WEBVTT - Maximizing Luck: Masters in Business with Judd Kessler 0:00:02.520 --> 0:00:11.840 Bloomberg Audio Studios, Podcasts, radio News. This is Masters in 0:00:11.920 --> 0:00:15.440 Business with Barry Ritholts on Bloomberg Radio. 0:00:16.239 --> 0:00:20.480 This week on the podcast, another extra special guest, Judd Kessler, 0:00:21.160 --> 0:00:25.599 Wharton professor, author of Lucky by Design, tells us about 0:00:25.720 --> 0:00:31.080 market design, how we allocate scarce resources for everything from 0:00:31.120 --> 0:00:34.920 Taylor Swift tickets to kidneys. I thought the book was 0:00:35.000 --> 0:00:40.360 really interesting, kind of wonky economic analysis, but fascinating, and 0:00:40.400 --> 0:00:45.159 the conversation absolutely fascinating. Also with no further ado, my 0:00:45.400 --> 0:00:49.240 interview of Professor Judd Kesler. So I found the book 0:00:49.240 --> 0:00:53.320 to be really fascinating look at market design, which is 0:00:53.360 --> 0:00:56.480 an area that we don't usually think about. We'll talk 0:00:56.480 --> 0:00:59.040 about the book in a few moments. I want to 0:00:59.080 --> 0:01:05.640 start with your best bachelor's, masters and PhD from Harvard, 0:01:05.680 --> 0:01:08.720 But that wasn't enough. You get a master's in philosophy 0:01:09.200 --> 0:01:11.880 from Cambridge. What was the career plan? 0:01:12.480 --> 0:01:15.680 So the career plan was to go to college and 0:01:15.680 --> 0:01:19.319 then find a career not in academia. That was not 0:01:19.480 --> 0:01:23.040 something that I even thought of as an option. I 0:01:23.160 --> 0:01:25.479 was an econ major. I thought I'd be a consultant. 0:01:25.680 --> 0:01:30.080 I accepted a Bay New York offer to take after graduation. 0:01:31.000 --> 0:01:35.400 But senior year of college I wrote a thesis under 0:01:35.520 --> 0:01:39.119 a supervisor named Alvin Roth, and I loved it. It 0:01:39.200 --> 0:01:42.720 was my first experience doing research, and I thought, this 0:01:42.800 --> 0:01:47.360 is really fun. I'm in the cutting edge of this 0:01:47.520 --> 0:01:51.400 topic that I chose that interests me, and so that 0:01:51.920 --> 0:01:53.400 made me think, all right, maybe I should give it 0:01:53.440 --> 0:01:55.800 a shot. So that was the trip to Cambridge, England, 0:01:56.120 --> 0:02:00.760 was me doing an mfil in economics to see, you know, 0:02:00.840 --> 0:02:02.800 is this something that I might want to pursue as 0:02:02.880 --> 0:02:06.200 a career. I didn't love the pedagogy in England, so 0:02:06.480 --> 0:02:10.040 the courses I wasn't enjoying. But every day I'd come 0:02:10.080 --> 0:02:12.600 home and think, oh, there's some research questions that that 0:02:12.720 --> 0:02:17.200 lecture prompted. And I realized, oh, the research is keeping 0:02:17.240 --> 0:02:19.640 me engaged in this program. Even though I don't love 0:02:19.680 --> 0:02:22.640 the coursework, I probably should be doing this full time. 0:02:22.720 --> 0:02:26.200 What was the research topic in your senior year that 0:02:26.400 --> 0:02:28.160 led you to heading to Inland? 0:02:28.360 --> 0:02:32.280 So it was a experiment. So I'm an experimental economist. 0:02:32.400 --> 0:02:33.920 Most of my not all of it, but most of 0:02:33.960 --> 0:02:37.959 my research is experimental, meaning undergrads are coming into the 0:02:38.040 --> 0:02:42.440 lab playing a game I've designed or we're doing some 0:02:42.560 --> 0:02:46.280 experimentation in the field where people are going about their lives. 