Strategies for Success in a Scarcity Economy
Melina Palmer: Welcome to episode 554 of the Brainy Business.
Melina Palmer: Understanding the Psychology of why People buy. In today’s episode, I’m excited to introduce you to Judd Kessler, author of Lucky by Design: The Hidden Economics.
Melina Palmer: You need to get more of what you want. Ready? Let’s get started.
Announcer: You are listening to the Brainy Business Podcast, where we dig into the psychology of why people buy and help you incorporate behavioral economics into your business, making it more brain friendly.
Announcer: Now, here’s your host, Melina Palmer.
💡 Uncovering Hidden Markets with Dr. Judd Kessler
Melina Palmer: Hello.
Melina Palmer: Hello, everyone. My name is Melina Palmer, and I want to welcome you to the Brainy Business Podcast.
Melina Palmer: What if the most important markets you play in aren’t the ones where you bid with money, but the ones operating behind the scenes with hidden rules, signals, and shortcuts that decide who wins and who loses in all aspects of life and work?
Melina Palmer: In a moment, we’re going to dig into how you can spot these hidden markets, use them to your advantage, and even redesign the ones you control.
Melina Palmer: Yes, you control some of these, too, because in our era of AI bots and overloaded timelines, it’s more critical than ever to understand the real game behind what looks like just another cue.
Melina Palmer: Today, I’m excited to introduce you to Judd Kessler. Judd is the Howard Marks professor of Business Economics and Public Policy at Wharton and he is a leading researcher in behavioral economics and market design.
Melina Palmer: His work focuses on pulling back the curtain on the hidden markets all around us, from concert tickets to job offers, and shows us how to get more of what we want.
Melina Palmer: His book, Lucky by Design explains these dynamics in accessible, actionable terms and is, of course, the focus of our conversation today.
Melina Palmer: While you listen, keep this question in mind. What hidden markets am I in right now and what are their rules?
Melina Palmer: Really quickly, before we get into the conversation, I want to be sure you know that there are links in the show, notes for my top related past episodes and books, ways to get in touch, and more.
Melina Palmer: It’s all within the app you’re listening to and at, thebrainybusiness.com 554.
Melina Palmer: Now let’s jump right in.
🤝 Behavioral Economics and Market Design
Melina Palmer: Dr. Judd Kessler, welcome to the Brainy Business Podcast.
Dr. Judd Kessler: Thanks for having me.
Melina Palmer: Yes, I’m very excited to be chatting with you today.
Melina Palmer: We’ve, of course, gotten to know each other a little bit here before jumping into the interview.
Melina Palmer: But for everyone who doesn’t yet know you, can you share a little bit about yourself and the work that you do?
Dr. Judd Kessler: Sure. I’m a behavioral economist at the Wharton School at University of Pennsylvania.
Dr. Judd Kessler: I’ve been here 15 years, and I do a bunch of research, including on how to get people to behave pro socially, which government programs are effective or ineffective, and on market design, how we allocate things in environments where we don’t want to use prices and developing better ways of doing that.
Melina Palmer: Well, and so we talk about behavioral economics.
Melina Palmer: Like I was saying with you on the show, that’s the whole point. That’s why we’re here. Right.
Melina Palmer: So excited to have you with us. Haven’t really specifically dug in on market design though, too much.
Melina Palmer: So can you share a little bit about what that means and the type of work? Yeah, no.
Dr. Judd Kessler: So it’s, I mean, it’s a subfield of economics, kind of like behavioral economics.
Dr. Judd Kessler: There’s some overlap, but it’s not, you know, it can kind of operate with, agents that, that optimize and don’t display biases, but of course humans do.
Dr. Judd Kessler: And so then it has, you have to account for that when you, when you do market design.
Dr. Judd Kessler: But it’s essentially a branch of economics that thinks about allocating scarce resources in environments without price or where, you know, price is not necessarily going to play as big a role.
Dr. Judd Kessler: and so, you know, a lot of what the academic market designers do is think about centralized clearinghouses.
Dr. Judd Kessler: So the kind of examples that we learn about in our classes are things like the doctors getting matched to residency programs at the end of medical school and they submit, a rank order preference list.
