Kurt Nelson 0:08 Hey Tim, do you ever feel like life is just a series of experiences that basically fit into one of two categories, you are either lucky or you have bad luck, so you have good luck or bad luck, and as if the best opportunities go to the luckiest people at the right time, and the rest of us are just hoping that we get at least one break going our way, Tim Houlihan 0:40 painting kind of a dismal picture there, but Kurt Nelson 0:42 maybe it's the day that today is. I don't know. Tim Houlihan 0:47 Well, Tim Houlihan 0:48 I mean, okay, so I mean, if I think you're thinking about like major, I'm thinking about major things, not like little things, right? Kurt Nelson 0:54 I'm thinking about anything I want. I want a little luck break too. I'll take that, finding $1 on the on the ground and going, that's lucky. Yeah, Tim Houlihan 1:03 that's Tim Houlihan 1:03 right. Kurt Nelson 1:04 Probably, yes. More, you are correct, sir. Yes, Tim Houlihan 1:08 like getting the job, getting into the school that you want to get into, the partner that you end up with, all those kinds of things, right? Yeah, yeah. I think that sometimes it, when I look at the world, sometimes it feels like it's just, I mean, I think that there's a difference between coincidence and luck. Kurt Nelson 1:26 Okay, Tim Houlihan 1:27 but I'm not going to get into that now, but I, but sometimes it does feel like it can just feel like a roll of the dice, Tim Houlihan 1:34 okay? Tim Houlihan 1:34 Like, okay, I got lucky or I didn't get lucky. Kurt Nelson 1:38 All right, Tim Houlihan 1:38 yeah, Kurt Nelson 1:39 we should talk about that in the grooming session, but Tim Houlihan 1:41 okay, but Kurt Nelson 1:42 what if that roll of the dice isn't actually true? What if what if it looks like luck is really something else entirely, something more intentional, something more designed and structured, and what if luck was something that you could actually get better at. Tim Houlihan 2:04 Okay, you have my attention. Let's hit that. Kurt Nelson 2:09 Welcome to Behavioral Grooves. I'm Kurt Nelson, Tim Houlihan 2:11 and I'm Tim Houlihan. Today we're speaking with Judd Kessler, an economist at the University of Pennsylvania, and the author of Lucky by Design. Now, as an economist, Judd is used to looking at markets with prices and supply and demand curves, but in our conversation with him, he introduced us to a new idea, an idea of hidden markets, and these markets are where scarce resources like time and attention and jobs and relationships are allocated, but not with prices. Kurt Nelson 2:43 Yeah, not with prices. And once you see those markets, this is where everything can change, because what looks like randomness starts to look a lot more like something almost predictable. And in our conversation with Judd, we'll explore how understanding the rules that govern those markets can help you make better decisions, and that could lead to finding better experiences, and maybe Tim, maybe you could get a little bit luckier along the way. Going to Ireland, you can find that four leaf clover over there, and be lucky like the Irish that you Tim Houlihan 3:23 are. I'm not planning on any four leaf clovers or any pots of gold, or that that's not part of the plan, and I don't think there's a market for those. Tim Houlihan 3:32 You don't Kurt Nelson 3:33 think so, that's not that's not what Jen's talking about. Okay. All right, Tim Houlihan 3:36 I do want to mention, though, I want listeners to be aware, though, that there's kind of a cool little payoff in this conversation, if you're a fan of Hamilton or Lin-Manuel Miranda. Kurt Nelson 3:45 Yeah, Tim Houlihan 3:46 there's some kind of tasty insider bits about Lin coming up in this conversation, so just teeing that up. Kurt Nelson 3:53 All right, so everybody, we encourage you to sit back and relax with a rethinking about luck itself and enjoy our conversation with Judd Kessler. Tim Houlihan 4:17 Judd Kessler, welcome to Behavioral Grooves. Judd Kessler 4:20 Thanks so much for having me. I'm happy to be here. Tim Houlihan 4:22 Well, it's so much fun. I mean, it's really.. I'm so grateful that you rescheduled and that we're getting it together today, and we're really looking forward to a wonderful conversation. I keep saying we.. Kurt is not with us, but that's okay, he's the Judd Kessler 4:36 royal we. It's Tim Houlihan 4:38 so.. let's get started with the speed realm. Would you prefer to learn a new language or a new instrument? Judd Kessler 4:46 Oh, a new language. I'm terrible at languages, but I'd love to be better. Tim Houlihan 4:49 Oh, does any language spring to mind? Judd Kessler 4:51 I learned Spanish in high school, but I didn't actually learn it, like, I, you know, it was my worst class, and I. I, in graduate school, I was helping friends with a startup, and I was in a room with Carlos Slim, who at the time was the richest man in the world, and I'm barely trying to, I'm like trying to figure out what the heck is going on in this conversation, and I'm like, this is, you know, this would be a phenomenal story to, you know, tell my kids and grandkids. If I knew what they were saying, Tim Houlihan 5:24 they were Tim Houlihan 5:24 talking about, Judd Kessler 5:25 like, yeah, Tim Houlihan 5:27 yeah. Well, I, well, when you said you, you know, you learned in high school, I think about, I love the Germans talk about classes differently from learning classes versus studying classes, you know, you're.. Tim Houlihan 5:41 oh, Tim Houlihan 5:42 you know that there's a difference, a Judd Kessler 5:44 different, a different word for.. I was in class, and I learned I actually entertained Tim Houlihan 5:49 exactly. I think that's fantastic. Okay. Second question, coffee or tea? Judd Kessler 5:54 Oh, coffee.. I mean, I have right now all the time, iced Americano. just coffee and ice, no matter the weather, Tim Houlihan 6:03 no matter the weather, Judd Kessler 6:04 no matter the weather. Tim Houlihan 6:05 Wow, because Judd Kessler 6:06 you got to be able to drink it fast, so you can't drink hot coffee fast enough to get the caffeine jult. It has to be iced, because then you can drink it like, you know, like water. Tim Houlihan 6:17 How much? How much a day, Judd Kessler 6:19 being honest, no, I wake up with one. I usually have, you know, it's a double shot, and then I'll probably do, probably two more double shots over the course of the day, depends on how many classes I'm teaching, probably. Tim Houlihan 6:34 So, is it fair to say you rely on iced coffee? Judd Kessler 6:39 I do rely, I do rely Tim Houlihan 6:40 on it. Tim Houlihan 6:41 Yes. Okay. Interesting. All right. Third speed route question, true or false? First come, first serve. First serve is pretty much the best way to organize the whole world. Judd Kessler 6:50 False, Tim Houlihan 6:51 false, Judd Kessler 6:52 false. If they're whatever the opposite of that answer, like you know, I think we overuse first come first serve, and and I think it's, it's historical accident, it's because it's easy, but yeah, we use it a lot, we said a lot more than we should. Tim Houlihan 7:06 Okay, is it first come, first serve, or first come first served? Judd Kessler 7:11 I think in the book, first come first served was how we, where we settled, but Tim Houlihan 7:17 was this Tim Houlihan 7:17 a Judd Kessler 7:18 point of a little bit? I also like, you know, should we hyphenate, you know, first come first, like, as all of them hyphenated, and I knew it was important because I believe this, and I really should validate it at some point, but I think my book uses the expression first come first served more than any other book in the history of the English language, because it's such a common way that we allocate stuff, and so I kind of felt like I had a lot of pressure on me to say it the right way, write it the right way, so that we could kind of set the language for generations to come. Tim Houlihan 7:55 Bravo for you. Just what a fantastic accomplishment, Jeff. Judd Kessler 8:00 I have to validate it first, but I think it's true. Tim Houlihan 8:03 Okay. Last speed round question: in any given bricks and mortar environment retail situation, is it better to find the shortest line or to have a longer line with your wife in it with you? Judd Kessler 8:19 Oh man, I have learned over time that the latter is better, better to be with my wife, and I learned that the hard way, kind of standing on line with my wife, and then realizing, like, oh, there's a shorter line, and running to it, leaving her in the dust, and that was a massive mistake. So, yeah, Tim Houlihan 8:39 okay, well, let's, let's, we are speaking with Judd about his new book, Lucky by Design, as you can see in the background there, Kurt and I loved it, by the way, because we're going to talk about hidden markets, but we got to start with luck, okay? This whole idea of luck, I grew up with this idea that luck is just something that happens to you, right? It's not something that you can design that you have any control over. I also grew up with the with business people telling me, well, the harder you work, the luckier you get, right? So help us understand what you mean by lucky by design. Judd Kessler 9:17 It's a great question, and I mean that the second way that you got advice about luck, the folks saying if you work a little harder you can get yourself luckier, that luck is something that is in your control, that is one of the theses of the book, and we'll talk about hidden markets, but what the book is arguing is that hidden markets are all around us. They affect what we get in life, and, and whether we get what we want. And the attitude that I think many people bring to these hidden markets is, oh, you know, I got what I wanted, or I didn't get what I want. That person got what they wanted, or didn't, like they got lucky or unlucky, that there's some thing that's happening that is totally out of our control. And my argument is that actually, if you understand that you're playing in a hidden market, you