Podcast Summary

Podcast: Something You Should Know
Host: Mike Carruthers
Episode: Why Winners Often Lose & What Great Teams Do Differently
Date: October 23, 2025

Episode Overview

This episode explores two main topics:

1. The Winner’s Curse and Behavioral Economics Anomalies – Why those who “win” (from lottery winners to investors) often end up disappointed or worse off, and what recurring psychological traps influence our decisions.
2. What Makes Great Teams Work (or Fail) – A dive into the dynamics of effective groups: why we need teams, what goes wrong in group work, and practical advice on forming teams that thrive.

Expert Guests:

• Dr. Alex Imas, Professor of Behavioral Science, Economics, and Applied AI, University of Chicago; co-author (with Richard Thaler) of The Winner’s Behavioral Economics Anomalies, Then and Now.
• Dr. Colin Fisher, Associate Professor of Organization and Innovation, University College London; author of The Collective Edge: Unlocking the Secret Power of Groups.

Memory Tip: Why Closing Your Eyes Helps Recall (02:38)

• Key Point: Closing your eyes or minimizing sensory distractions can help you better remember things.
• Quote: “Any sensory distraction inhibits our ability to remember things. Closing your eyes blocks out the visual distraction.” – Mike Carruthers (03:10)
• Tip: To improve recall, deliberately get away from visual or auditory distractions, matching the incoming information to the sensory channel.

Segment 1: The Winner’s Curse & Behavioral Economics Anomalies

What is the Winner’s Curse? (04:54–06:19)

• Concept Origin: Occurs when the winner in auctions (or similar settings) overpays due to over-optimism, ending up with less value than they expected.
• Illustration: The bar jar auction—the winner tends to overbid and loses money.
• Historical Roots: First recognized by oil executives bidding on drilling rights, often ending up with unprofitable wells.
• Quote: “By winning, they actually end up losing because they pay a certain amount for their bid, but they actually end up losing money on it.” – Alex Imas (05:23)

Why Do People Fall For It? (06:19–08:46)

• Over-Optimism: Winners are often those most optimistic, thus most likely to overestimate value.
• Failure to Adjust: Even experienced organizations repeat the error; learning is not automatic.
• Quote: “It seems like this is… a systematic problem that keeps happening to the same companies… It’s not like, oh, I lost money, I learned my lesson, I’m going to bid lower next time.” – Alex Imas (08:09)

Other Behavioral Economics Anomalies (08:52–12:46)

• Neglecting the Importance of Selling: Even institutional investors focus on what to buy, neglecting wise selling decisions—often performing worse than random chance.
• Prospect Theory & Loss Aversion: People value avoiding losses more than gaining equivalent wins, and frequently reject positive-expected value gambles.
• Universality: These patterns persist across cultures, professions, and stakes.
• Quote: “They pay attention to what they want to buy… but when you look at what they’re selling, they do worse than random… just because they're not really paying attention." – Alex Imas (09:32)
• Quote: “A 50% chance of winning $2, 50 chance of losing a dollar… They found that people were turning these down.” – Alex Imas (11:31)

Can People Learn From Mistakes? (12:46–13:54)

• Not Inevitable: Some individuals and organizations do learn to avoid these traps, but the average effect prevails.
• Personal Traits: Some are naturally less susceptible; others adjust through self-awareness.

Why Winners Sometimes Feel Disappointed (14:01–15:01)

• Misplaced Expectations: Overvaluing anticipated happiness, underestimating the reality (e.g., promotion or lottery win isn’t as fulfilling as imagined).
• Quote: “A person works nights and weekends… and then now what? It’s kind of just another part of the job.” – Alex Imas (14:21)

The Lure—and Trap—of Big Wins (19:12–21:28)

• Hedonic Adaptation: We quickly adjust to acquisitions—a new car, a lottery windfall—diminishing long-term satisfaction.
• Empirical Example: Lottery winners’ happiness spikes briefly, then returns to baseline or below.
• Quote: “On the first day, they’re super happy, but then that happiness goes right back to baseline, sometimes even less than baseline, because… their phones are going to be lighting up for the rest of their lives with people asking them for money.” – Alex Imas (20:35)

The Sunk Cost Fallacy (21:28–23:52)

• Concept Explained: Continuing investment in a losing venture due to past investments, rather than current/future prospects.
• Everyday Example: Sitting through a bad movie or concert simply because you paid for the ticket.
• Quote: “I would go to concerts… they sucked. And I would sit there… but on Friday, for the first time in my life, I went to a concert, it was not good, and I left after three songs, and I was incredibly proud of myself.” – Alex Imas (23:33)
• Escalation of Commitment: Applies to large-scale projects, too—pouring more resources into failure because of already invested effort.

Procrastination as a Behavioral Trap (24:21–25:09)

• Common Example: Pushing needed changes (“I’ll go to the gym tomorrow”) further into the future.

Key Takeaway: Acknowledging these patterns helps protect against them; awareness is the first step to change.

