Podcast Summary: Top Traders Unplugged, IL45: Where Markets Reveal Human Error

Guest: Alex Imas
Host: Kevin Coldiron (with intro by Niels Kaastrup-Larsen)
Date: January 21, 2026

Overview

In this engaging episode, Kevin Coldiron sits down with University of Chicago behavioral economist Alex Imas, who co-authored the new edition of Winner’s Curse with Nobel laureate Richard Thaler. The conversation centers on the behavioral errors and market anomalies that challenge traditional economic models, through the lens of stories and research drawn from the book. Key topics include mental accounts, the law of one price, the winner’s curse, and the complexities of influencing economic behavior with nudges. Imas also reflects on his journey into behavioral economics, the challenges of integrating behavioral models into mainstream economics, and the importance of understanding what makes choices difficult.

Key Discussion Points & Insights

1. Alex Imas’s Path to Behavioral Economics

• Personal Backstory:
  • Originally on a pre-med track, immigrant from Moldova (“as any immigrant kid, my parents were like, you got to be a doctor…” – [03:44]).
  • Became interested in behavioral economics during a cross-country road trip when he heard Richard Thaler on the radio discussing Nudge ([03:44]-[06:23]).
  • Switched to economics, landed in the same building as Thaler at UC San Diego, which led to their collaboration.

2. Mental Accounting – How We Psychologically Divide Up Wealth

• Definition:
  • People keep separate “mental accounts” for money depending on its source and intended use, rather than optimizing all wealth as a single pool ([08:15]-[10:25]).
  • “Money depending on its source...I’m going to be treating that very differently. And this has a lot of implications for basically how people spend money.” – Alex Imas [09:26]
• Implications:
  • People have a much lower “marginal propensity to consume” from illiquid sources like home equity ([10:45]-[12:16]).
  • Real estate equity is often rolled from one house to another, rarely spent freely ([12:42]-[13:37]).
• Policy & Behavioral Takeaways:
  • For economic stimulus, structuring payments to look like bonuses increases spending ([15:39]-[17:11]).
  • Giving young people early exposure to capital (e.g., stocks) could change their financial behavior down the line ([17:54]-[19:08]).
  • Notable research: Making savings goals vivid and specific increases the likelihood of funding them ([20:16]).

“If that savings goal is vivid and salient, they're going to be more likely to consider it and make a choice that's consistent with their long run preferences.” – Alex Imas [20:51]

3. The Meaning and Misuse of “Nudge”

• Clarification of ‘Nudge’:
  • The original concept refers to subtle defaults (like automatic 401(k) enrollment), not monetary incentives or penalties ([22:08]-[24:52]).
  • Much policy called “nudging” is actually a “push” or “shove.”
  • “The nudge term has been misused to such a colossal extent to almost be useless. People call things nudges, which are not nudges, they're pushes and they're shoves.” – Alex Imas [22:08]

4. The Winner’s Curse – Why "Winning" an Auction Can Be a Loss

• Explanation:
  • In common-value auctions (e.g., oil rights, jar of coins, fundraising events), the winner often overpays due to overestimating the value ([25:19]-[27:38]).
  • The curse intensifies with more bidders ([27:45]-[27:58]).
• Historical Context:
  • First observed by oil executives who wondered why winning bids resulted in less oil than expected.
• Mitigation:
  • Greater awareness among bidders can help mitigate the effect ([28:41]).

“One way to kind of temper the winner's curse is to tell everybody about it, so everybody bids a little less, and then you know, the winner...if everybody's kind of following this strategy of accounting for the winner's curse, there won't be a winner's curse.” – Alex Imas [29:13]

• Everyday Example:
  • School fundraising auctions and charity events are practically designed to exploit the winner’s curse ([31:04]).