understand the rules of that market, then you can develop strategies that help you do better in those markets, and, and what looks to other people like luck, like you got lucky in that market, was actually something that you had control over, and it doesn't always have to be, you know, working harder, it could be just understanding the game and figuring out the right strategy, but importantly, it's something that you can control, Tim Houlihan 10:43 and it doesn't preclude the idea of things just happening to Tim Houlihan 10:49 us. Judd Kessler 10:49 No, it is not. They're not mutually exclusive. In fact, some of the mechanisms that do allocations in these hidden markets, I'm sure we'll talk more in more detail about what those are. A lot of them have random components built in, you get a lottery number, or you're actually being selected by lottery, and so that is out of your control, that's whether you get, get lucky or not, in that context, really is kind of the outside of of your control, but even in those types of markets you can play strategies that help you do better, Tim Houlihan 11:28 like for the lottery, Judd Kessler 11:30 not for, not for, like the, you know, New York State lotto, or the Mega Millions lotto, where you're picking numbers, I mean, you can just, as an aside, you can do better in the sense of a lot of people play their birthdays as the numbers that they pick, and it turns out that that is not a great strategy, because even though those numbers are just as likely to be selected as any other number, because a lot of people play their birthdays when you, when you, if you were to win the jackpot, you would be more likely to split the jackpot with somebody else, so because you know they numbers Tim Houlihan 12:05 your birthday, Judd Kessler 12:05 potentially, and so you're better off kind of doing a quick pick or picking numbers that that other people are unlikely to pick, but that aside, because I'm not advising anyone to try to make their way with state lotto, but no, a lot of lotteries you have rules that allow you to say enter, but then maybe have somebody else enter on your behalf, so say you want to get theater tickets, like you can enter, your friend can enter, maybe can have other friends enter for you, and if they win, hand the tickets over to you, sometimes you win something that's good for your whole family, and so you and your partner, your wife or husband, can also enter. Sometimes, when you win a lottery, you don't have to use what you've won right away, you can defer to another time. So I talk in the book about, say, you want to run in the London Marathon, you want to run next year, when you can get to England, you should enter the lottery this year in the hopes of winning, and then deferring till next year, and then if you don't win, enter again next year. So understanding the rules that are being used in those markets gives you an opportunity to do a little bit better, even when the allocation is totally based on chance. Tim Houlihan 13:23 Yeah, you've brought up this term, hidden markets, that we need to.. this is a.. this is a central part of the book. We loved this.. this idea, by the way. I keep saying we, because it is.. we, Kurt, and I have already talked about, about Lucky by Design much already, so I'm representing that correctly. What is a hidden market? Judd Kessler 13:45 So, a hidden market is when we are allocating a scarce resource, but we are not relying exclusively on prices to decide who gets it and who doesn't. Tim Houlihan 13:55 Okay, Judd Kessler 13:56 I'm an economist. I've been an economist at Wharton for the last 15 years I got my PhD in economics, and if you have taken an econ class or talked to an economist, we often describe markets as being mediated by prices. There's some price that adjusts, and if you've ever heard an economist say supply equals demand, that's an assertion that price is going to adjust, so that all of the goods that there are in the market are going to get sold to people willing to pay that price, and that is how we often describe how markets work. Tim Houlihan 14:37 This is a neoclassical model, like everybody accepts this, right. Judd Kessler 14:41 Everybody, I mean, and this is again, like, I teach this to my students, so this is not a.. this is just the way that we talk about markets, and the issue is that not all markets let price adjust to the point where supply and demand need. Right, and you know, and do the allocation of the scarce resources that way. Lots of markets do, which is why we teach it, which is why I teach it in my classes. But then there's all sorts of markets that we care about, where the allocation is happening in some other way. And so, what, what is actually happening is that there's typically more people who want something than we are able to serve, and that situation is what I call a hidden market, Tim Houlihan 15:26 and Tim Houlihan 15:27 price is not the mediator, and Judd Kessler 15:29 price is not the meter. There may be a price, like I pay a price to eat food at a hot restaurant, but there are more people who want to eat at that hot restaurant than there are tables available on any given night, and so getting the reservation becomes a hard problem, or maybe you have to wait in a long line outside the restaurant in the hopes of getting a table, that phenomena of who gets the table, that's a hidden market, or Tim Houlihan 15:53 yeah, or who gets a ticket to a Taylor Swift concert, or Taylor Swift organ donated, you know, the donated organ and things, Judd Kessler 16:02 organ donation, that's a case where there is not prices, like you can't just go and say, "like to buy, buy an organ. Taylor Swift tickets, there is a face value of the ticket, but many more people want it than can be served at face value. Lots of live events, sports, theater have that feature: elementary schools, middle schools, high schools, colleges. In many of these, there are more people who want to attend the good ones than there are spots available. But you know, at Penn, we don't just raise tuition until we just get the number of people who we can fit in a class. We have another different type of mechanism that decides who gets the seats in the, in the freshman class and who doesn't. So, oh, and I should say, like, dating markets and labor markets are also, we call those markets, those are also hidden markets that employers do not lower the offered wage until they get one person apply for each job, they decide what the wage is going to be, or they decide what the salary is going to be, and then they select from a pool of candidates the one they think will be the best, and they're competing for that person with other firms that are trying to get potentially that same candidate, and all of these have this structure of we're trying to decide who gets what, but we're not just letting price do the work, we're creating another set of rules that that determines who gets what. Tim Houlihan 17:28 Yeah, yeah. It, when did you discover that hidden markets were a thing? Judd Kessler 17:33 I was fortunate enough to take a class from a guy named Alvin Roth, who many of your listeners might know, he won the Nobel Prize in economics for the, for his work in the field of market design, Tim Houlihan 17:49 not so Tim Houlihan 17:49 lightweight, Tim Houlihan 17:50 not a Judd Kessler 17:50 lightweight. I was, I was lucky enough, I think by design, I was lucky enough to work with him. He was my undergraduate thesis advisor when I was an undergrad, and then was my PhD dissertation advisor when I went back to Harvard for my PhD, and taking his class on market design kind of opened my eyes to all of these situations where we would like to allocate scarce resources, but we do not want to let price decide who gets what, and some of my earliest work in market design is with him. We were thinking about organ allocation, and how to, how to increase the pool of available organs using the allocation rules that were being implemented to decide who got which organs when they became available. Tim Houlihan 18:37 Well, let's stick with the organ donation model, because there is clearly more demand than there is supply in the world of organ donation and demand for it. Is there a better way of doing, of allocating those resources? Well, first, tell us how it happens now. Like, I have, I happen to actually be working with a guy who has had his second heart transplant? Judd Kessler 19:03 Wow, Tim Houlihan 19:04 one of the, one of the, you know, rare people. He's the 25th person at Vanderbilt University to receive a second heart transplant, and it's, it's remarkable, right? But the way to, and he, it was in dire shape when this happened, and he was really high on the list, but it still took months, so Judd Kessler 19:24 this is, yeah, so this is a classic hidden market, in the sense that there's lots of people who, for medical reasons, need an often life-saving organ transplant, Tim Houlihan 19:35 yeah, the Judd Kessler 19:35 number of organs that become available, the supply side is limited, and we don't love, we like when it grows in some respects, but not in other respects, because lots of the organs that are being used for transplant are coming from deceased donors, so right, a heart transplant can only come when somebody passes away, but. Agreed to let their organs be used for other folks, and when folks do that, if they're medically eligible to donate, you can often get lots of life-saving organs from an individual person, you get their heart, you get lungs, kidneys, intestine liver, so on. Tim Houlihan 20:18 So we're not excited about the idea of increasing the supply, so to speak. Judd Kessler 20:22 No, but, but of the people who die in a way that makes them medically eligible, we'd love for, you know, if you're interested in saving the lives of the people on the waiting list, we'd love for those folks who have passed away to make their organs available for transplant, because that isn't, that is somewhat something people have to decide themselves