0:02:46.280 --> 0:02:48.640 They don't realize that half of them are getting one 0:02:48.720 --> 0:02:50.760 version of an experience and half forgetting the other, and 0:02:50.800 --> 0:02:53.840 we're seeing what the effect is. So my undergrad thesis 0:02:54.000 --> 0:02:59.280 was trying to understand how pairs of people could contribute 0:02:59.320 --> 0:03:01.919 to public go to things that benefited both of them. 0:03:02.560 --> 0:03:06.400 And I learned about, you know, everything that I could 0:03:06.480 --> 0:03:09.919 learn about public good provision, and I varied both the 0:03:09.960 --> 0:03:13.800 structure of the game and how the benefits of the 0:03:13.800 --> 0:03:17.880 public good were split across people. And this was something 0:03:17.880 --> 0:03:21.280 that had never been done before. And my advisor, Al 0:03:21.440 --> 0:03:27.200 was very encouraging, enthusiastic funded the research study. And I 0:03:27.280 --> 0:03:30.400 had this experience of looking at the data and thinking, 0:03:31.000 --> 0:03:33.960 this is the. 0:03:32.880 --> 0:03:34.760 First I'm the first person. I'm on the frontier. 0:03:35.080 --> 0:03:38.400 I'm never going to be an astronaut, but I'm on 0:03:38.440 --> 0:03:41.160 the frontier here exploring the answer to this question that 0:03:41.200 --> 0:03:41.680 interests me. 0:03:42.240 --> 0:03:44.720 I'm looking at the data and discovering the answer. 0:03:44.920 --> 0:03:48.000 So this sounds like it's a cross section of game 0:03:48.080 --> 0:03:50.040 theory and behavioral economics. 0:03:50.440 --> 0:03:56.000 Fair description, exactly right. And it's a paper. 0:03:56.320 --> 0:03:58.680 You know, I've since become an academic, and I've been 0:03:58.680 --> 0:04:00.680 writing research papers for a long time. This one was 0:04:00.720 --> 0:04:05.320 never published, and the reason was that in my twenties 0:04:05.480 --> 0:04:08.240 and even into my thirties, I didn't really know how 0:04:08.280 --> 0:04:08.840 to motivate it. 0:04:08.880 --> 0:04:10.040 I didn't know what it was about. 0:04:10.840 --> 0:04:12.240 You know, at a deep level, I knew what I 0:04:12.280 --> 0:04:15.200 had done, and I knew that it was new and different. 0:04:15.920 --> 0:04:20.440 But I finally cracked the code in my late thirties 0:04:21.080 --> 0:04:24.080 because what I had studied, unbeknownst to me was how 0:04:24.720 --> 0:04:31.520 couples allocate effort to construct public goods in their household. 0:04:31.640 --> 0:04:34.200 Does that mean who cooks, who cleans, who gets the kids, 0:04:34.240 --> 0:04:37.240 who basically pays the bills? Is it just that simple? 0:04:37.360 --> 0:04:37.800 Exactly? 0:04:37.920 --> 0:04:42.320 Well, it's the game was we each put in some effort. 0:04:42.520 --> 0:04:46.240 Sometimes the production is split evenly between the two, and 0:04:46.279 --> 0:04:49.719 sometimes it's split unevenly, so one person gets more of 0:04:49.760 --> 0:04:52.119 the output and the other person gets less. 0:04:52.480 --> 0:04:52.960 And what I. 0:04:52.880 --> 0:04:56.479 Found was that in some structures where we each have 0:04:56.600 --> 0:05:00.960 to match each other's contribution to general rate and output, 0:05:01.279 --> 0:05:04.560 then the inequality didn't matter. Pairs of people, these are 0:05:04.640 --> 0:05:09.000 random strangers. They're able to contribute at high levels. It's 0:05:09.080 --> 0:05:12.560 when we're contributing to the public good and one of 0:05:12.640 --> 0:05:14.599 us can cut back and kind of free ride off. 0:05:14.440 --> 0:05:15.080 Of the other one. 0:05:15.640 --> 0:05:18.159 When we split it equally, we're able to sustain with 0:05:18.240 --> 0:05:21.560 the pair, you know, high levels of contribution. But when 0:05:22.160 --> 0:05:25.279 we're split unequally and one of us can free ride 0:05:25.279 --> 0:05:27.960 off each other, the contribution collapses. 0:05:28.080 --> 0:05:30.000 I was going to say that sounds like a recipe 0:05:30.040 --> 0:05:30.640 for a divorce. 0:05:31.800 --> 0:05:34.040 Well, you know, the reason I was able to later 0:05:34.160 --> 0:05:37.680 understand what I had studied in my twenties was those 0:05:37.720 --> 0:05:40.600 are the situations where, you know, my wife and I 0:05:40.640 --> 0:05:44.320 have conflicts when we both need to contribute for the 0:05:44.360 --> 0:05:47.360 public good to be provided, Like we both have to 0:05:47.360 --> 0:05:51.520 be diligent with bedtimes with our kids because of one 0:05:51.520 --> 0:05:52.279 of us slips. 