5. Law of One Price and Market Anomalies

• Definition:
  • The law states identical assets in efficient markets should have the same price ([33:46]).
• Violations & Examples:
  • 3M/Palm Pilot: Palm Pilot shares worth more than 3M shares, though owning Palm also meant you had 3M ([33:46]-[36:51]; [00:07] opening quote).
  • The Cuba Fund: Investors bid up a fund believing it held Cuban stocks, when it didn’t ([36:33]-[36:51]).
• Why These Violations Persist:
  • Arbitrage is risky, expensive, or logistically blocked ([37:18]-[38:51]).
  • In truly transparent “no limits” cases (like 3M), the anomaly can’t be rationally explained away, but such pure examples are rare ([00:07]-[01:41]; [38:51]).
  • Sometimes anomalies persist because people expect others to be fooled ([39:33]-[40:54]).
• Investor Implication:
  • Seeming arbitrage trades may expose you to substantial hidden risk, especially during volatile markets ([41:04]-[42:11]).
  • “Embedded beta”—these trades can add to risk when you most want to avoid it ([41:04]).

6. Why Behavioral Economics Isn’t Central in Economic Curricula

• Challenge:
  • Behavioral economics can’t rely on one parsimonious, universal model like classical economics ([43:27]-[45:53]).
  • Each context may require a distinct model; makes for messier textbooks.
• Current Frontier:
  • Efforts to unify behavioral phenomena into a broader, predictive framework.

7. The Importance of Understanding Decision Complexity

• What Makes a Choice Difficult?
  • More options and higher dimensionality (more factors per decision) increase complexity ([46:56]).
  • When choices are complex or unfamiliar, heuristics and biases emerge.
• Personal Decisions:
  • Writing down the math or making plans in advance can “trick” yourself into better outcomes ([49:27]; [32:04]).
• Limits of Incentives:
  • Sometimes incentives are not enough if the person’s model of the world or their attention is misaligned ([52:04]-[52:49]).

“Incentives always matter. But sometimes the objective function is such that incentives will matter in a way that looks wrong to you.” – Alex Imas [52:33]

Notable Quotes & Memorable Moments

• On road trip inspiration:
  “I think, you know, your mind is just kind of open to ideas. I think if I listen to, like, literally the same story in any other context, it wouldn't have hit.” – Alex Imas [06:58]

• On the winner’s curse:
  “The winner is not random. It's the person who overestimated what's in the jar, right? And because it's not random, it's the person who overestimates, that person's going to tend to pay more.” – Alex Imas [25:55]

• On why behavioral economics is still an “add-on” in education:
  “The advantage of economics is to have a cohesive framework. But this is why it’s very difficult to write a textbook with behavioral economics…In this context, the model is going to be different. In that context, the model is going to be different...” – Alex Imas [44:07]

• On planning and self-control:
  “So every single day I was like, oh, man, this sucks. So now in the evening, I'm like, all right, here's what I'm going to plan for myself, but I'm going to decrease it by 50%, right. Just because I don't want to make my next day self feel bad about himself.” – Alex Imas [33:03]

Timestamps for Key Segments

• Imas’s backstory & meeting Thaler: [03:09]-[06:23]
• Mental accounting explained: [08:15]-[10:25]
• Real estate & rolling mental accounts: [10:45]-[13:37]
• Policy design and mental accounts: [15:19]-[17:11]
• Salience, attention, and savings: [20:16]-[21:21]
• Debate over nudges: [22:08]-[24:52]
• Winner’s curse defined & examples: [25:19]-[29:13]
• Fundraising auctions and everyday winner’s curse: [31:04]-[31:44]
• Law of one price & 3M/Palm example: [33:46]-[36:51]
• Limits to arbitrage: [37:18]-[38:51]
• Behavioral economics and education: [43:27]-[45:53]
• Complex choices and heuristics: [46:56]-[48:59]
• Incentives sometimes fail: [52:04]-[52:49]
• Host wrap-up & book plug: [53:06]-[53:41]

Conclusion

This episode offers an insightful, approachable exploration of how behavioral biases shape markets—and why even the smartest participants routinely err. Imas shares the real-world value in understanding mental accounting, complexity, and market anomalies, and coolly distinguishes genuine nudges from their misapplied imitations. For investors, economists, and everyday decision makers alike, the lessons here are timely, relevant, and likely to surface whenever you next feel tempted to “win” an auction, under-prepare for a choice, or wonder why your 401(k) is still untouched.

Recommended action: Read Winner’s Curse, follow Alex Imas’s research, and always pause before you bid.