or their next of kin have to consent to after their death, but the way that it normally works is that there is a waiting list for each organ in each transplant center, and the rules for the specific organs differ based on kind of the medical conditions of the organ or the medical needs related to the organ, so for example, with kidneys, there is dialysis for folks who have end-stage renal disease, so need, you know, they have a kidney failure, but they, they need a kidney transplant, they can survive often for many years on dialysis, which is replacing kidney function, and so, as a result, one of the factors that gets used to decide who gets an organ when it becomes available, who gets a kidney that a deceased donor is, you know, is donating, is that is going to be determined based on how long the person has been waiting while they have been on dialysis, how bad is their liver function? You know, how close are to death store are they is going to be a key determinant, and whether a kidney that becomes available is is given to them. Tim Houlihan 21:50 So, each of these are really different markets. It's not as if organ donation is a holistic market, right? Judd Kessler 21:57 Each one is its own market, and each one, you're there's active work trying to figure out how can we, how can we optimally design when an organ becomes available. Who gets it? Because you can think about all the different issues that might arise. If I'm at the top of a waiting list for kidneys, there might be lots of kidneys that become available. I might, if I'm medically okay to wait for the next one, you know, maybe a few days or weeks later I might turn down an organ that's not ideal because I'm expecting a better one to come along, and then Tim Houlihan 22:30 an ideal meaning sort of the match, the biological match, right? Judd Kessler 22:34 Ideal meaning the biological match, but and also the age of the donor, you know, the like how healthy the donor was relative to other donors that might come available in the future. Those types of considerations might affect my strategic decision if I'm at the top of the list, and then, as a result, you might have an organ that's kind of a mediocre organ being offered to more and more people as you go down the list, and of course, the longer that you are waiting to take, the longer it takes for you to be offered the organ and decide whether it's a good fit for you. The organ, in particular, if it's out of the body of the deceased donor, which it often has to be to do some of the tests that would be necessary to see if it's a good match. The longer it's out of the body, the kind of worst condition it is. And so then all of a sudden you have an issue where organs that maybe the 500th person on the list would have taken it if you offered it to them immediately when it's been out of the body for a bunch of hours. Now even the 500th person is like, oh no, that organ's not going to be a great fit for me now. When I say person, you know it's really the transplant surgeon who's right helping the patient decide. So, anyway, Tim Houlihan 23:49 recovery organ is a front row seat to Taylor Swift, correct? Judd Kessler 23:52 Some are some are in the, you know, nosebleed section, and and if you, but but again, if you offered it to somebody whose alternative was wait another three years in the hopes of getting a better organ, you know, maybe they would take it. So there's lots of work that is being done on should we be picking kind of smaller groups of people for each organ, like so you know, maybe I decide that even though you're high on the list, like we're not even going to offer this organ to you, because based on what we know about the organ, and about maybe even about you. It's just like it's not going to be a likely organ that you take, and so we'd rather not waste the hour letting you kind of mull it over. We'd rather kind of more quickly get down the list, and then on the flip side, you will get an organ when, when you are on the list that you know for the organ, like you will be offered one more quickly, so you'll wait less time when you are having been selected to be on the more narrowly defined list for a given organ. So these are the types of things that market designers think about. Hopefully, this will not be the case for your listeners, but if you end up needing a lifesaving organ transplant. One of the strategies that I talk about in the book is what's called multi listing, so I described folks as being on a waiting list based on how their medical need and how long, for example, they've been waiting for a kidney. It turns out that when an organ becomes available, one of the things that they use to decide who to offer it to is geographic location, so if an organ is across the country, you might be less likely to be offered it, but somebody at a transplant center closer to the deceased donor is going to potentially get, get offered it instead. So, what does that mean for a potential recipient? It means if you can get yourself on waiting lists at different transplant centers, so one in your, you know, one in state A and another in state B, you know, kind of far away, you're increasing the chance that an organ becomes available and offered to you, because you, you might be closer to one at transplant center B, that's something that you know, if you had a private jet, there's lots more transplant centers you could get to within a few hours than if you exactly don't, but if your life is on the line, these are the things that that folks might want to do if they can, and so we don't begrudge people trying to get something that will save their life, but the rules in this case allow folks to do the multi listing, Tim Houlihan 26:25 right? So, is is that a good idea? It's where does fairness and equity come into something like this? Because someone has the means and their life is just as precious as anyone else's. It, you know, we certainly don't want to devalue anyone's life. Judd Kessler 26:41 Yeah, so I mean, this is this is an active question. So I talk about I talk about Steve Jobs getting his liver transplant that he got a little over a decade ago in Tennessee. Now Steve Jobs kind of famously lived in California. Tennessee is quite far from California, and now I don't know, I don't have his medical records. I don't know if he was also listed in California or just listed in Tennessee, but regardless, you know, you could say, "Oh, well, it's not fair. He was able to get an organ in Tennessee. Lots of people who live in California don't have that option. It turned out at the time Tennessee had a much shorter waiting time for organs than California did, and so you know, I think the flip side argument would be, well, that's not fair. Why should somebody in California be having, you know, be much more likely to die than somebody in Tennessee of the same condition, you know, and so I think a defender of the Steve Jobs would say, oh, he's like evening out the weights between people in Tennessee and people in California, but to Tim Houlihan 27:56 be made, yeah, the Judd Kessler 27:57 heart of the issue is, you know, when you're thinking about these rules, you want to think exactly as you said about the equity that's built in, and I think that is why we do not say, "All right, we're gonna, we have, you know, 10,000 kidneys a year, we'll just, you know, auction them off to the 10,000 highest bidders. We don't like that, because we don't think that that is equitable. We don't like an allocation that gives the scarce resource to the wealthiest folks, and again, this is a situation where, if you're willing, if your life's on the line, you're probably willing to pay whatever it takes to save your life, to extend your life, and so you could very easily see the organs being allocated to just the rich and excluding the poor, you know, in all cases, so that that is an issue that we have to constantly be thinking about when we're designing these these mechanisms and these these markets. How is it doing on equity? But I will say the work that I did with Al kind of takes a different approach in a way that I think we should consider Tim Houlihan 29:10 the Judd Kessler 29:10 policies as being kind of there's only winners and no losers. So here's what we have studied. Tim Houlihan 29:18 First of all, I like that model going into it, or that goal to have an only winners and no looters. Yeah, Judd Kessler 29:27 and the way that you do that in a hidden market, this is true of all hidden markets, is if you can figure out a way to make the scarce resource less scarce, then you can increase the number of winners without harming anybody, right? If there's a fixed number of organs, you're just deciding who gets it, like you're creating winners and losers. But if you can say, "Look, we have a set of organs, let's increase that set of organs, let's increase the pool of people who are making their organs available for transplant, that could potentially benefit everybody, Tim Houlihan 29:58 and that's the key. It's not so much that we. Want more people to die, so that they can make their organs available. We don't want that. It's increasing the pool of people who say yes to when I die, I want my organs to be available, Judd Kessler 30:11 exactly. And there, there has been, since I've been working on this for the last 20 years, there's been hopes that we could change the way we ask the question and induce more people to donate, so we thought, oh, maybe we can make, make it an opt-out question instead of an opt-in question, and that that would increase the number of people who say yes. And, sure enough, Tim Houlihan 30:34 classic. Judd Kessler 30:35 Yeah, Johnson and Goldstein have a classic paper on this, and they show very convincingly that if you make something a default, people are more likely to choose it. The problem is, is that empirically, in the organ donation space, that does not actually increase the number of organs we recover, because there is also a second part of the process where the next of kin is there