0:05:52.360 --> 0:05:54.880 Then the kids schedule in them up. 0:05:55.240 --> 0:05:57.440 Then you know, it doesn't matter if I care more 0:05:57.480 --> 0:05:59.440 about that or my wife we kind of both realize 0:05:59.440 --> 0:06:02.640 we have to at the same level, or or we 0:06:02.680 --> 0:06:03.279 both lose. 0:06:03.560 --> 0:06:08.960 Where does it sort of where does that gap between effort? Yeah, 0:06:09.120 --> 0:06:09.919 how does that manifest? 0:06:10.040 --> 0:06:12.560 So if one of us cares more about say the 0:06:12.640 --> 0:06:14.800 kids eating vegetables for. 0:06:14.960 --> 0:06:17.120 How does it house neat? Yeah? 0:06:17.200 --> 0:06:20.839 Yeah, for us, it's you know, the health helpful eating. 0:06:20.920 --> 0:06:23.480 One of us might care more than the other. And 0:06:24.560 --> 0:06:27.680 in that case, you know, if my wife cares more 0:06:27.960 --> 0:06:30.240 and I free write off of her, she fed them 0:06:30.279 --> 0:06:33.640 a healthy lunch, say yesterday, uh, and then I can 0:06:33.640 --> 0:06:35.640 feed them a less healthy dinner when it's my turn. 0:06:36.480 --> 0:06:38.400 That's where the recipe for a disaster. 0:06:38.760 --> 0:06:42.039 Those are O missions? What about co missions? What about 0:06:42.080 --> 0:06:45.320 doing things positively where one of you might slip? How 0:06:45.320 --> 0:06:46.200 does that manifest? 0:06:46.240 --> 0:06:46.400 Oh? 0:06:47.120 --> 0:06:49.240 I mean most of the things I'm thinking of are like, 0:06:49.480 --> 0:06:51.320 are we giving them too much screen time? 0:06:51.400 --> 0:06:51.520 Oh? 0:06:51.560 --> 0:06:52.080 I guess we could. 0:06:52.120 --> 0:06:55.279 It could be uh reading them books at night, you know. 0:06:55.400 --> 0:06:57.159 I mean, so we both care a lot about this, 0:06:57.279 --> 0:06:59.040 so well we'll do it. But if you know, if 0:06:59.040 --> 0:07:01.039 one of us cared more, that would be a recipe 0:07:01.040 --> 0:07:03.599 for a disaster, because that person would read to the 0:07:03.640 --> 0:07:05.240 kids and the other person would say, you know what, 0:07:05.480 --> 0:07:07.440 like you got read to last night, I won't do 0:07:07.520 --> 0:07:11.040 it right, And that's when the trouble. 0:07:11.240 --> 0:07:12.360 Yeah, that's when trouble started. 0:07:12.400 --> 0:07:16.960 So that was my first academic research was exploring those 0:07:17.040 --> 0:07:18.679 kinds of dynamics in two person games. 0:07:18.800 --> 0:07:22.160 How do you go from that to studying market design? 0:07:22.760 --> 0:07:27.480 So this was Alvin Roth the mentor that I mentioned. 0:07:28.080 --> 0:07:31.600 He was my undergrad thesis advisor. And when I was 0:07:31.760 --> 0:07:35.640 getting my PhD, I committed a kind of sin, of 0:07:36.280 --> 0:07:38.960 academic sin, which is you're not supposed to go back 0:07:39.000 --> 0:07:41.480 to the institution you did your undergrad degree to get 0:07:41.480 --> 0:07:44.480 your PhD. But I wanted to work with Al, so 0:07:44.520 --> 0:07:47.240 I kind of I cheated a little bit. I went 0:07:47.280 --> 0:07:49.560 back to Harvard, but it was technically a Harvard Business 0:07:49.600 --> 0:07:53.280 School PhD joint with the Econ Department, so I pretended, oh, 0:07:53.320 --> 0:07:56.280 I'm getting a different angle on this. I ended up 0:07:56.280 --> 0:07:59.240 being helpful because being at the Business school helped me 0:07:59.320 --> 0:08:02.400 transition to mind current job as a Wharton professor. But 0:08:02.640 --> 0:08:05.240 I went back to work with Al, and he was 0:08:05.280 --> 0:08:07.680 doing both He was doing experimental work and he was 0:08:07.680 --> 0:08:10.360 doing market design work. And I had gotten exposure to 0:08:10.400 --> 0:08:13.400 both of them in his course courses as an undergrad 0:08:13.560 --> 0:08:18.080 and an early PhD student. And the research that kind 0:08:18.080 --> 0:08:21.840 of transitioned me was on organ donation and organ allocation. 