because they had already bought tickets.
• Everyone preferred to stay home, but he insisted on going due to the sunk movie tickets, then immediately recognized the same dynamic in restaurant no-shows and introduced deposits.

Using biases for good: commitment devices and temptation bundling

Commitment devices to change behavior

Prepaying and self-imposed penalties[1:18:59]
• Tim describes people who improve gym attendance by prepaying for sessions or by making small monetary bets with friends contingent on showing up.
• Thaler endorses the idea that paying for something or making a commitment is an effective way to get oneself to do it, citing his own use of scheduled Pilates sessions.

Temptation bundling experiment

Katie Milkman's Hunger Games audio book study[1:19:41]
• Thaler describes an experiment by Katie Milkman where participants received the "Hunger Games" audio book and were only allowed to listen while at the gym.
• This "temptation bundling" paired an enjoyable activity with an aversive one, encouraging more frequent workouts because participants wanted to hear the next chapter.
• Thaler compares it to only being allowed to watch the next episode of a show after running around the block.

Design principle: Make good behaviors easy, bad ones harder

Applying self-control lessons from cashews and cigarettes[1:21:38]
• Thaler connects back to the cashew story, saying everyone knows the principle: if you want to quit smoking, don't keep cigarettes around; if you drink too much, make alcohol less accessible.
• He frames the general rule as: make it harder to do the things you want to do less of, and easier to do the things you want to do more of.

Big data, real-world validation, and Amazon's economics

Replication of anomalies in large data sets

Updating earlier work with modern evidence[1:25:01]
• Thaler explains that his new book revisits anomalies he wrote about in 1992 with co-author Alex Imas to see whether the original findings hold up.
• They examine whether the phenomena replicate, generalize out of sample, and appear in field data as well as lab experiments.

Gas prices and mental accounting in retail data

Upgrading gasoline but not other goods[1:26:52]
• During the financial crisis, gasoline prices dropped by about 50%, effectively freeing up cash in people's "gas budgets."
• Thaler cites a study using data from millions of shoppers at a big-box chain showing people started buying premium gas more often, despite it offering no benefit for most cars.
• At the same time, they did not correspondingly upgrade other items like orange juice, illustrating compartmentalized mental accounts.

Online experimentation and corporate economists

Internet-scale A/B testing[1:29:41]
• Nick remarks that running behavioral experiments is easier now thanks to social media and the internet's ability to quickly reach large populations.
• Thaler notes that companies constantly run experiments (e.g., A/B tests), and big data allows many lab findings to be verified in real-world settings.
Amazon's large internal economics group[1:31:59]
• Thaler mentions that the largest "economics department" in the world is now at Amazon, with around 100 PhD economists.

Kahneman, Tversky, availability, and the power of stories

Thaler's academic standing and need to think differently

Not the top math student[1:33:42]
• Thaler recounts that his thesis advisor later said of his grad school years, "we did not expect much of him."
• He says he was good at math but not as strong as typical PhD economics students and succeeded by noticing problems with existing economics and inventing behavioral economics as an alternative path.

Influence of Kahneman and Tversky

Discovering their work through a conference[1:35:24]
• In the 1970s, Thaler heard about Kahneman and Tversky's research from a student at a conference and then went back to read their psychology papers.
• He had to physically go to the library's psychology section, which he had never visited before, to find their work.
Key idea: systematic bias[1:37:08]
• A critical idea from Kahneman and Tversky was that people make systematic, predictable errors rather than random mistakes.
• Thaler illustrates availability bias by asking about the relative frequencies of homicides and suicides: people often think homicides are more common, yet suicides actually occur about twice as often.
• He notes that suicides are usually quieter and less reported, whereas homicides are heavily covered in media, making them more "available" in memory.

Amos Tversky on learning through stories

Amos's note to his son[1:38:45]
• Before Amos Tversky died of cancer at 59, he wrote a note to his son saying that he believed their time talking had been useful and that people learn through stories.
• Thaler includes this note in the first class of his course each year and tells students that although some say his class "just tells stories," that is precisely how people learn.

Book recommendation: The Undoing Project

Michael Lewis's biography of Kahneman and Tversky[1:41:58]
• Thaler mentions Michael Lewis's book "The Undoing Project" as an accessible account of Kahneman and Tversky's partnership and contributions.
• He considers them two of the greatest 20th-century scientists and recommends the book to listeners curious about them.

Kahneman's assisted dying and reflections on control

Daniel Kahneman's decision and Thaler's reaction

Kahneman's choice of assisted suicide[1:44:17]
• Nick brings up the public news that Daniel Kahneman chose assisted suicide and notes that he was not severely ill at the time.
• Thaler says Kahneman was his best friend for about 40 years and that one day Kahneman called him to say he had decided "that's it."
Peak-end rule and desire for control[1:45:32]
• Kahneman's work showed that our memory of an experience is shaped by the peak and the end, and he took this idea seriously with respect to his own life.
• Kahneman wanted to avoid a period of cognitive decline and loss of control, preferring to choose the timing of his death while still fully lucid.
Thaler's attempted intervention[1:47:26]
• Thaler spent about a week arguing with him and thought he was making progress, but Kahneman eventually said Thaler was getting "annoying."
• Thaler flew to New York, took Kahneman out for dinner, and bought a 1998 La Mouline wine he hoped would be "worth living for."
• Kahneman appreciated the wine but did not change his mind; they then spent the next day planning the coming month, including how to ensure obituaries focused on his work rather than his manner of death.
Final months and acceptance[1:49:51]
• Kahneman spent two weeks in Paris with his partner and then another week there with his daughter and her family from Tel Aviv before going to Switzerland.
• Thaler says the last month of Kahneman's life may have been his happiest, and while he would have liked more time, he respected Kahneman's decision.