at the at the time of death, and Tim Houlihan 31:01 they get to weigh in, Judd Kessler 31:02 they get to weigh in. So it turns out that while the rates of people being listed as registered donors is in fact much higher in lots of the countries that have opt out, the number of organs you recover per capita is not that much different, or the estimates are that they're very, very similar. Tim Houlihan 31:20 Gotta say, that really bummed me out when I read that. Judd Kessler 31:22 It's, yeah, it is. It is disappointing, as particularly as somebody does behavioral econ research, to think, oh, this thing that we, that looks like it works really, really well doesn't work. There is one other thing that looks like it works very well, also inspired by that Johnson Goldstein paper, which is asking as a yes-no question instead of an opt-in question, say like at the DMV, where if the thought was that if you have a line that you sign to say I want to be an organ donor, you know, then maybe people just skip the question, but if you make me say yes or no to do you want to be an organ donor, you know, yes, I want to be a donor, no, not at this time, but you force me to answer one of those, then the fact that most people support organ donation would kind of lead them to feel like, all right, I can't ignore this now, I'm being forced to answer, I have to say yes, Tim Houlihan 32:20 kind of a good intuitive, Judd Kessler 32:22 good intuitive, yeah, and you could see why, and they show that in a hypothetical setting, that's exactly what happens when you ask people you know to say yes or no, more people say yes than if you just have them opt in, and they know that you know if they do nothing, they won't be a donor, and in work I did with Al, we looked at DMV data, where they changed the way the question was asked. We did our own experiment, where people came to the laboratory and were signing up on the real Massachusetts Organ and Tissue Donor Registry through a front end that we were manipulating experimentally, but changing the way the question was presented, and there's just no effect of asking as a yes, no, or opt in on registration rates, so those kind of, you know, hopeful but but failed attempts at making the scarce resource less scarce, but a thing that does work Tim Houlihan 33:14 good to help me, yeah, get me hopeful again, you here Judd Kessler 33:18 is something that is done in a few countries around the world, so Chile, China, Singapore, and Israel do this. The US does not currently do this, but I hope we move in this direction, which is provide priority on those organ donor waiting lists, the ones that I described earlier, where you're waiting for a life-saving transplant, give you priority for an organ on those lists, if you agreed when you were young and healthy to be a registered organ donor, that gives an incentive, not a monetary incentive, but an incentive for folks to become donors when asked, and that has the potential to actually expand the pool of available organs, and that, Tim Houlihan 34:03 yeah, Tim Houlihan 34:04 so it's Judd Kessler 34:04 hard, yeah, it's hard to do studies on that, but when Israel implemented it, we could look at data from before and after, and sure enough, you tell people this is the incentive, you get more signatures on donor cards, if you tell next of kin that if they donate the organs of a deceased loved one. The whole family will get priority if anyone in the family ever needs an organ. You see lots more people saying, you know, I was going to say no to organ donation, but now I'm going to donate the organs of my.. Tim Houlihan 34:32 it's Tim Houlihan 34:33 enough of an incentive, and I love that it's non-monetary. Judd Kessler 34:38 It's using the hidden market, it's using the fact that there is a scarce resource to create an incentive to make that resource less scarce, and every time we can do that, I think we, we can improve the market, and that is something that we as designers have to think through, or as I. Individuals in societies playing in markets, we can advocate for, we can advocate for HOV lanes that let you drive faster if you are carpooling. We can advocate for making it easier to get TSA Pre Check or Global Entry, so that you're and making sure that those folks who have those are actually experiencing shorter weights, so there actually is an incentive to get TSA Pre Check, because when you have done that, you are easier to screen at the airport, and you make everybody go faster if the staffing levels are set appropriately, right, encouraging people to take actions that make the scarce resource less scarce, that makes the hidden market move more smoothly. We should be actively encouraging that. Tim Houlihan 35:53 Hey, Groovers, quick break from the conversation to talk about something we don't bring up enough on the show. Yeah, that's right. When we're not behind the mic, we're working with organizations to apply behavioral science in ways that actually move the needle for leaders, teams, and whole cultures. Kurt Nelson 36:10 So, whether it's designing smarter incentives, boosting engagement, setting goals that actually stick, or helping teams navigate change, we bring real science to real workplace challenges, Tim Houlihan 36:21 and we don't just talk theory. Our approach blends research-backed insights with hands-on strategies that drive results. Now, we've seen small behavioral shifts lead to big wins in Fortune 500 companies and scrappy startups, and even in mission driven nonprofits. Kurt Nelson 36:38 Yeah, and we bring the same curiosity, creativity, and care to our client work that we bring to every episode of the show. Tim Houlihan 36:46 Billy, I think people might want more than what we bring to the show. Kurt Nelson 36:52 You probably have a point there. You're probably right. Tim Houlihan 36:55 Okay, so we'll bring more care and creativity to our work with you and your teams than what we do on the show. Kurt Nelson 37:02 Yes, more care. So, so if you're ready to build stronger motivation, better team dynamics, and maybe even make your workplace a little more groovy, Tim Houlihan 37:12 yeah, reach out to us. Grab us on LinkedIn or Facebook, or just drop us a line. We'd love to help you and your team find your groove, you why is it that hidden markets are hidden, like we've all tried to buy tickets to a concert that was in short supply and struggled with the I was online, I was there, I had my chance, and then I got bumped off, and then I missed it. Everybody's had that experience. Why? Why is this? Why are there still hidden markets? Why don't we just sort of intuitively come to solve for these problems? Judd Kessler 37:52 Yeah, I think there's two reasons. I mean, I call them hidden markets, not because we don't know that they exist, but because we don't think about them as markets, we think about them as experiences that we have that are terrible or annoying lines that we have to wade in, and when we do that, we ignore the possibility of improving them by thinking about the underlying design. I was giving a talk, and I made some reference to long lines, and I may have mentioned long lines at the airport, and somebody came up to me and said, after the talk, it was like, "Well, but what if the lines, you know, not that long? What if, instead of an hour, it's only half an hour, 15 minutes? And I was like, "Yeah, but that, that's not right, like what if it was zero? What if we actually could improve things so that it was substantially shorter, right? Or what if we change the rule from being something that requires standing in line to something that's allocated in some other way? It's kind of, we're so used to experiencing these things that we often don't take a step back and ask, like, why are we doing the allocation this way? Would there be a better way for us to do it, so that's the, you know, the first thing is we, we kind of are blinded by the fact that they are all around us, and we've been experiencing them our whole life, to kind of think about them as markets that have rules that we can either do better in or can fix to improve outcomes, and then the second thing is, I, you know, I think it's, it's hard to get those institutions to change, so right, like lots of the markets that we have, the rules are set by historical accident, or you know it was somebody determined that this is the way it should be done, and then you know years have passed and nobody has complained enough to change things, so that the hidden markets that we have today are set or created not by folks who are thinking deeply about how to do them better but by. People who you know, maybe we're doing their best, but then kind of set it and forgot about it. So, the ticketing example, I think, is a great one to demonstrate this, because when we bought tickets in the 1970s I'm using the royal weed now, because I was not yet born, but when people were buying tickets in the 1970s or 1960s you literally had to stand in a physical line because you were buying a physical item from the box office and you needed to hand them cash in exchange for the physical ticket, and that Tim Houlihan 40:35 box Tim Houlihan 40:35 office was the only place that you were going Judd Kessler 40:37 to be, you could do it at the box, sometimes they would let, like, local record stores also sell tickets, so they would, so then they didn't have everybody standing in the same line. You could stand in different places, but, but it was a physical experience that required handing over physical items, and then being there physically is important. What happened? But that's a first come, first serve, right? If you're standing in line, it's a first come, first serve line. Those who wait the longest are going to be the first ones at the box office, and you know, you might say, look, there's some efficiency benefit there. If I love a band and I'm willing to camp out overnight, I'm going to get tickets before somebody, or you know, better tickets than somebody who, like, doesn't really care and just shows