0:08:22.400 --> 0:08:25.000 The book has some fascinating data points on that. We'll 0:08:25.040 --> 0:08:27.880 talk about that in a bit. I want to stay 0:08:27.920 --> 0:08:31.520 with your background. You end up winning the Vernon Smith 0:08:31.600 --> 0:08:35.320 Scholar Prize in twenty twenty one. What work was that for? 0:08:35.720 --> 0:08:37.840 So that was for a line of work starting with 0:08:37.880 --> 0:08:44.120 this organ allocation work, because that was both a public 0:08:44.160 --> 0:08:48.440 good study like I described in the earlier work and 0:08:48.800 --> 0:08:52.240 policy relevant. And so the Vernon Smith Prize is for 0:08:52.320 --> 0:08:55.960 somebody who's contributed with experimental research in a bunch of 0:08:56.000 --> 0:08:58.600 areas and I had you know, I'd done that, I'd 0:08:58.640 --> 0:09:02.079 done that in organ allocation, done that, and of course allocation. 0:09:02.360 --> 0:09:05.160 I had done work on summer youth employment, but kind 0:09:05.160 --> 0:09:08.680 of always with this experimental lens to try to understand 0:09:09.120 --> 0:09:09.880 what the effects were. 0:09:10.240 --> 0:09:13.920 And what's kind of fascinating is you're clicking off a 0:09:13.920 --> 0:09:17.080 lot of chapters in the book, which are how do 0:09:17.080 --> 0:09:22.000 we allocate scarce resources when there are a variety of 0:09:22.040 --> 0:09:25.760 different ways to do it. Sometimes it's lottery, sometimes it's effort. 0:09:26.600 --> 0:09:30.000 Sometimes it's people paying more to get it, which really 0:09:30.200 --> 0:09:34.600 is I never thought of those things as market design, 0:09:35.000 --> 0:09:38.480 and yet most people look at those things as just hey, 0:09:38.520 --> 0:09:41.920 you got lucky. You got the summer job or the 0:09:41.960 --> 0:09:45.280 course you wanted, or the kidney you needed because you 0:09:45.360 --> 0:09:47.880 signed up. A big theme of the book is, hey, 0:09:47.920 --> 0:09:51.280 this is in luck. This is recognizing all of these 0:09:52.000 --> 0:09:56.840 market design structures and figuring out the rules and playing 0:09:56.880 --> 0:09:57.920 them as well as you can. 0:09:58.480 --> 0:10:02.080 Exactly right in the book. I call these hidden markets 0:10:02.200 --> 0:10:05.320 because they're not the markets that we always think of. 0:10:05.360 --> 0:10:07.480 When we think of markets, we think of the farmer's 0:10:07.520 --> 0:10:09.959 market where you're paying a price for produce. We think 0:10:10.000 --> 0:10:12.600 of the stock market where you're paying a price for 0:10:12.679 --> 0:10:15.840 equity and publicly traded companies. But there are all of 0:10:15.880 --> 0:10:20.600 these markets where you're trying to allocate a scarce resource. 0:10:21.640 --> 0:10:25.200 You might have a price that gets paid, but it's 0:10:25.240 --> 0:10:27.520 not doing all of the work. There's something else that 0:10:27.640 --> 0:10:31.120 is deciding who gets access to the scarce resource. And 0:10:31.160 --> 0:10:33.280 then there are markets where there is no price. We've 0:10:33.280 --> 0:10:36.240 decided that we want to do the allocation without having 0:10:36.280 --> 0:10:38.840 folks pay. We want to distribute it in some other way. 0:10:39.800 --> 0:10:43.400 And these are areas that market design thinks about. But 0:10:43.480 --> 0:10:46.400 that a standard ECON class like the ones I teach 0:10:46.440 --> 0:10:49.800 to my undergrads or MBA students or executives would not 0:10:49.920 --> 0:10:50.760 necessarily cover. 