What keeps Thaler going, his new book, and resources for learners

Motivation and continuing work

Revisiting anomalies with a young co-author[1:52:27]
• Thaler says he enjoys wrestling with ideas and took on the task of revisiting his 1992 book with younger co-author Alex Imas to test whether their anomaly claims still held.
• He is interested in the replication crisis and wanted to see whether their key behavioral findings were robust in light of new data and methods.

Intended audience and style of "The Winner's Curse" (new edition)

Accessibility compared to other works[1:53:46]
• Thaler says the new book is not a thriller or self-help book but is written to be accessible, and he believes it is less difficult than Kahneman's "Thinking, Fast and Slow."
• He and Imas include at the end of each chapter a "takeaway for economists" and a "takeaway for humans," without explicitly saying economists are not humans.

Corrupting the youth: summer camp and lectures

Russell Sage summer camp for grad students[1:55:44]
• Thaler explains that rather than trying to change established economists' minds, he focused on "corrupting the youth" by running a two-week behavioral economics "summer camp" for 30 top graduate students.
• Alumni of this program now teach in top departments and edit journals, including the current chair of Berkeley's economics department.
Journal of Economic Perspectives anomaly columns[1:57:26]
• Thaler wrote a recurring "anomalies" column in the Journal of Economic Perspectives, a journal created because regular economics articles had become too technical for non-specialists.
• His columns poked at conventional theory with examples like the endowment effect and stock return patterns, in a style some colleagues initially questioned as counting for academic credit.

Recommendations for learning economics and behavioral economics

Journal of Economic Perspectives as a resource[1:59:21]
• Thaler recommends the Journal of Economic Perspectives as a free, online, accessible source for anyone modestly interested in economics.
• He praises Timothy Taylor, the managing editor, for rewriting articles to be readable, increasing their reach and citation counts.
Upcoming university talks[2:01:51]
• Thaler mentions a series of talks at universities, including Cornell, Penn, and Princeton, as part of his efforts to engage with students about behavioral economics.
Closing remarks and pointers[2:03:09]
• Tim reiterates the book title "The Winner's Curse: Behavioral Economics Anomalies Then and Now" and notes that show notes will include links and can be found by searching for Thaler on his site.
• Nick expresses appreciation for Thaler and for Tim's skill as a host; Tim says they are overdue for an in-person catch-up and mentions overlapping circles at Berkeley.

Lessons Learned

Actionable insights and wisdom you can apply to your business, career, and personal life.

1

Default options and small frictions dramatically influence behavior, so if you want better outcomes-for yourself or others-make the desired action the path of least resistance.

Reflection Questions:

  • • Where in my life am I relying on willpower instead of changing the default or environment to make the better choice easier?
  • • How could I redesign one process in my business (onboarding, billing, saving, etc.) so that the beneficial option is automatic unless someone actively opts out?
  • • What concrete step can I take this week to remove one obstacle to a habit I want more of and add one obstacle to a habit I want less of?
2

In any competitive bidding situation-from auctions to hiring star talent-the Winner's Curse means the highest bidder often overpays, so disciplined underbidding or trading down can be strategically superior.

Reflection Questions:

  • • In what current negotiation or "bidding war" in my life might my desire to win be pushing me to offer more than the asset or opportunity is truly worth to me?
  • • How could I define in advance a clear maximum price or concession I'm willing to make so I don't get swept up in the heat of competition?
  • • Where could I apply a "trade down for more picks" strategy-accepting slightly less prestige or centrality in exchange for more diversified opportunities or resources?
3

Mental accounting and sunk costs shape how we treat money and commitments, but economically all dollars (and past expenses) are equivalent-so decisions should be based on future costs and benefits, not how we got here.

Reflection Questions:

  • • What am I currently continuing-project, subscription, relationship, investment-mainly because I've already put a lot of money or effort into it?
  • • If I were starting from scratch today, would I still choose to spend this time or money the same way, or would I allocate it differently?
  • • What is one sunk-cost-driven obligation I can consciously release or renegotiate this month to free up resources for higher-value uses?
4

You can harness your own biases through commitment devices and temptation bundling-pairing enjoyable rewards with effortful tasks and creating stakes-to make good habits more likely to stick.

Reflection Questions:

  • • Which healthy or productive behavior do I most struggle to follow through on consistently (exercise, deep work, learning, etc.)?
  • • How could I bundle that behavior with something I genuinely enjoy-media, social contact, a treat-so that doing the habit becomes immediately rewarding?
  • • What commitment (prepayment, public promise, small bet with a friend) could I set up this week so that not following through feels more painful than doing the work?
5

Stories and vivid examples are far more memorable and persuasive than abstract arguments, so if you want ideas to stick-with yourself or others-wrap them in concrete narratives and demonstrations.

Reflection Questions:

  • • When I try to explain an important idea or principle, do I default to abstract language, or do I support it with specific stories and examples?
  • • Which one or two personal experiences could I turn into a simple story that illustrates a key belief or lesson I want my team, family, or audience to remember?
  • • How might I test, in my next presentation or conversation, replacing one formula or generality with a short, concrete story and observe the difference in engagement?

Episode Summary - Notes by Riley

#830: Nick Kokonas and Richard Thaler, Nobel Prize Laureate - Realistic Economics, Avoiding The Winner's Curse, Using Temptation Bundling, and Going Against the Establishment
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