up, you know, the day that the box office opens, later in the day, just to see if anything is left, because those, those latter folks are not the die-hard fans, and so maybe they should have a lower chance of getting the tickets now. Fast forward a few decades, what happens Tim Houlihan 41:35 before we get to, can I just say that in the 80s I was in a line, a very long line for a concert, and they thought, well, we're going to be really clever about this. We're going to have everyone's lined up, so we, they've been in order, and we're going to pick a number randomly. The line owners said we're going to pick a number, and then we're going to count through the line to that person. That person is going to become number one, so it will be random, and Judd Kessler 42:05 oh my god, I've been waiting. That sounds like Tim Houlihan 42:09 waiting in line for five hours, and it, I think, I was number 21 in a line of about 120 people, and the number that was picked was 26 and so I became the fourth last person in the line after what Judd Kessler 42:26 nightmare, so that is like a very badly designed Tim Houlihan 42:29 market. Judd Kessler 42:30 There are, you could imagine other things, and this I remember when I think there was something like this when, when one of the Harry Potter books came out, like a new Harry Potter book came out, and you know, they, they said, "Look, we're gonna have people start lining up, but we're not gonna make everybody wait all the hours, like, come in the morning, and we'll give you, like, a color-coded bracelet or something, and then we'll, you know, let you in later on in the day, right? But those types of that strategy is turning a physical line into what I would call first come first serve waiting list, right. You get there early, get on the waiting list, and, and so that, that is, I guess, getting easier to do now with technology, but at the time, right, if I, if I could figure out how to get a color-coded bracelet, I could that match the ones that Barnes and Noble was using, maybe I could avoid having to go at all. I just find out, hey, what color are they using for? And I go to my supply store, easily Tim Houlihan 43:28 gamed, Judd Kessler 43:29 easily gamed. So you have to figure out what is the technology that you can use to implement the market rules that you want, and what has happened with live event tickets, your bad experience notwithstanding, is that it went from first come first serve lines. Then we invented credit cards, we invented the internet, and the first come, first serve lines turned into first come, first serve races. First, you were calling into box offices over the phone and giving your credit card number, and there it was like you were trying to try to get in to the operator before other people. Then it all got moderated by websites like Ticketmaster, and there, when they use first come, first serve, it's a race, they open the available slots, and over clicks the fastest to buy the tickets, gets them, and if they, if you don't click fast enough, they've all been bought. And what has happened over time, and we kept first come, first serve, but now the people who get the tickets are the people who've programmed the fastest bots to buy tickets before anybody else Tim Houlihan 44:37 can. It doesn't feel fair. Judd Kessler 44:39 It does not feel fair, and the bots are often programmed by speculators or ticket brokers who are then turning around selling those tickets on secondary markets. The internet did not invent ticket brokers, right? There were people who were elbowing into those lines and buying tickets and then turning around and reselling them, and that's been around. For you know, over 100 years at least, but it, the internet made that process kind of easier for the brokers and made the market a much bigger one, both because they can program bots, and they also made secondary market platforms kind of easier to, like, it's when I was a kid, and we wanted to buy tickets from a ticket broker, you had to have like a shady cash transaction in front of Madison Square Garden, and I was just remembering that the time that my family friend took me, and we bought tickets from somebody, and then made it like all the way into the ticket scanning check, only to learn that they were fake, that they had just, you know, they were, they were not real tickets, right? So, so the internet solves a lot of those problems. Like, I, my last time buying tickets for the theater, I bought them from StubHub, and they've, they were going to validate that they were real tickets, and you know, if there had been an issue, like the tickets were fake, I would have gotten a refund, it might have been a hassle, but you know, it would have happened, Tim Houlihan 46:01 yeah, Judd Kessler 46:01 or I trust it would have happened, and so, so both the techno technological improvements on the market and the secondary market have let there be a proliferation of ticket brokers, but notice it's because we never bothered to change from first come, first serve, Tim Houlihan 46:21 right. It's basically it's still the same model. It has been that model. What's a better way to design? Judd Kessler 46:28 Here's how you solve this again. It's a technological.. we're using the technology that we have to solve the problem, but we're.. we're taking a kind of a broader look at it. So the key issue is that when you're selling something like a live event ticket and you're doing it for a price that is below the market clearing price, you're creating a hidden market. We could talk about why artists do this, why Taylor Swift wants to let face value ticket prices for the Eras tour be $99 Why the average ticket is $204 when she could, if she want, you know, if the price that would clear the market was substantially above that, but Tim Houlihan 47:11 she won't Tim Houlihan 47:12 charge more. She could Judd Kessler 47:13 have just charged more, but they, the artists, don't want to do this. The sports teams don't want to do this. And again, we could have a long conversation about this, but I think people's instincts are right on this, that it's like, don't want to piss off your fans, you know, fans of your team, fans of your muzhik, you want, you don't want to look like you're taking advantage of them. Taylor Swift is a billionaire, in part thanks to the Eras Tour, but you know, a billionaire charging a few $1,000 to fans for tickets, like people complain when that happens, and then the artists might not want to be charging a ton of money to their fans. They might like the idea of letting people who support them get to see them perform live for affordable prices. Sports teams might like their die-hard fans to be able to get in without paying an arm and a lick, but for whatever reason they want to price the thing below what would be clearing the market from the traditional econ perspective, so there is always going to be speculators that work their way in, unless you figure out how to totally shut down that secondary market, and that Tim Houlihan 48:24 is the, that's a challenge, Judd Kessler 48:25 that is the job. So the way to do it is to make tickets stop, stop acting like they are property that you have the right to sell to somebody else, but treat them more like contracts between you and the venue to sit in the seat for during the concert, the same way, by the way, that I have a contract with Delta when they are selling me a seat on a flight between two cities, right? If I, when I buy a ticket from LaGuardia to Atlanta, I do not have the right to sell that ticket to somebody else. That ticket has my name on it, and if I can't use it, I can return it to Delta, and they, we can have some agreement about, you know, do I get a refund, is it a partial refund? And then Delta can resell it to somebody else. Tim Houlihan 49:18 Yeah, and the rules around, like, the how we get the refund and how much is refundable, and that's problematic in and of itself, but, but the contract part is central to it. The Judd Kessler 49:27 contract part is central, and so, and now, now Delta is probably trying to make as much money as they can off of me, and so we can complain about that, and you know, the artist, though, if we're taking at face value the sorry, well, part sorry, the if we're taking that at face value, that they are actually trying to give us something at a discount, then we, you know, they will presumably want to have policies that are not punishing us if we have a last. Minute cancelation, so I, I imagine that what would end up happening is something like, all right, if we can't let you buy tickets and then cancel them for, you know, without a fee at any point, because then I might book a bunch of tickets with the intent of, you know, kind of waiting to see if I want to go that night and then canceling at the last minute, and, and then, you know, if I get a full refund, the ticket can't be used, that would be a real inefficiency. So, there has to be something, you know, I have to have some skin in the game. So, you can do that with, you know, a cancelation fee that gets larger as the event gets closer, or that's contingent on whether the box office is able to resell the ticket to somebody else, but, of course, at face value, right, if it really is a Taylor Swift ticket that you return because you can't go to the show, will get bought up, there'll be a massive waiting list that people want to buy the ticket, so you're gonna, so they could say, like, all right, if your ticket gets resold, you get a full refund, or you know, minus a few dollars, and I think I would be happy with that as a policy, and then the second change that we have to make, and this one's a little trickier, but again gets back to the first come first serve thing, is that we have to stop selling tickets on a first come first serve basis, because even if it's a ticket that has my name on it that only I can use and can't be resold, if you let it be first come first serve, the folks who are currently ticket brokers will just switch their business