0:10:51.120 --> 0:10:54.040 So other than the students in your warton class, how 0:10:54.040 --> 0:10:58.080 can individuals become more aware of all of these hidden 0:10:58.160 --> 0:11:01.679 market mechanisms and use them to their best advantage? 0:11:01.840 --> 0:11:05.080 Yeah, so the first step is recognizing that these things 0:11:05.080 --> 0:11:09.400 are markets. You want access to something, it's scarce, there 0:11:09.520 --> 0:11:14.440 is a limited amount that can be allocated, and you're 0:11:14.440 --> 0:11:17.599 competing with lots of other people who want them. Examples 0:11:17.679 --> 0:11:21.360 might make it more concrete because we're, you know, thinking 0:11:21.360 --> 0:11:23.760 about things that people participate in every day. 0:11:23.800 --> 0:11:24.360 These markets. 0:11:24.360 --> 0:11:27.600 So you want to get a reservation at a hot restaurant, 0:11:27.840 --> 0:11:29.560 you want to get a ticket to a live event. 0:11:30.160 --> 0:11:33.440 You want to get a product that is hard to 0:11:33.480 --> 0:11:37.280 come by, either you know, a clothing special clothing drop 0:11:37.480 --> 0:11:40.559 or this summer it was La Boo boos, the ugly 0:11:40.640 --> 0:11:43.400 cute stuffy dolls, but you could think of beanie babies 0:11:43.640 --> 0:11:45.040 or cabbage patch dolls if you're as. 0:11:44.960 --> 0:11:45.400 Old as me. 0:11:46.040 --> 0:11:49.200 And in these cases there is a price that you pay, 0:11:49.880 --> 0:11:53.040 but there's also some other ordeal that you may have 0:11:53.080 --> 0:11:55.760 to go through to get access to those scarce resources. 0:11:56.720 --> 0:12:01.280 Same thing with benefits or services provided by the government. 0:12:01.400 --> 0:12:04.160 You want to get your kid into public elementary school, 0:12:04.160 --> 0:12:06.079 you want to get a library book, you want to 0:12:06.120 --> 0:12:09.760 get a life saving organ transplant. These are environments where 0:12:10.000 --> 0:12:12.360 you have to understand, okay, what is the rule that 0:12:12.559 --> 0:12:17.240 is doing the allocation, and then how can you use 0:12:17.280 --> 0:12:19.679 your knowledge of that rule to figure out the right strategy. 0:12:19.960 --> 0:12:23.360 Your daughter trying to get into her favorite after school 0:12:23.400 --> 0:12:28.760 program really resonated because it was such a little niche thing. 0:12:29.920 --> 0:12:33.320 It's just one of those everyday life frictions. You don't 0:12:33.360 --> 0:12:36.800 really think of those as markets that have been designed, 0:12:37.160 --> 0:12:40.640 but you do a really nice job explaining any allocation 0:12:40.720 --> 0:12:43.480 of scarce resources is a market decision. 0:12:43.320 --> 0:12:46.520 Exactly, and that one is one of the banes of 0:12:46.559 --> 0:12:49.240 my existence. I have to it's a first come, first 0:12:49.280 --> 0:12:52.360 serve race, which is what I call the experience that 0:12:52.840 --> 0:12:56.720 folks have on a regular basis of there is a 0:12:56.760 --> 0:12:59.560 scarce resource, it is being made available at a point 0:12:59.559 --> 0:13:02.720 in time, and whoever clicks first gets it, whoever calls 0:13:02.720 --> 0:13:06.000 in first in different market structures, is the one who 0:13:06.000 --> 0:13:10.000 can claim that scarce resource. After school programs at my 0:13:10.080 --> 0:13:13.240 daughter's elementary school, this is what the kids are doing 0:13:13.280 --> 0:13:15.920 between two thirty when school lets out, and five thirty 0:13:15.920 --> 0:13:19.280 when working parents can pick them up. There are some 0:13:19.480 --> 0:13:24.400 very popular classes for the kids to do during those hours, 0:13:25.520 --> 0:13:26.720 but there are a lot of kids who want to 0:13:26.720 --> 0:13:30.120 participate in them, and so every semester they will say okay. 0:13:30.200 --> 0:13:35.120 On June twelfth at ten am. We're going to release 0:13:35.400 --> 0:13:40.160 all of the fall semester courses, and whoever clicks to 0:13:40.200 --> 0:13:43.440 claim the spots in those classes first will get them, 0:13:43.600 --> 0:13:45.679 and everybody else will be disappointed. 