Dr. Judd Kessler: And then the hospitals do the same and they match. And the match that gets used for elementary school students.
Dr. Judd Kessler: in my hometown of New York, you rank a list of schools and there’s preferences that you have.
Dr. Judd Kessler: And then the schools give you priorities and they do a match.
Dr. Judd Kessler: And academic economists have been involved in those matches and generated, algorithms that have lots of nice properties.
Dr. Judd Kessler: but I think of market design kind of more broadly as, you know, thinking about, environments where the traditional thing that economists think happens when you have scarcity, the price rising to clear the market, there’s a lot of markets where that doesn’t happen.
Dr. Judd Kessler: and so you need to figure out who gets allocated stuff.
Dr. Judd Kessler: and so, you know, the idea is there are different rules that apply there and kind of understanding those rules can be, can be helpful.
Melina Palmer: Right. Well, and we know that there are people on the side that are creating the program when they have this scarce resource that have the best of intentions and what it feels like, as with any of the, you know, behavioral economics, like the thing that seems like it’s going to be the right way or the easy thing to do, or what maybe feels like the only option because it’s all you’ve ever seen.
Melina Palmer: You aren’t realizing that it’s making it nearly impossible for some people to get something or not thinking about, you know, whether we call them cobra effects here or not.
Melina Palmer: But those loopholes, they are there and people will find them, whether it’s now bots or anything else.
🎫 The First-Come, First-Serve Trap: Live Event Tickets
Melina Palmer: So do you have some examples of the like.
Melina Palmer: I know you have all the examples, but what example would you like to share of the like, good intentions gone wrong and like common missteps?
Dr. Judd Kessler: Yeah, so like, you know, I talk in the book about this classic example of a hidden market for live event tickets.
Dr. Judd Kessler: So, you know, Taylor Swift has her tour, her ERAS tour.
Dr. Judd Kessler: She doesn’t want to raise the price so that only rich people can buy tickets to her shows.
Dr. Judd Kessler: That was, that’s not the thing that she wants. so she puts the price substantially lower.
Dr. Judd Kessler: But at the prices she’s charging, she could fill each stadium like a dozen times. Right.
Dr. Judd Kessler: So, you know, charging $99 for a ticket, there could be, you know, thousands of people who are going to, you know, want a ticket that are, that are not going to be able to get, you know, for every section.
Dr. Judd Kessler: And so that’s a classic case of where there’s scarcity. It’s not being resolved with prices.
Dr. Judd Kessler: And what has historically happened over time is that we used to do first come, first serve for live event tickets.
Dr. Judd Kessler: So in the, you know, the olden times, pre Internet, pre, even credit cards, people would stand online in front of a venue box office or for musical performances outside of record stores sometimes and, and buy tickets to the events, you know, basically by waiting overnight or waiting longer than everybody else.
Dr. Judd Kessler: And I think there’s things that are not great about that. Right. It’s not easy for market participants.
Dr. Judd Kessler: You have to feel safe sleeping on the, street in front of the venue, which might kind of preclude certain people from entering.
Dr. Judd Kessler: So it might not be equitable or easy for market participants, but it might be efficient insofar as the people who get the tickets really, really want them.
Dr. Judd Kessler: And then over time, technology improved and we were able to, you know, order over the phone with a credit card and then, you know, online.
Dr. Judd Kessler: but we kept first come, first serve for tickets. And what ended up happening was that when it was calling in on a phone line, I mean the phone lines would get flooded and like, you know, it’d Be hard to make normal calls when tickets for big shows were being, or big, venues and concerts were being released.
Dr. Judd Kessler: But, also it created an incentive for speculators to set up boiler rooms to have people call repeatedly, when the tickets were available for sale.
Dr. Judd Kessler: The Internet has made it even worse. So now you mentioned bots and a lot of tickets and a lot of first come, first serve, races are won by computer programs that we can’t compete against because, we’re not a computer.
Dr. Judd Kessler: and so they’re going to beat us for those tickets.
Dr. Judd Kessler: And so these are kind of a market that again, you know, it’s how it’s always been done.
Dr. Judd Kessler: and it’s not clear that it’s kind of the right way to do it today.