model to, hey, I have this great service, if you want to see Taylor Swift perform, just hand over your Ticketmaster account, and when the tickets become available, I will buy you the best possible ticket, or you know, they'll create fake ticket master accounts and buy up the tickets fast, and then you know, hand them over to people with, you know, some kind of name change feature, so you have to eliminate first come, first serve to eliminate the tickets going to the people with the fastest spots, and I think the alternative is using lottery rules to decide who gets the tickets, and I like lottery because it gets back to the thing we talked about with when you waited online for five hours because you really wanted to see the artist. When you have a lottery, the way you show that you're really motivated to see concert or show is flexibility. You say I will sit in any section on any day that the artist is in town. I, you know, whether it's a cheap seat or, you know, down by the stage, you know, I might have preferences over them, and we could ask for your preferences, but if you are willing to be flexible, your chances of getting a ticket will be much higher than if you say no, it has to be orchestra, it has to be Saturday night performance, or I'm not interested, like you're mechanically going to be entered into fewer lotteries and have a lower chance of winning, Tim Houlihan 52:56 right, Judd Kessler 52:57 and so that combination of, you know, ticket is a contract, your name is on it, we validate who you are when you come to the theater, so you cannot transfer it to somebody else. And we're not using first come, first serve, we're using fair way to allocate, like a lottery, that also allows you to show that you are really motivated to see this artist, like that. Well, that is my proposed solution to live event tickets. Tim Houlihan 53:25 We are speaking with Judd Kessler about his new book, Lucky by Design, and one of the things that Kurt and I have talked about when we were reading the book was, is there a hidden market for podcasts, both for podcast guests, sort of, the, we have, we only have 52 weeks in the year that we're publishing, so there's only 52 slots, if you will, but then is there also then on the consumption side, where we just learned this week that there are now 4 million podcasts in production right now, 4 million, when we started, there were six. There were less than 600,000 podcasts, which seemed enormous. Judd Kessler 54:07 This is a great question. There's first come, first serve, it's whoever clicks the fastest, or whoever's been waiting the longest. A lottery is whoever the random number generator picks. So those rules, you know, there's one side that's kind of playing, and then there's a algorithmic rule of some kind that's that's selecting Tim Houlihan 54:30 markets Tim Houlihan 54:30 are different, choose Judd Kessler 54:31 me markets are different, both sides of the market are playing in that game, they're both trying to get what they want, and so this is, you know, can be podcasts, and their guests could also be labor markets, where employees are on one side and employers are on the other, dating markets, where you're trying to find someone, college admissions markets, where we're applying, and schools are admitting you, Tim Houlihan 54:58 physicians trying to get. Gigs in certain venues, Judd Kessler 55:02 all of these are cases where both sides have preferences, and then the thing to think about is, you know, what. What are the incentives and strategies of the participants on both sides of the market, and that will help you think about what the right strategy is. So one of the things I often talk about when I'm thinking about these two-sided markets is thinking about the signals that folks send to each other in these markets, and whether folks on dating markets and labor markets are sending the right signals to the people on the other side, and that is a natural thing to be nervous about. That's a natural thing to be insecure about. That's the human condition. I think something that we often don't think about, but might serve us well in hidden markets is what signals are we sending to them to the other side of the market about how motivated we are in them, because it's easy to focus on what they think of us, but we can potentially control what signals we send about our excitement about joining their firm or matching with them on a date or joining their podcast or joining their institution as a student, and that signal is one that we have more control over, and if we send the right signal could put their mind at ease to take a chance on us in situations where they otherwise might not. Tim Houlihan 56:44 I like this, this idea that maybe there is more give and take than what we have previously thought. Now, on the market of trying to compete with 4 million podcasts for listeners, that's not a choose me market, right? Judd Kessler 57:04 So I think of that as the scarce resources there are the timeless attention of the listeners, right? So, so they are, they are running their own hidden markets, right. So, the way I talk about this in the book is, if you are, if you're thinking about what is a hidden market, it's where we have a scarce resource and we allocate it, but we don't use prices to decide who gets what. Well, your time and attention is a scarce resource, and, except maybe for, you know, high-priced lawyers or consultants, you're not deciding who gets your time and attention based on how much people are willing to pay, you're deciding based on other things, so you know the choose me market that I think is active there is, or the, maybe I shouldn't call it a choose me mark, but the hidden market that is active there is the listener deciding which of the podcasts they're going to devote their time and attention to, but I do think there's a little bit of a kind of two-way street there, where I mean, you maybe you'll take any listener that you, that comes Tim Houlihan 58:16 interested to some degree, Judd Kessler 58:19 to some degree, sure, like, hey, you know, if they leave a positive review, great, but, but the I think the issue is right, you're trying to find an audience that is going to be with you for a while, you're going to generate a lot of value if your listeners are actually interested in your podcast for the longer term, and they will continue to come back, and you will continue to deliver high value for them, and they will then start proselytizing your podcast to other people who are like them. Like finding somebody that is a good match for your podcast is, I think, of kind of more valuable thing for you, and the same thing is true in the labor markets, the dating markets, and the college admissions markets that we just described, right, in all those cases, in Tim Houlihan 59:06 the choose me markets, Judd Kessler 59:07 in the choose me markets, you are looking for somebody that is a good match for you, and you are going to end up happier if the match is kind of stable in the long term. Tim Houlihan 59:19 Thank you for that, John. I really appreciate that. Like the Behavioral Grooves team just got some free consulting from an economist, Judd Kessler 59:29 any Tim Houlihan 59:30 time. So, thank you. There is so much that we want to talk about, but there was one thing that just really was so fun in the book, that you were a theater guy in high school, and that you, you went to high school with a kind of famous guy, Judd Kessler 59:44 yeah, yeah, Tim Houlihan 59:47 kind of have to explore that just a little bit. Judd Kessler 59:49 I think that's fair. So I opened the chapter where I talk about secondary markets, where people, like the speculators we talk about, buy Tim Houlihan 59:58 tickets Judd Kessler 59:59 live. Event tickets and resell them, and I opened that by telling the story of being interested in theater in high school, doing a lot of theater, and my sophomore year I was in a musical that was written by a student, so we had a show at our high school where it was five student written, student acted, student directed plays, and they Tim Houlihan 1:00:22 pretty Tim Houlihan 1:00:22 cool, pretty cool shows, Judd Kessler 1:00:24 very cool setup. And I pulled in a lot of people. The school became very kind of theater was theater focused, I think, in part because this show, where you have five casts, one cast for each of these one act plays. So anyway, I was cast as a sophomore with senior who was very popular, very big into theater, and it was a little awkward, because Tim Houlihan 1:00:46 was it a musical? Judd Kessler 1:00:47 This was not a musical, this was a stage display. There was a musical that was being put on that that year. One of the five was a musical written by this guy who I got cast alongside, but I got cast as his best friend, and it was very awkward, because you know he was like popular, and I was a sophomore two years younger than him. So the director was like, "You're on stage, chemistry sucks. Here's what you're gonna do. He's like, "Every time you see each other in the hallway at school, I want you to each like yell each other's names like your best friends, who haven't seen each other in a decade, and then run towards each other and give a giant hug every time you see each other in the hallway. It's not that big a school, so this would happen at least a couple times a week, Tim Houlihan 1:01:33 and Judd Kessler 1:01:34 this guy would yell Judd and run at me, and I'd yell Lynn, and I'd run at him, and I'd hug him, and we became friends, and it's Lin-Manuel Miranda, and so when he, you know, was his musical that was being put on, then he has these massive Broadway successes. I mean, oh yeah, there was, Tim Houlihan 1:01:56 there was that, Judd Kessler 1:01:57 there was that, and also, you know, writes great music for the movies that my kids love for Disney and things like that, but it was, I mean, it was like a great experience to act with someone who then becomes this mega superstar. I then I got kind of a firsthand look at what