0:13:46.240 --> 0:13:48.600 And it is a. 0:13:48.559 --> 0:13:50.880 First come for Serve race. And I like the race 0:13:51.320 --> 0:13:54.160 analogy because I don't do a ton of cardio and 0:13:54.200 --> 0:13:56.560 this is where my heart race is faster that you know, 0:13:56.720 --> 0:13:59.360 this is fight or flight, because I know I'm competing 0:13:59.360 --> 0:14:01.640 with all these other parents who want to get their 0:14:01.679 --> 0:14:04.240 kids into these classes. And if my daughter gets what 0:14:04.280 --> 0:14:07.600 she wants, mornings are wonderful, and if she doesn't, it's 0:14:07.679 --> 0:14:09.200 you know, I don't want to go to school today. 0:14:09.360 --> 0:14:12.520 There's some you seem to have an advantage because there 0:14:12.559 --> 0:14:16.280 are some fascinating strategies here. Hey, maybe you don't start 0:14:16.320 --> 0:14:19.120 with the Monday classes. Maybe you do Tuesday, Wednesday, Thursday, 0:14:19.600 --> 0:14:21.880 because they're going to fill up while everybody's racing to 0:14:21.960 --> 0:14:24.640 get Monday. And if you're disappointed in a Monday, but 0:14:24.680 --> 0:14:27.480 you've locked in the three ones for the rest of 0:14:27.480 --> 0:14:31.680 the week, there's an advantage. Thinking about how the rest 0:14:31.720 --> 0:14:33.400 of the participants are playing the game. 0:14:33.640 --> 0:14:34.600 This is exactly right. 0:14:34.640 --> 0:14:36.240 So the ball game theory. 0:14:36.480 --> 0:14:38.160 It's all game theory, and I wrote a book about 0:14:38.200 --> 0:14:40.080 game theory. I didn't use the term game theory because 0:14:40.080 --> 0:14:43.360 I didn't want to scare people off. But it's thinking 0:14:43.400 --> 0:14:45.840 about what it is that you want and then what 0:14:45.880 --> 0:14:48.280 it is that other folks might be going for and 0:14:48.360 --> 0:14:52.000 developing the right strategy for that. Now, first come for 0:14:52.120 --> 0:14:56.440 serve races. There's a bunch of strategy that is kind of, 0:14:56.960 --> 0:14:59.680 you know, maybe obvious when you think about it. Of Okay, 0:15:00.000 --> 0:15:01.920 you have to know that it's a race. You have 0:15:02.000 --> 0:15:04.920 to know that this is a situation where you need 0:15:05.000 --> 0:15:08.520 to be available to click. 0:15:08.280 --> 0:15:10.520 As fast as you can at that time. 0:15:10.640 --> 0:15:13.520 Right when I get the email and it says June 0:15:13.560 --> 0:15:16.600 twelfth at ten am is when registration opens. Even if 0:15:16.640 --> 0:15:20.800 I've never participated in the registration for these after school classes, 0:15:21.240 --> 0:15:23.720 the ten am tips me off that something is going 0:15:23.760 --> 0:15:26.400 on at my son's school where the classes are not 0:15:26.960 --> 0:15:31.280 as demanded. There is no ten ams. I mean, there 0:15:31.320 --> 0:15:33.400 might be a time when the registration begins, but nobody 0:15:33.440 --> 0:15:36.000 really cares about it because you can go whenever you 0:15:36.040 --> 0:15:37.920 want that day or later in the week, and there's 0:15:37.960 --> 0:15:43.280 plenty of options available. But this market, the ten am 0:15:43.320 --> 0:15:45.200 tells you all right, by ten oh one or ten 0:15:45.240 --> 0:15:46.760 o two, the good stuff might be taken. 0:15:46.920 --> 0:15:49.960 Did your wife ever get to the French laundry in Napa? 0:15:50.800 --> 0:15:52.600 This was a first time, first of race that I 0:15:53.000 --> 0:15:56.000 talk about in the book. It's for milestone birthdays only 0:15:56.040 --> 0:15:59.360 because it's so expensive. So in the book I talk 0:15:59.400 --> 0:16:02.120 about how we did not get it for her fortieth birthday, 0:16:02.200 --> 0:16:04.040 so she will try again when she's fifty. 