Melina Palmer: Right.
Melina Palmer: And I do feel that I must put out the.
Melina Palmer: Mom, if I didn’t thank you enough for the multiple times that you sat out for Backstreet Boys and NSYNC concert tickets.
Melina Palmer: For me, that, that is dedication and getting tickets to bring a friend even. Right.
Dr. Judd Kessler: So, I mean, and that’s the smart thing to do once you’re waiting online, you know, buy as many as you can.
Dr. Judd Kessler: That’s, what the ticket brokers do. That’s what you should do to bring your, bring your whole crew.
Melina Palmer: Right. So mom, thanks for that. Appreciate that.
Melina Palmer: I got to see them in concert when they could still dance.
Melina Palmer: You know, now that they’re all there are cruises.
Dr. Judd Kessler: I think you can go on and see the Backstreet Boys today.
Dr. Judd Kessler: I mean, just.
Melina Palmer: Yes. Yeah. So, but I mean, so we all see and have encountered these hidden markets, but also saying hidden for a reason.
Melina Palmer: And I really like in reading through the book and as you see, just like all the layers of ways to think about it and how this is impacting people, there are definitely things you’ve maybe encountered but don’t realize.
Melina Palmer: It’s that market where it’s advantageous to be thinking about what your competitors want or how to approach this before we jump into the more complex styles.
👶 Rock, Paper, Scissors: An Allegory for Market Strategy
Melina Palmer: I really appreciated that you started us off with a story about your kids and as I said, you know, might be because we’ve got three kids at home as well, that this really resonated with me.
Melina Palmer: But I think the way that you relate examples to things that it’s like, oh, yeah, I’ve dealt with that we’ve done this helps, whether it’s getting, you know, reservations for dinner or buying tickets for, the ERAS tour, which, you know, didn’t even get into that.
Melina Palmer: But I, I Know other people who did?
Dr. Judd Kessler: Yes. Good for them.
Melina Palmer: So can you share a little bit just with the intro and some of that information with.
Melina Palmer: Yeah. With your kids?
Dr. Judd Kessler: Yeah. So I, I mean I, I opened the book with a story about teaching my daughter, who was four years old at the time, how, to play rock, paper, scissors.
Dr. Judd Kessler: And it’s, you know, I’m sure everybody who’s listening knows it, but you know, it’s a hand game that rock beats scissors, scissors beats paper and paper beats rock.
Dr. Judd Kessler: And I think of this story as kind of an allegory for the book because what was happening for my 4 year old was that she was watching her older brother and older sister play rock, paper, scissors against each other for allocation purposes to see who got the television remote, who got the last can of seltzer in the fridge, what we had for, you know, whose preferences, won the day on what we ordered for dinner and for, you know, until she learned the rules of the game, she just kind of saw her siblings make incomprehensible hand
Dr. Judd Kessler: gestures at each other and then one would be happy and one would be sad and something would get allocated.
Dr. Judd Kessler: and so first thing I did was teach her about, you know, the game, what the hand gestures were, how which move, beat which, other move.
Dr. Judd Kessler: but then she played for the first time against her older sister and it was for getting into the bath and you know, something she cared a lot about, but relatively low stakes and she just played scissors every time.
Dr. Judd Kessler: And that is not a good strategy. And her sister is only two years old there, figured it out and beat her pretty decisively by continually playing rock.
Dr. Judd Kessler: And it struck me that it’s not just that you have to see that a market exists, that stuff is getting allocated with this particular rule.
Dr. Judd Kessler: and you have to understand the rule, you have to understand how the game is played, but you also need strategy to figure out how to get what you want right.
Dr. Judd Kessler: You have to learn that as well. And so then I realized that there’s lots of markets like that in the, in the world that are allocating things.
Dr. Judd Kessler: and to succeed in those markets you have to understand that it’s a market, you have to see it, you have to understand the rules that are, being employed to allocate stuff.
Dr. Judd Kessler: And then you have to develop the right strategy to get what you want.
Melina Palmer: definitely.
Melina Palmer: And even in this case we only have three options, right, of rock, paper or scissors when you’re trying to win.