was happening with Hamilton and the Hamilton tickets, and got me so fired up about this, because the tickets, I mean, Hamilton, phenomenal Broadway show, best musical I've ever seen. I think that's true of most people who've seen Tim Houlihan 1:02:31 it, Judd Kessler 1:02:31 but it was impossible to get tickets, and when you look back, it is because of these ticket brokers, and you know, there are market design that said, you know, 80% of some of the ticket, of the tickets during that first stretch of shows, when it was really in its, you know, kind of opening, opening year heyday, 80% of them were bought by speculators, that there was a report that one ticket brokerage bought like 40% of all the tickets that were released in some time period, and it was because of the market design, so that, like, got me really kind of really attentive to this question, and I'll tell it, since you asked about it, and you know, I'll tell you something that's not in the book, but I sometimes tell my students when we talk about ticket markets, and I have them read an op-ed that Lynn wrote for the New York Times, when kind of about taking harsher penalties against these ticket brokers that use bots to buy up tickets, when that was explicitly not allowed. I've been married for, you know, since 2012 The person who introduced me and my wife is my another one of my friends from high school, who is married to Lynn, and they had been married. They were married before my wife and I, but when we were deciding, you know, how to organize our wedding, we're like, well, we have to have a role for the person who introduced Tim Houlihan 1:04:05 us, Judd Kessler 1:04:06 yeah. And so we're like, oh, we should have her officiate the wedding, and her Broadway star husband should also have a role to play Tim Houlihan 1:04:18 anyway. Judd Kessler 1:04:18 So, so Lynn and his wife, Vanessa, officiated my wedding to my wife, Alana. So, that, that is not in the book, but your listeners get that tidbit. Tim Houlihan 1:04:30 Kind of cool, Judd Kessler 1:04:32 fun, it's a fun flex, you know, in my MBA classes to show that picture of the wedding. Tim Houlihan 1:04:38 Love it. I just, I just love it, and you know, I also sort of got the impression in the book that maybe there was enough acting for you in high school, as much as you enjoyed it, but maybe that was enough. Judd Kessler 1:04:56 I think, Tim Houlihan 1:04:57 did I, Tim Houlihan 1:04:57 did I read that right, or Judd Kessler 1:04:58 no? I mean. I think maybe it's like when you, when you compare yourself to, you know, your co-stars and they're destined for greatness. You kind of say, maybe I'll do another path. No, but I don't know. I think of teaching classes, getting up in front of students is, you know, not not dissimilar to the theater I did in high school. It's, you know, coming on a podcast, talking unscripted in this case, but you know, it's, it's, it's, there's some performance, you know, I'm not, I'm not in a career that does not have me in front of people talking. Tim Houlihan 1:05:34 Fair enough. I don't disagree with you. I think, well said, actually. We, we'd like to end with a little bit more music. We already talked a little bit about Taylor Swift, and because of the Ticketmaster stuff, and you know, I could just spit nails when I think about Ticketmaster as an organization. The number of lawsuits against that company just stretch back years and years and years. But let's turn to a happier spot. Let's imagine that you, Judd, were isolated on a desert island for, let's say, a year, and you had a listening device, and you could only take two artists with you on that listening device, but you got their whole catalog, but it would only play two artists, which two artists would you choose to take with you? Judd Kessler 1:06:21 Oh my god, that is tough. Tim Houlihan 1:06:26 Is this a choose me market for the, for the art? Judd Kessler 1:06:28 I mean, you've given me, it's like kind of too much, too many options. So I don't need to bring Lynn Smith, because I've memorized all those songs, I can just play them in my Tim Houlihan 1:06:38 head. I like, I like that. That was a, that was a nice, nice lateral arabesque. Judd Kessler 1:06:48 I think it would probably, I'd probably have to pick like two very different, like it would probably be the Beatles. It's like lots of, you know, lots of great news that go slightly different styles over a bunch of time, but then, like Sabrina Carpenter, like something, a little right, because, like, it depends, you don't know, over a year on a desert island, what kind of mood you're going to be in, and maybe you'll want, you know, yeah, little age, Tim Houlihan 1:07:14 as an economist, you're variety seeking, Judd Kessler 1:07:16 I am variety seeking, yeah, no, if you just had like Bach and Mozart, like, oh my god, like, what if you need to, like, you know, build a new structure, and you want, like, the pump-up music that'll help you, you know, collect the wood, and you need something with a little more, yeah, Tim Houlihan 1:07:32 it might not be the Brandon Birkin charity, Tim Houlihan 1:07:35 exactly, Kurt Nelson 1:07:36 yeah, Judd Kessler 1:07:37 might not get you building your, your new desert paradise. Tim Houlihan 1:07:42 Fair enough, fair enough. Judd Kessler, it's been an absolute treat to have you on Behavioral Grooves. Thank you so much for being a guest today. Judd Kessler 1:07:49 Thanks so much for having me. This was a lot of fun. Kurt Nelson 1:08:00 Welcome to our grooving session, where Tim and I share ideas on what we learned from our discussion with Judd. Have a free-flowing conversation and groove on whatever else comes into our lucky by design brains. Tim Houlihan 1:08:13 Okay, that's kind of a gimme, but Kurt Nelson 1:08:16 wow, what, what could, what would you said? What you, you do the intro here, Tim. Go, go, that's that's there, here you go. Tim Houlihan 1:08:28 How about hidden markets by our hidden market brains? How about that? Kurt Nelson 1:08:32 All right, okay, that would work fine. I could have got that. Okay, Lucky by Design works as well, right? Tim Houlihan 1:08:44 Yes, it does. Absolutely. Okay. All right. Nothing, nothing to object about. Nothing there. That's Kurt Nelson 1:08:51 all right. Grooving session off to a rough start. We're not lucky. Why aren't we lucky with this grooving session, Tim? We didn't pick that four leaf clover. What's going on Tim Houlihan 1:09:04 here? It's because, because luck still exists. I mean, I think the judge approach and thinking about there are a lot of markets that we can anticipate, and by understanding that these hidden markets actually exist, that we sort of countermand the luck side of things, but that doesn't mean that the sheer luck doesn't exist. Kurt Nelson 1:09:31 Yes, there are rolls of dice that actually happen, that Tim Houlihan 1:09:36 yes, Kurt Nelson 1:09:37 you know you can get on a lucky streak and get the right roles, Tim Houlihan 1:09:43 that's exactly right, and I think in the group, in the introduction, I mentioned that I think that there's a difference between coincidence and luck. Kurt Nelson 1:09:52 Yes, Tim Houlihan 1:09:53 and the coincidence for me is just the randomness of things happening, but luck is. The value judgment that goes along with, well, that was a good thing or a bad thing, like, you know, we talk about good luck or bad luck, but we don't talk about good coincidences or bad coincidences. Coincidence, a coincidence has a very neutral thing that's just random. Kurt Nelson 1:10:16 Did you, and we didn't talk about this, but there's that recent research out there, and I apologize, I don't have the who it was done by, where they took self-described lucky people and self-described people who said they were not lucky, and they gave them this experiment, which I thought was really fascinating, they said, "Look, read this like 18 pages. Don't quote me on the actual way that this is done, but you'll get the gist of it. 1820, page newspaper, count the pictures in here, and if you get that right, we'll give you money at the end of this experiment, and on, like, the second page or third page, there is one of the pictures that says there are 57 pictures in this, you know, document. Go ahead and turn this into the prompter, and you'll get paid, and all of the people who self-described themselves as lucky saw that, whereas almost nobody on the unlucky saw that. Tim Houlihan 1:11:30 Wow. Kurt Nelson 1:11:31 And then again after that, there was this, like, further in the thing, like another picture that said, hey, if you see this, go up and tell the prompter you know this statement, and you'll double your earnings. And once again, the self-described lucky people, Tim Houlihan 1:11:55 wow, Kurt Nelson 1:11:56 saw that, whereas the unlucky self-described unlucky people did not. Tim Houlihan 1:12:00 So it makes me curious, if you could be primed if going in the experimenters said, okay, we, you know, you're you seem like a kind of lucky person, Kurt Nelson 1:12:12 I wonder, and Tim Houlihan 1:12:13 so we're going to put you in with the lucky group, okay? Did you mind if that, you know, if you don't think that, that's okay, but but we think you're a pretty lucky person, so we're just going to code you as, as being part of the lucky group, Kurt Nelson 1:12:24 or we'll do a little bit of a kind of fake experiment up front, and said, "Oh, look, you are in the luck, you are in the high end of the lucky people now, let's go, you know, you're, we're putting you in with the lucky group over here. Yeah, that's a fascinating company, man. We need to get some research backing, and do that thing anyway. I was going with that, because again, there's this, you know, we all heard, you know, luck is what happens when preparation meets opportunity, that quote various different things, and I think there is that aspect that, and what, how they describe this is that lucky people had a more open perspective, that they weren't so focused in on the task that they were open