0:16:04.480 --> 0:16:09.800 I was reading that and using your strategy imediately thought, oh, 0:16:09.840 --> 0:16:13.560 you're flying out just for a weekend. Four o'clock is 0:16:13.840 --> 0:16:17.160 essentially seven o'clock in New York. Why not do four 0:16:17.240 --> 0:16:20.240 or four to thirty and bang, they're good to go. 0:16:20.360 --> 0:16:24.280 This is exactly so the strategy to play there is 0:16:24.320 --> 0:16:27.280 to think about what I call settling for silver versus 0:16:27.280 --> 0:16:30.680 going for gold. So the settling for silver strategy is, 0:16:31.440 --> 0:16:34.640 you know that seven o'clock or seven thirty is the 0:16:34.640 --> 0:16:36.480 most desirable time to eat, at least you know for 0:16:36.560 --> 0:16:40.120 regular people not in retirement communities. That's the ideal time. 0:16:40.680 --> 0:16:43.720 If you're going to go on a Saturday, that is 0:16:43.760 --> 0:16:46.200 what most people are going to be aiming for. When 0:16:46.240 --> 0:16:48.800 I went for her fortieth birthday to try to register. 0:16:48.840 --> 0:16:50.520 I knew it was a race. I knew when the 0:16:50.600 --> 0:16:52.600 starting gun was going off, I was there, My heart 0:16:52.640 --> 0:16:56.080 was beating fast, and I went first for the seven 0:16:56.200 --> 0:16:58.320 thirty reservation page reloads. 0:16:58.800 --> 0:17:00.680 I don't get it, and I see that. 0:17:00.600 --> 0:17:02.920 Four to thirty still available, so I click for four thirty, 0:17:02.920 --> 0:17:06.520 thinking it's better than nothing, and the page reloads and 0:17:06.600 --> 0:17:07.320 that is also gone. 0:17:07.359 --> 0:17:08.320 So struck out there. 0:17:08.400 --> 0:17:12.600 That's why we're waiting a decade to your point, if 0:17:12.640 --> 0:17:14.240 I had I was doing it as a surprise for 0:17:14.320 --> 0:17:16.399 my wife, if I had planned and talked to her 0:17:16.400 --> 0:17:19.840 about it in advance, we might have recognized four four 0:17:19.960 --> 0:17:21.760 thirty is just is. 0:17:21.760 --> 0:17:23.880 Nearly as good youer an East Coast, it's. 0:17:23.760 --> 0:17:26.360 Nearly as good as seven thirty. And that's the kind 0:17:26.400 --> 0:17:30.440 of situation where you want to settle for silver, where 0:17:30.440 --> 0:17:34.520 you want to go for something where there's less competition. Again, 0:17:34.600 --> 0:17:37.000 the game theory coming in, fewer people are going to 0:17:37.040 --> 0:17:40.399 be going for four four thirty. That is something that 0:17:40.440 --> 0:17:42.840 you actually have a much better shot at if you 0:17:42.920 --> 0:17:45.480 go for it first. You have to act as if 0:17:45.840 --> 0:17:48.840 that is what you wanted all along, right, because when 0:17:48.880 --> 0:17:51.639 the page reloads the first time, four thirty is still available, 0:17:52.040 --> 0:17:54.160 Meaning if instead of going for seven thirty, I gone 0:17:54.160 --> 0:17:56.240 for four to thirty initially as if it was my 0:17:56.359 --> 0:17:59.919 first choice, she would have been able to cross French laundry, 0:18:00.040 --> 0:18:00.560 the bucket list. 0:18:00.640 --> 0:18:01.000 There you go. 0:18:01.560 --> 0:18:06.080 Aside from the east coast West coast difference post pandemic, 0:18:06.680 --> 0:18:09.960 My wife likes to point out that you use apps 0:18:10.000 --> 0:18:13.600 like Open Table RESI, and she says six thirty is 0:18:13.600 --> 0:18:16.120 the new seven thirty because everybody wants to get home 0:18:16.160 --> 0:18:19.119 and stream whatever they're streaming. It's so different than it 0:18:19.200 --> 0:18:21.560 was in the twenty tens. And I'm like, am I 0:18:21.640 --> 0:18:23.399 just getting old? Are we going to start going to 0:18:23.400 --> 0:18:26.000 the early bird specials? She's like, no, no one wants 0:18:26.000 --> 0:18:28.080 to have dinner at ten, nine, ten o'clock at night. 