Melina Palmer: Unless. Are you planning to teach them rock, paper, scissors, lizard Spock.
Dr. Judd Kessler: I do not.
Dr. Judd Kessler: My dad, he used to play with match, rock, paper, scissors, match, but match was, dominated because it beat paper but lost scissors, and rock.
Dr. Judd Kessler: And at some point I tried to explain to him, dad, this is like, you know, in my econ classes I would teach you never play match.
Dr. Judd Kessler: but he liked it. He liked kind of, you know, having a fourth option to play. Yeah.
Melina Palmer: So rock, paper, scissors, Lizard Spock is, Are you familiar with.
Dr. Judd Kessler: No. Tell me what’s, what’s Lizard and Spock?
Melina Palmer: Yep, it, well, it’s from the Big Bang Theory, which, you know, one of the greatest shows ever.
Melina Palmer: So it’s, you know, lizard poison Spock, and rock crushes lizard, Spock defeats paper or whatever. Like it’s the whole.
Dr. Judd Kessler: So, I mean, look, I liked opening with rock, paper, scissors because I thought it was simple and easily approachable.
Dr. Judd Kessler: But it’s true that the markets, market rules can get complicated quickly. Right.
Dr. Judd Kessler: Like rock, paper, scissors, two people, three strategies, you know, that’s it.
Dr. Judd Kessler: And the optimal thing, by the way, for those, you know, is to be random, which is very hard for a four year old to do even once she understands the strategy.
Dr. Judd Kessler: But. Right, but in a lot of other markets, it’s, it gets complicated quickly.
Dr. Judd Kessler: And I think a lot of people feel like, oh, well, if it’s complicated, you know, there’s very little I can do.
Dr. Judd Kessler: But I, I, I want people to recognize that they have more agency than they think in these markets.
Dr. Judd Kessler: And by kind of learning what, what strategies they have available, they can at least feel good about the process, even if they don’t get exactly what they want.
Melina Palmer: Yeah, and, and being able to understand your own choice in that and what you care about the most, to understand, that.
⚖️ The Three E’s: Efficiency, Equity, and Ease
Melina Palmer: But before we get to that piece, let’s talk a little bit about the three E’s that come into play when we’re considering these two types of markets.
Dr. Judd Kessler: Yeah. So the thing that is happening when we have a hidden market is that for some reason we’re not using price to decide who gets what.
Dr. Judd Kessler: and so, you know, economists, we love prices. We think prices are the greatest.
Dr. Judd Kessler: when economists say supply equals demand, we’re making an assertion that price will, make that happen.
Dr. Judd Kessler: but of course, there’s many markets where we don’t let price rise.
Dr. Judd Kessler: Taylor Swift doesn’t want the price to be very high. We don’t sell seats in elementary schools.
Dr. Judd Kessler: We don’t decide who to hire based on who will take the lowest salary.
Dr. Judd Kessler: We don’t sell Life saving organ transplants to people who can pay the most.
Dr. Judd Kessler: There’s lots of cases where we leave price out of it or price doesn’t rise.
Dr. Judd Kessler: and so one of the reasons that we don’t think prices are good all the time is, for reasons related to equity and efficiency.
Dr. Judd Kessler: Two of the three E’s. So, because of wealth and income inequality, it might not be equitable if rich people got access to everything and poor people did not.
Dr. Judd Kessler: and you could also see why that, that inequality would mess with efficiency.
Dr. Judd Kessler: So you think about the die hard baseball fan that’s been to every home game sitting in the cheap seats, and then it’s time for the team makes it to the World Series, it’s time for the championship, and the ticket prices skyrocket.
Dr. Judd Kessler: Well, is it really more efficient that somebody who is willing to pay $1,000 for a seat gets it when the die hard fan can’t?
Dr. Judd Kessler: that doesn’t seem like it’s the right allocation of resources.
Dr. Judd Kessler: So we usually, when we decide not to use prices, it’s because we’re worried that the allocations that will come out will not satisfy the three E’s.
Dr. Judd Kessler: Efficiency, equity. And then the last one is ease being easy for market participants.