to other things that were going around, so they're paying attention to the environment around them in a much more broader sense than just focusing in on the task and being so focused on counting these that I'm not paying any attention to what the pictures are, I'm just so focused in on counting, and that that ability to have an openness to experience helps in identifying those lucky things, and I think I don't think Judd would disagree with that, Tim Houlihan 1:13:39 no, Kurt Nelson 1:13:40 but what he's talking about is vastly different in kind of understanding the hidden markets behind what is going on, and when you understand, oh, this is why people are choosing this, that I can change what, how I market myself, because, Tim Houlihan 1:13:59 right, Kurt Nelson 1:13:59 it's a hidden market, it's not based on dollars and cents, it's based on something else. Tim Houlihan 1:14:05 Yeah, I would agree with that. I don't, I think that Judd is really keen on focusing on these hidden markets, because they are so impactful, and as you said, with the definition of of luck, you can prepare, you actually, you can have preparation with hidden markets if you know where to look for them, and you know what to look for, and from for me, in the last 20 years of my life, I've seen the choose me market is so has been very powerful and important in my life, and it's had a tremendous impact. If I think, if I would have known more about the Choose Me market approach, when it came to dating and relationships, when it came to finding jobs, when it came to getting gigs as a musician, those are all Choose Me markets, and I. Would have approached them more in the ways that Judd suggests, like to be more specific, to be, to not, you got to be open, right? You have to be aware and have your radar on, and at the same time, you have to approach it with precision to say, this is exactly who I am, this is exactly what I want. This is this is what my gig is going to be. If you, if you come to hear me play, you're going to hear this, Kurt Nelson 1:15:31 that would not 70s music, and that Tim Houlihan 1:15:34 no, that's too broad. Yeah, it was like, oh, my set tonight is 100% Paul Simon, or it's, you know, and it turns out when I, when I reflect back on the shows that I did when I was more focused in promoting, we're gonna do a Laurel Canyon set, turnout was better than it's just Tim Houlihan singer songwriter, Kurt Nelson 1:16:00 oh Tim Houlihan 1:16:00 yeah, Kurt Nelson 1:16:02 so you've seen actual evidence Tim Houlihan 1:16:06 of yes, yes, Kurt Nelson 1:16:08 you were luckier when you applied Judd's insights, even without knowing that they were Judd's insights, Tim Houlihan 1:16:20 yes, yeah, that's exactly right. I think so. And this is only in retrospect, by the way. I wasn't, I don't think I was aware of it at the time, Kurt Nelson 1:16:28 but I think it's really, I think that part of what you just said is important. It's that we can reframe luck as the outcome of understanding the rules of the game, yeah, and then acting accordingly. So it's, it's people who succeed in these hidden markets that they are understand what the hidden markets are behind this, and they're not necessarily working harder, they're just playing smarter Tim Houlihan 1:17:00 in some ways, isn't it kind of like choice architecture? Kurt Nelson 1:17:02 It Tim Houlihan 1:17:03 is. It is that you get to frame if you are aware of this hidden market, you get to frame what the, what the options are. You can anticipate what they are, Kurt Nelson 1:17:12 what the default is. So, therefore, you, you're more likely to get chosen, right? Because it's too much effort to go against the default. It Tim Houlihan 1:17:22 is exactly that. That's well said. I think there's also something around environmental rationality. Gerd Gigerenzer. Kurt Nelson 1:17:30 Okay, I've never heard of this guy. So, is Gerd Giger Tim Houlihan 1:17:35 Gerd Giger? He's a German economist and behavioral science guy, and he's a bit of a shit disturber. I kind of like him for that. Okay, but he worked a lot with bounded rationality, like he was an acolyte of Herb Simons. Kurt Nelson 1:17:53 Well, all right, I like him already. Tim Houlihan 1:17:55 Yeah, there's a lot to like there, but he talks about, he termed it environmental or ecological rationality. Okay, it's a context matters kind of message, right? But, but he just talks about how these.. it makes me think about how markets are very context sensitive, like I like, because I mentioned, choose me markets show up in different ways, you know, dating relationships, job, and getting a gig, those are three really different environments and contacts. They're different in Giga Menzers terminology, different ecological systems, and yet they're still the same kind of hidden market. They're still choose me markets, so that's Kurt Nelson 1:18:41 gonna have to go out and look up Gerd, Tim Houlihan 1:18:45 yeah, Kurt Nelson 1:18:46 Gerd gigger, and sir. Okay, cool. I know that's really cool, and I do like that aspect of the ecological this idea that you can be in a different environment, but it's the same market with different factors that are playing into it. Dating is different than a gig, which is different than a job, and you, you can apply some of the same rules, but it is in a different context, and so you need to look at it slightly differently, which I think Judd would, would align with, right? So Tim Houlihan 1:19:20 he would, and this is part of his kind of exceptional cognitive ability, is to see this bigger picture of what a hidden market is in general, and and use the book to help educate us about that, so that we can apply it to all these different scenarios that I think it's a really great thing that he, that he did. It's a good read, by the way. I just want to, Tim Houlihan 1:19:49 yeah, Tim Houlihan 1:19:49 encourage people to grab Judd's book, and so into it. Kurt Nelson 1:19:54 There was another thing that Judd brought up, right, is that he. Luck is really, we can rethink about luck as quality over quantity, that better matches, yeah, beat more options, and yeah, it's this idea, it's not about just maximizing, it's not like I gotta do a shotgun approach and splatter everything and maximize my exposure. It's about understanding that market, understanding how that market operates, and then putting your strengths around what that market is looking for at the forefront, Tim Houlihan 1:20:45 that's a great example for fitting into the choose me markets. When you're out there in the dating scene, and you're like, oh geez, I like this person, and, and so I don't want to offend them in any way by saying I believe in this or believe in that. It's like I think Joe would say, 'Hell no, just be you, just just own it. And as I say that, I can think of times, plenty of times in my own life when I have deferred to diplomacy when I didn't need to, when it would have been better just to not be so diplomatic, just say, hey, I don't know if I agree with that, Kurt Nelson 1:21:27 like every time you talk with me, right, Tim Houlihan 1:21:29 every Tim Houlihan 1:21:29 time, literally every time. Kurt Nelson 1:21:32 All right, all right. Well, let's wrap this up. I think this is a good spot to wrap this up on, and I think there's an interesting piece, actually, before I even talk about the interesting piece, I would love our listeners to comment on what they find, like, how did they find luck in their life? Like, what is it that is lucky for them? Where do they see luck happening or not happening? Is it in these choose me markets? Is it in other facets of their life? Would love to just hear their experiences with that, but I think the bigger piece that we can take from Judd's conversation is, you know, these stories we tell these stories to ourselves about luck, and they're often the wrong stories, because there's a system behind this, and we don't see the system, and once we see the system, we can't unsee it, and then luck becomes much more of a process of understanding that system and fitting into that system, Tim Houlihan 1:22:41 so once again, the message is that voice in your head, don't listen to Kurt Nelson 1:22:51 it, is that partially listen to it, right? Tim Houlihan 1:22:56 Okay, okay, all right. Groovers, we have a Substack newsletter that we would love for you to subscribe to, it's only 500 $500 a month, or is it, is there a discount now? Kurt Nelson 1:23:10 There's a discount, low, low, low, low discount of Tim Houlihan 1:23:15 free, free, Kurt Nelson 1:23:16 yeah, Tim Houlihan 1:23:17 it's worth $500 a month, Kurt Nelson 1:23:20 it is worth much more than that. It is, it is, it is one of the things that will allow you to find luck in your life if you subscribe, because it'll show you the hidden systems, it will bring you the insights that will allow you to, you know, win at these choose me markets, it will all right. I'm gone. That's that was true, folks. But Tim Houlihan 1:23:49 no, there Kurt Nelson 1:23:50 was a.. I just want to make, make that comment. We are not advocating that our Substack is worth that, but there is a Facebook community that's definitely worth three times that, so there you go, so Tim Houlihan 1:24:02 and Instagram, and you know all the social media stuff, LinkedIn. Follow us, we'd, we'd love to hear from you, and drop us a note. Tell us, I love Kurt's question. Tell us about what you think is a lucky experience, or the way you define yourself when it comes to luck in your life, Kurt Nelson 1:24:21 I think that might be a community Facebook community or group community question that we Tim Houlihan 1:24:28 can tell Tim Houlihan 1:24:28 yes on that Kurt Nelson 1:24:29 we can go on. So join that community and you'll get to answer that question as part of, along with over 200 other people. So there you go. Tim Houlihan 1:24:39 So with that, Groovers, we hope that you take some of Judd's insights and use them this week as you go out and find your groove, Unknown Speaker 1:24:46 you. Transcribed by https://otter.ai