Segment 2: What Great Teams Do Differently

Why Groups Matter—And Why They Struggle (28:53–30:23)

• Centrality of Groups: Most innovation and progress, from science to music, happens in groups, not alone.
• Dual Nature: Teams can be engines of great things but also prone to dysfunction and inefficiency.
• Quote: “Groups are the engine of almost all the best stuff in the world… That said, groups are also really hard and we get them wrong a lot of the time.” – Colin Fisher (29:17)

Group Work vs. Individual Work (30:23–32:49)

• Task Nature Matters: Groups work best when tasks benefit from multiple perspectives—modular, delegable tasks (can split up and reassemble), vs. those that require creative, joint thinking.
• Coordination Costs: Too much fragmentation or forced compromise can ruin outcomes (“designed by committee” effect).

The “Designed by Committee” Syndrome (32:49–34:45)

• Compromise Is Not Always Good: Teams often default to watered-down solutions instead of picking the best idea.
• Quote: “It looks like something that everybody could sign off on, but nobody really likes and doesn't really express anyone’s best work.” – Colin Fisher (33:22)

Building a Good Team: Composition and Size (34:45–37:07)

• Member Selection: Pick for necessary skills and knowledge, not simply availability or inclusivity.
• Size Matters: Optimal team size is around 4–7 people; too large and meaningful discussion drops off.
• Quote: “Most of our groups are too big to get anything done… If we have 20 people in a room… the chance that we're going to really learn what everybody thinks is very, very low.” – Colin Fisher (36:04)
• Diversity: More perspectives are generally positive. Too much sameness yields weak decisions; worries about “too much diversity” are usually unfounded except when outsiders judge subjectively (37:07–39:25).

Dealing with Group Dynamics and Leadership (39:25–41:32)

• Preventing Dominance: If one person hijacks the group, it’s often because the group lacks clear norms or structure.
• Set Expectations Early: It’s easier to prevent dysfunction with clarity and norm-setting from day one.
• Quote: “If one person is dominating for any reason, that's a sign again that the group needs leadership… Prevention is much better than curing group dynamics.” – Colin Fisher (39:44, 40:29)

The Early Meetings Set the Team's Fate (41:32–42:42)

• Inertia: Early-established roles and patterns stick.
• Tip: Focus on shaping the first few meetings intentionally.

Is Working In Groups a Skill? (42:42–43:45)

• Partly: Skills like listening and communication help, but every group is its own unique dynamic. Aligning everyone's vision is crucial.

Should Successful Teams Stay Together? (43:45–45:05)

• Research Shows: Keeping effective groups intact for future projects tends to work well—familiarity breeds success, not staleness.

Most People Underestimate the Power of Groups (45:05–46:26)

• Society Relies on Small Groups: Family, friends, teams. Overemphasis on lone geniuses misleads us; real progress is collective.

• Quote: “Most of our life are spent in these small groups… thinking that the way we're going to get change in the world is to be saved by some great individual rather than to build better groups is kind of what's holding us back here.” – Colin Fisher (45:20)

Memorable Moments & Quotes

• On Lottery Winners: “Lottery winners are incredibly likely to become bankrupt, as many, many news stories have focused on individual incidents. But there’s actually papers now showing that bankruptcy is a real thing with lottery winners.” – Alex Imas (21:18)
• On Sunk Costs: “On Friday, for the first time of my life, I went to a concert. It was not good, and I left after three songs, and I was incredibly proud of myself.” – Alex Imas (23:43)
• On Group Variety: “If everybody knows exactly the same thing and thinks exactly the same thing… then the chances that groups are going to make good decisions… are very low.” – Colin Fisher (37:28)
• On Group Size: “The optimal number… is about 4.5, which is pretty tough to do… so, anywhere from three to seven people, then we’ve got a real chance.” – Colin Fisher (36:42)
• On the Power of Groups: “Small groups are the unit that society is built on.” – Colin Fisher (45:15)

Timestamps of Key Segments

• Memory Recall Trick: 02:38–04:20
• Introducing Winner’s Curse and Dr. Alex Imas: 04:52
• Explaining Winner’s Curse: 05:03–06:19
• Why It Persists: 06:19–08:46
• Behavioral Anomalies – Investors: 08:52–12:46
• Loss Aversion & Prospect Theory: 11:20–12:46
• Who Escapes the Trap: 12:46–13:54
• Winners’ Disappointment: 14:01–15:01
• Hedonic Adaptation: 19:12–21:28
• Sunk Cost Fallacy: 21:28–23:52
• Escalation, Procrastination: 23:52–25:09
• Intro to Groups & Dr. Colin Fisher: 28:51
• Why Groups Matter: 29:15–30:23
• Group Work vs. Individual Work: 30:23–32:49
• Designed by Committee: 32:49–34:45
• Building Effective Teams: 34:45–37:07
• Diversity in Teams: 37:07–39:25
• Managing Dynamics/Leadership: 39:25–41:32
• Early Group Meetings: 41:32–42:42
• Skill vs. Structure in Teams: 42:42–43:45
• Should Teams Stay Together: 43:45–45:05
• Why Groups Are Underappreciated: 45:15–46:26

Final Takeaways

• Behavioral economics shows that even “winners” often trip themselves up with predictable psychological traps. Awareness, reflection, and deliberate counter-steps can improve decision making.
• Teams are powerful engines for innovation and progress, but require the right composition, size, and structure, with an emphasis on skill, mutual understanding, and clear norms—especially early on.
• Both individual growth and group success hinge on collectively understanding and overcoming these human tendencies.

This episode offers practical, research-backed wisdom for both personal decisions and working with others—essential listening for navigating life’s big and small choices.