Dr. Judd Kessler: So whenever we look at a hidden market, those are the three things that we want to think is the rules of this hidden market, are they achieving or are they getting close to achieving?
Dr. Judd Kessler: Efficiency, meaning giving the thing to the person who values it the most.
Dr. Judd Kessler: Equity, meaning treating kind of people that you want to be treating equally. Equally.
Dr. Judd Kessler: So giving everybody the same shot, at getting something that they want. and then easy.
Dr. Judd Kessler: Is it an ordeal to get what you want? Or can you just kind of, enter the market, participate and leave without, too much of your own time and energy being wasted?
Dr. Judd Kessler: So the lines that your mom stood in or slept in to get you the Backstreet Boys tickets, that was an ordeal.
Dr. Judd Kessler: That was not easy to participate. but of course, as we’ve gone online, it might not be efficient or equitable if bots, are buying things up and reselling them at high prices.
Melina Palmer: Yeah. And it may feel like you on the side of like, well, I’m gonna, I’m just like everyone else.
Melina Palmer: And if I get my shot when I hit refresh, then I do.
Melina Palmer: And if, if you know, Steve down the street got it, then, you know, good for them.
Melina Palmer: but you don’t realize that there’s like, say someone who programmed a thousand computers to get them all and no one had a shot.
Dr. Judd Kessler: Yeah. In the book I use the analogy of you know, you’re racing in the 100 meter dash against a fleet of Ferraris.
Dr. Judd Kessler: Like, like you’re just, you just. It’s not a fair comparison.
Dr. Judd Kessler: It’s not, that’s not gonna, going to be good for you.
🥇 Strategy in First-Come, First-Serve: Go for Gold vs. Settle for Silver
Melina Palmer: so as we think about that, so now we know like we’ve got these competing forces and knowing for someone who’s acting as a market designer whether they have that as their job title or not, which is mostly not.
Dr. Judd Kessler: Right? Mostly not.
Melina Palmer: Yeah.
Melina Palmer: but you have to consider those three E’s as you are looking to design the opportunities.
Melina Palmer: but we also have the people who are trying to get stuff. Right.
Melina Palmer: And so you have some really good examples of even something as simple as getting a dinner reservation or getting the parking spot at Costco, which again I hear you preach.
Dr. Judd Kessler: Yeah, it’s very important markets that we play in weekly. Yeah.
Melina Palmer: so can you share a little bit about kind of what we’re looking at.
Melina Palmer: Ah, as we’re deciding what we value, what others value, how to approach kind of mindset of, of getting stuff as we start to look for these hidden markets.
Dr. Judd Kessler: Yeah. So the, those two examples of getting the reservation at the hot restaurant and getting the parking spot at Costco, those they have some, they’re different but they have something in common which is they’re both first come, first serve races.
Dr. Judd Kessler: basically. so you know the, the getting the reservation at the hot restaurant is a lot like you know, trying to be the first to click.
Dr. Judd Kessler: there are bots that buy up popular reservations now but, but typically you know that that’s a smaller part of the market.
Dr. Judd Kessler: and so when you are playing in that market, you, you will be going say this, this happened to me when I was trying to get my wife a birthday dinner at a fancy restaurant that was very hard to get.
Dr. Judd Kessler: Ticket get. I’m sorry, reservations for all of the reservations for the following month were going to be released on the first day of the preceding month at a particular moment in time.
Dr. Judd Kessler: And I had to decide whether I should click for the reservation that I thought you would like the best.
Dr. Judd Kessler: So Saturday night at 7:30 or go for something less desirable. So I call these two strategies.
Dr. Judd Kessler: Go for gold, like a gold medal. reservation would be the 7:30 on Saturday or you could take a kind of less aggressive strategy which I call settle for silver.
Dr. Judd Kessler: So don’t, don’t try to get the absolute best thing.
Dr. Judd Kessler: Pretend that your second choice or Your third choice, or something less desirable is actually what you want.
Dr. Judd Kessler: And the same. We do the same thing in the parking lot at Costco, right. We’re driving towards the front.
Dr. Judd Kessler: We would all. I mean, unless you want to get your steps in while you’re on your Costco trip.
Dr. Judd Kessler: we all kind of want to be really close to the entrance.
