Masters in Business: Nobel Prize Winner Richard Thaler Live from the Economic Club of New York

Podcast: Masters in Business
Host: Barry Ritholtz
Guests: Richard Thaler (Nobel Laureate, University of Chicago Booth), Alex Imas (University of Chicago Booth)
Date: November 20, 2025

Overview

This special live episode of Masters in Business features Nobel Prize-winning economist Richard Thaler and his colleague Alex Imas, in conversation with Barry Ritholtz at the Economic Club of New York. The discussion centers around the updated release of Thaler's influential book, The Winner’s Curse, the origins and impact of its “anomalies” approach to behavioral economics, and key behavioral economic concepts that have shaped markets, investment, and decision-making over the past three decades.

Key Discussion Points & Insights

1. The Origins of "The Winner’s Curse" and Anomalies in Economics

• Genesis of the Anomalies Columns:

  • (03:29) Thaler describes how in 1986, he and Hal Varian developed the ‘anomalies’ feature for a new journal to showcase economic phenomena not explained by traditional models.
  • “An anomaly is something that cannot easily be explained using the standard assumptions that people are really smart, unemotional, selfish, no self control problems … basically not like anybody you know.” — Thaler [03:57]
  • After four years of columns, he compiled them into the original Winner’s Curse book in 1992.

• Reception of the Book:

  • (05:20) Pre-Freakonomics, popular economics books weren’t mainstream; the profession had read the articles, and the book tried to extend the reach.
  • “I’ve often said that I’m a professional heretic and troublemaker ... I decided instead to have a strategy of corrupting the youth.” — Thaler [05:53]

2. Alex Imas’ Academic Journey and Updating the Classic

• Imas’ Path to Behavioral Economics:

  • (07:23) From neuroscience and pre-med, Imas discovered Thaler and behavioral economics via an NPR segment while cross-country driving; switched tracks to pursue a Ph.D. in economics.
  • “Corruption at first sight.” — Thaler jokes as Imas describes their first encounters [08:49]

• The New Edition:

  • (08:53) The updated Winner’s Curse is now about 2/3 new content, incorporating 30 years of research and new anomalies, with each chapter updated with recent advancements.

3. Replication, Robustness, and Anomalies in the Real World

• Replication Crisis in Behavioral Economics:

  • (12:40) Thaler addresses concerns about non-replicability, arguing their work replicates robustly because they focused on big effects with strong supporting evidence.

• Most Enduring Anomalies:

  • (14:30) Imas highlights the Endowment Effect, describing its persistence across settings—from mugs to houses:
    • “If I own the mug, I start valuing it more ... in housing markets, this matches the number Richard documented in the lab.” — Imas [15:04]

4. Human Behavior in Economic Games

• Ultimatum Game:
  • (16:43) Theoretical prediction: people should accept any offer greater than zero. Real behavior: low offers are rejected, typical split is 50:50, revealing fairness and reciprocity motives.
    • “If you want cooperation, you have to be cooperative.” — Thaler [18:52]
    • Anecdote: In Thailand, a contract with mutual trust (pay after ride) illustrates real-world behavioral dynamics. [19:45]

5. The Winner’s Curse and Auction Behavior

• Oil Leases and Auction Dynamics:

  • (22:53) Thaler explains the Winner’s Curse through oil lease auctions, where winning bids systematically overestimate value due to selection bias.
    • “The ones you win are not a random sample of your bids. The auctions you win are when you bid high.” — Thaler [23:24]

• Broader Applicability:

  • (26:43) Imas cites NFL free agent auctions and contractor bidding as domains where the Winner’s Curse persists due to failing to account for competition.

• Key Psychological Mechanism:

  • (28:14) People don't properly adjust for the fact that winning means outbidding similarly informed competitors—a lesson applicable from classrooms to financial markets.

• The Keynesian Beauty Contest:

  • (29:17) Imas describes this famous game illustrating layers of strategic thinking and collective irrationality:
    • “The Nash equilibrium ... should be 1. Would you win guessing one? No ... majority of people guess something like 50 × 2/3 × 2/3.” [29:30]

6. Real-World Manifestations: Sports, Financial Markets, and Biases

• NFL Draft Overvaluation:

  • (32:02) Early picks are “massively overvalued,” and teams pay a huge premium (e.g., 137% discount rate) to get current picks instead of waiting—a persistent anomaly.

• Learning Lags in Sports and Markets:

  • (39:15) Progress in adopting evidence-based innovations (e.g., three-point shots in basketball, going for it on 4th down in football) is slow due to risk aversion and reputational fears.