0:18:28.400 --> 0:18:29.000 I believe that. 0:18:29.080 --> 0:18:31.239 And at the French laundry the meals take forever. So 0:18:31.280 --> 0:18:33.040 getting out of there, you know, early. 0:18:32.920 --> 0:18:35.119 For thirty gets you out at nine, ten and five, right, 0:18:35.560 --> 0:18:39.960 Absolutely fascinating. Coming up, we continue our conversation with Judd Kessler, 0:18:40.320 --> 0:18:44.320 Howard Mark's professor at the Wharton School at University of Pennsylvania, 0:18:44.520 --> 0:18:49.200 discussing his new book, Lucky by Design, The Hidden Economics. 0:18:49.240 --> 0:18:52.640 You need to get more of what you want. I'm 0:18:52.680 --> 0:18:55.920 Barry Ridhelts. You're listening to Masters in Business. 0:18:55.840 --> 0:19:07.200 On Bloomberg Radio. 0:19:08.240 --> 0:19:11.040 I'm Barry Dults. You're listening to Masters in Business on 0:19:11.080 --> 0:19:14.560 Bloomberg Radio. My extra special guest this week is judde Kessler. 0:19:14.880 --> 0:19:18.480 He is the Howard Marx Professor at the Wharton School 0:19:18.600 --> 0:19:22.040 at the University of Pennsylvania. So I want to talk 0:19:22.160 --> 0:19:26.880 about Lucky by Design. The book is really interesting. I'm 0:19:26.920 --> 0:19:31.240 intrigued by how much of what we think of as 0:19:31.359 --> 0:19:36.639 luck is really just the way allocation mechanisms have been 0:19:36.800 --> 0:19:43.879 either well designed or poorly designed. Lotteries, waitlists, queues, scoring rules, algorithms, 0:19:43.960 --> 0:19:49.960 norms explain this concept that luck by design may really 0:19:50.040 --> 0:19:52.439 be based on some hidden economic rules. 0:19:52.720 --> 0:19:56.960 Yeah, so the way the markets operate, there's a set 0:19:57.000 --> 0:19:59.480 of rules that decides who gets what. So we talked 0:19:59.520 --> 0:20:02.480 about first come for serve races, but as you point out, 0:20:02.520 --> 0:20:06.440 there's first come for serve waiting lists. There's lines, there 0:20:06.440 --> 0:20:10.119 are lottery systems where you're putting your name in the 0:20:10.160 --> 0:20:13.240 hat and we're pulling people out. And then they're centralized 0:20:13.280 --> 0:20:17.560 clearing houses where you might rank your preferences over things 0:20:17.640 --> 0:20:19.879 you want. And then there's some priorities or rules in 0:20:19.920 --> 0:20:24.160 the background. And I have this sense that people look 0:20:24.200 --> 0:20:26.760 at these systems and they don't have a framework for 0:20:26.880 --> 0:20:30.000 thinking about them, and so when they participate in these markets, 0:20:30.800 --> 0:20:33.520 they don't really realize they're doing so, and then the 0:20:33.560 --> 0:20:39.520 outcomes seem like they're based on chance, or they try 0:20:39.560 --> 0:20:43.240 to understand them and they struggle and they feel overwhelmed 0:20:43.280 --> 0:20:45.959 and stressed out, and then play a strategy that might 0:20:46.000 --> 0:20:48.040 not be right for them, and then they look around 0:20:48.080 --> 0:20:50.280 and they think, oh, man, that person got what they 0:20:50.359 --> 0:20:51.800 wanted I didn't. 0:20:52.200 --> 0:20:53.639 They must have been lucky. 0:20:53.840 --> 0:20:56.320 Because if you don't understand the system, then it all 0:20:56.359 --> 0:21:01.439 seems like it's happening by chance. But by understanding the 0:21:01.520 --> 0:21:05.960 rules that are applying in each market, you then can recognize, Okay, 0:21:05.960 --> 0:21:08.920 this is a situation where it's a first come, first 0:21:08.960 --> 0:21:12.400 serve waiting list. So I have to put my name 0:21:12.440 --> 0:21:14.480 down early. Then I have to think about the strategy 0:21:14.520 --> 0:21:16.639 I'm going to play when it's my turn. Do I 0:21:16.680 --> 0:21:19.199 take what's offered to me? Do I keep waiting? And 0:21:19.280 --> 0:21:23.439