Dr. Judd Kessler: We want to drive to the front and try to get that perfect spot.
Dr. Judd Kessler: You know, maybe it’s fine to walk to Costco from a distance without any purchases, but on the way back, it’s much harder.
Dr. Judd Kessler: So we want to be out front. And, we can decide that we should. We’re going to go for it.
Dr. Judd Kessler: We’re going to drive all the way to the front.
Dr. Judd Kessler: but of course, you know, if the lot is pretty crowded, right.
Dr. Judd Kessler: As we pass the spot a few rows back, right. That’s our silver medal spot.
Dr. Judd Kessler: We could take it right now and be sure to have it.
Dr. Judd Kessler: if we go to the front, and see there’s nothing there, and we circle back, like, will that spot still be available?
Dr. Judd Kessler: I’m not sure. Right. And so the strategy you play of kind of trading off what is it that I really want versus what might I be okay with?
Dr. Judd Kessler: Right. It’s the same dynamic. So with the reservation, at the hot restaurant, you know, if you decided that, you know, you wanted the 730 reservation, you’re going to be competing with a lot of people who want the same thing as you, and you might be better off settling for Silver, saying, look, I know it’s not my first choice, but if I go for a 5pm reservation or 4:30pm reservation, like, I’ll be.
Dr. Judd Kessler: There’ll be a lot less competition, and you will have a much higher chance of getting the reservation.
Dr. Judd Kessler: You know, if you play it that way, it’s a little disappointing because you have to settle. Right? But.
Dr. Judd Kessler: But if it’s the case that you identify in your preferences that actually, you know, I, I don’t really care that much about when I eat.
Dr. Judd Kessler: Like, as long as I get to eat at this, you know, restaurant, which is a dream of mine, like, it’s okay to eat at 4:30.
Dr. Judd Kessler: you know, if that’s the case, if it’s not that big a difference, then you then settling for Silver might be, you know, the right strategy for you.
Melina Palmer: And like, you’re saying the. And I know in the case with the getting the reservation, for your wife, and you want it to be a surprise, and so you’re trying to get the dream, the Dream the dream.
Melina Palmer: But then you can look and say, well, is it if you would have had a conversation and you ask and say, hey, I’m going to try to do this thing, you know, do you just want to go no matter what?
Melina Palmer: Like then you can start to prioritize, right? And say, is it about being there, no matter what?
Melina Palmer: And even if it’s 3pm like make it happen, right? It’s great.
Dr. Judd Kessler: No, it’s important to know.
Dr. Judd Kessler: I mean, look, this, the same dynamic, the settling for silver versus going for gold thing, it comes up a lot in, in hidden markets.
🎓 The Choose Me Markets: Signaling Intent and Desirability
Dr. Judd Kessler: So another market that I talk about, you know, much later in the book is market for college admissions.
Dr. Judd Kessler: You know, so there is a decision at some point that folks have to make when they’re applying to college, of are they going to apply early decision, so apply early and commit to go to a school or you know, are they not going to?
Dr. Judd Kessler: And if they do apply early decision, where are they going to apply?
Dr. Judd Kessler: Because the whole point of early decision is you’re committing in advance to attend a school.
Dr. Judd Kessler: So you can only apply early that way to one place. The schools like it.
Dr. Judd Kessler: They like to maintain high yield. They want to, you know, have a lot of people who they admit, come and so they will make give you do in fact have a higher chance of getting in if you apply early.
Dr. Judd Kessler: And so then the go for gold, settle for silver.
Dr. Judd Kessler: There is, look, it might be that your top choice school is this, you know, very high reach school that might, you know, have very low admissions rate.
Dr. Judd Kessler: And you know, it would be great if you could go.
Dr. Judd Kessler: But you know, whether you apply early decision or not, like your chances of getting in are infinitesimal.
Dr. Judd Kessler: A settle for silver strategy might be to say, look, my second or my third choice school, right, I might not get in, but if I apply early, maybe I will, right?
Dr. Judd Kessler: Maybe that’s the school that you want to use your early decision application on.
Dr. Judd Kessler: Because that’s one where kind of your, it’s not your first choice, but it is high enough on your list that if you got it, you would end up being quite happy.