• Persistence of Anomalies Among Experts:

  • (42:24) Imas: Even sophisticated investors show persistent biases. His research finds fund managers are worse than random at deciding what to sell in their portfolios, often succumbing to salience and endowment effects.

    • “They were selling the things that were very… salient on their screens and the things that they were least attached to. But if you’re good at buying, that’s not what you should be selling.” — Imas [43:36]
    • “They could maybe double their alpha if their selling decisions were as good as their buying decisions.” — Thaler [45:12]

7. Feedback, Blind Spots, and Institutional Inertia

• Lack of Learning from Feedback:
  • (47:47) Thaler: Only feedback teaches us, but most individuals and organizations don’t systematically review their decisions or learn from mistakes.
    • “Have you ever studied those [scouting reports]? No.” — Thaler [48:31]
    • Even job interviews are ineffective predictors, often due to confirmation bias and lack of systematic evaluation.

8. Choice Architecture and Nudge Policy Impact

• Designing Better Defaults:

  • (50:06) Ritholtz notes Thaler’s influence in retirement saving—defaults (opt-out enrollment, auto-investment, escalation) dramatically increased participation and wealth buildup (potentially doubling 401k assets):
    • “My mantra is ‘make it easy.’ If you want people to do something, make it easy. I always say what I would like is a world that’s like GPS.” — Thaler [52:30]

• UK Government Example:

  • Simple behavioral tweaks (e.g., better tax letters) improved outcomes at zero cost.

Notable Quotes & Memorable Moments

• On Engineers Discovering the Winner’s Curse:

  • “The research, original research, was not done by psychologists or economists. ... The auctions you win are when you bid high.” — Thaler [23:09, 23:24]

• On Real-World Biases Holding Up:

  • “One of the things that surprised me is in the sports world, teams have learned, but really slowly … People don’t like to look like fools.” — Thaler [39:15, 40:55]

• On Selling Decisions in Investing:

  • “They did worse than random. … They weren’t spending a lot of time on the selling decisions.” — Imas [43:36]

• On Behavioral Economics vs. Psychology:

  • “The difference between behavioral economics and psychology is markets.” — Thaler [36:14]

• On Reducing Biases:

  • “How do you avoid all of these biases? We all succumb to ... I’m subject to every one of them.” — Thaler channeling Kahneman [47:09]

Audience Q&A Insights

• Can Reasonable People Disagree?

  • (56:04) Robert Aumann’s theorem says they cannot (if fully rational and informed), but in practice, biases like confirmation and motivated reasoning mean disagreement persists.
    • “People have confirmation bias in the real world ... they end up in completely different worlds thinking that they’re rational.” — Imas [56:55]

• Volume in Markets and Information Overload:

  • (58:21) Market volumes show not everyone agrees despite ubiquitous information — “Perhaps the biggest anomaly in financial markets is the volume of trade.” — Thaler [58:45]

• Technology Amplifying Biases:

  • (59:48) The democratization of trading (e.g. Robinhood) has magnified behavioral biases, with retail traders losing billions on lottery-like options bets.
    • “The same sort of biases ... are on steroids in digital spaces.” — Imas [61:10]

Timestamps for Key Segments

• [03:29] — Genesis of the anomalies columns & Winner’s Curse
• [05:20] — Reception, heresy, and "corrupting the youth"
• [07:23] — Alex Imas: life-changing encounter with Thaler and behavioral econ
• [12:40] — Replication and robust behavioral effects
• [14:30] — The Endowment Effect in practice
• [16:43] — The ultimatum game and real-world behavior vs. theory
• [22:53] — Introducing the Winner’s Curse (oil leases and auctions)
• [28:14] — Psychological roots of the Winner’s Curse & Keynes’ Beauty Contest
• [32:02] — NFL draft: overvaluation and trading anomalies
• [39:15] — Slow learning in sports and finance
• [42:24] — Persistent anomalies among experts and selling bias in investment
• [47:47] — Feedback, blind spots, and institutional inertia
• [50:06] — Choice architecture & retirement savings revolution
• [56:04] — Do reasonable people truly agree? Why disagreement persists
• [59:48] — Technology as an amplifier of behavioral biases

Takeaways

Behavioral economics has revolutionized how economists and practitioners think about markets, choice, and decision-making. Thaler and Imas illustrate the enduring power of human biases, the slow shift of both markets and organizations toward evidence-based improvement, and the immense real-world stakes — from sports to investing to public policy — of getting choice architecture right. The laughter, anecdotes, and mutual respect among the speakers make for a lively demonstration of minds that have profoundly shaped how we see economic behavior.