Dr. Judd Kessler: And it might only be feasible because you played that strategy right as you.
Melina Palmer: Were talking about that.
Melina Palmer: It just, I think for people to realize too, and you give a lot of good examples in the book, but all the competing incentives and forces at play, right?
Melina Palmer: So like for those listening, if we think about, you know, our nudges, incentives being a big piece of this, right, we’ve got who uses who Chooses who pays, who profits.
Melina Palmer: As we’re looking at this, there are multiple people who would be choosing and multiple people who might profit in different ways.
Melina Palmer: And when you think about that college admissions piece, piece, it’s so easy to think about my kid and the kids they’re competing against and what they care about.
Melina Palmer: But the school wants people to actually go there once they have applied, right.
Melina Palmer: They have other incentives they’re looking for. They don’t want to just be giving out a bunch of offers and have people not come in and have to bring people off a wait list or go later on.
Melina Palmer: Like, what do they care about? Where are they going to be weighting and valuing your interest?
Melina Palmer: And same for, like applying for jobs and being able to show that you’re really invested in this company and getting kind of out of your own realm.
Melina Palmer: first layer being to the competition of other kids going for the same spot or other people going for the same ticket or the reservation, but then also the entity, like, what do they care about?
Melina Palmer: Right.
Dr. Judd Kessler: Yeah, no, this is exactly right.
Dr. Judd Kessler: And this is, you know, why it’s later in the book is these. I call them Choose Choose Me Markets.
Dr. Judd Kessler: And so, you know, who’s choosing? But you know, in the Choose Me markets, it’s both sides, right?
Dr. Judd Kessler: The reservation and, you know, the, the, ticket for the live event.
Dr. Judd Kessler: Like, they have some rules that are programming who gets what, who clicks first, you know who, if you’re standing in line, if you’re the first person in line, like, they don’t care about.
Dr. Judd Kessler: They’re not choosing, but they’re choosing kind of algorithmically. It’s whichever. They don’t care about who you are.
Dr. Judd Kessler: They just care about when you click. But with the college markets, with labor markets, with dating markets, right?
Dr. Judd Kessler: These are more complicated markets where the person on the other side is also choosing you. Right?
Dr. Judd Kessler: You, you don’t get to just say, I would like to attend this school. They have to choose you.
Dr. Judd Kessler: You don’t get to say, I’d like to, you know, work at this firm. They have to hire you.
Dr. Judd Kessler: and so there it becomes super important to think about the preferences and the kind of what the entity that’s choosing you, that’s on the other side of the market cares about, and that is tough.
Dr. Judd Kessler: I mean, it’s, it’s easier for you to think about your preferences. What do I want?
Dr. Judd Kessler: And maybe it’s easier to, to think about people competing with you. What do they want?
Dr. Judd Kessler: but it turns out that one of the valuable things to recognize Is that in a lot of these markets, the entity that you’re choosing, one of the things they want is to know that this will be a fruitful match, that you will be happy to attend the school or stay in the job for a long time, or be a serious romantic partner for the long term, if that’s what you’re looking for on a dating app.
Dr. Judd Kessler: And so it is very important for you to signal to that other side of the market that you are that person that you care about making a long term valuable match.
Dr. Judd Kessler: And so applying early decision is one way to do that.
Dr. Judd Kessler: it used to be on the labor market that a way to do that would be to write a long, thoughtful, detailed cover letter about how good you would be in that particular role, which shows that you researched the role that you thought about your place there.
Dr. Judd Kessler: And long, detailed, thoughtful cover letters, you couldn’t write, ah, a million of them.
Dr. Judd Kessler: You had to kind of be selective about which firms you bothered to do that for.
Dr. Judd Kessler: that signal is becoming less effective, I think, as large, language models have made writing a letter like that lightning fast.
Dr. Judd Kessler: So I have noticed that for applicants to, work for me as research assistants, all of the best emails that I’ve ever received in my career, my 15 years hiring RAs, they’ve all come in the last six months.
Dr. Judd Kessler: Like, they’re thoughtful, they’re detailed, they, they know about my research and how they want to fit in. And it’s like, like, okay, like this is now, now everybody’s sending me these great cover letters.
Dr. Judd Kessler: I used to be able to use it as a screen. I can’t do that anymore.
Dr. Judd Kessler: and so, you know, we have to think about how can we communicate to the people on the other side of the market that we are, you know, that we would be a good match.
Dr. Judd Kessler: It’s worth their investing in us.
Melina Palmer: Yeah. And that’s like Larry.
📶 The Evolving Signal: AI, Dating Apps, and In-Person Connection
Melina Palmer: And as you’re talking about that I’m also thinking about, I get pitches from, for podcast
Melina Palmer: And as you’re talking about that I’m also thinking about, I get pitches from, for podcast and like people wanting to be on the show or be featured in something and just off the top, lot of garbage, right?
Melina Palmer: Like a lot of it is not good, very obviously not well thought through.
Melina Palmer: but then, yeah, you start to get somewhere. It’s like, okay, there’s some effort, somebody thought about something or whatnot, and it’s easy where, but like also relating it to yourself.
Melina Palmer: Right? So I think still for people that are looking to pitch, to be featured somewhere, do something, which I know a lot of people, listening, care about that sort of stuff still Go with being thoughtful.
Melina Palmer: And I think you can use AI to help. But like, what’s the story now?
Melina Palmer: If you’re looking to stand out, it’s like, so why does that matter for you?
Melina Palmer: Like, why are you caring and why do they care?
Melina Palmer: What do you see in the work that’s like that next layer of like, you’ve talked about this and I think this angle could help your audience because of that.
Melina Palmer: And like, I really resonated with this part in the book or whatever that you’re able to dial it into something specific.
Melina Palmer: even if AI maybe helps you. Right.
Dr. Judd Kessler: No, So I, we’re kind of in the, we’re in a middle point in time. So. Right. It’s.
Dr. Judd Kessler: It turns out my undergrads at Wharton have gotten really good at AI, quickly.
Dr. Judd Kessler: But that doesn’t mean that everybody has. Right. So, so certainly if you’re in a, if you’re telling us, you know, oh, I got pitched a lot and a lot of pitches are bad.
Dr. Judd Kessler: Right. It’s still a useful signal then, whether AI helps you or not, to say, I care enough about this that I’m willing to kind of tailor my pitch to you and your audience and think through that.
Dr. Judd Kessler: and that is something that is going to continue to be valuable until the moment where every pitch, even from the people who don’t care and wouldn’t be good fits, are sending things that look like they’re like the best ones that you get today.
Dr. Judd Kessler: And maybe, maybe it won’t come, maybe it’ll come in six months or a year.
Dr. Judd Kessler: but this, this, process, you know, will then lead us to need other ways for folks, in these markets to figure out kind of who is actually going to be a good fit for this relationship.
Dr. Judd Kessler: And in this case, maybe it’s just an hour, you know, of time talking and you know, a shorter, edited down podcast.
Dr. Judd Kessler: But you know, for a labor market context, it’s, you know, you train them, I have them come in, I put them into my workflow.
Dr. Judd Kessler: Like, if they’re, if they’re not going to be a good fit for the longer term, that’s really problematic.
Dr. Judd Kessler: And so then, you know, you, you really start relying on, okay, what is, what is a good signal that this person is actually, you know, interested?
Dr. Judd Kessler: On dating apps, this is like an example of this.
Dr. Judd Kessler: Like some people on dating apps complain and ah, this is like mostly straight women about straight men where you could, a lot of complaints you could get.
Dr. Judd Kessler: But one of them is that there are Some subset of men who will just swipe right on every woman.
Dr. Judd Kessler: They just, you know, you might call it like the numbers game strategy.
Dr. Judd Kessler: Like I’m just going to swipe right on everybody and kind of we’ll see who’s interested in me and, you know, kind of matches by swiping right back.
Dr. Judd Kessler: That is problematic. I mean, you get a lot of matches if you’re a straight woman playing on this app this way.
Dr. Judd Kessler: But, you know, if people in your town or in your kind of on, and you’re part of the platform are doing this right.
Dr. Judd Kessler: It’s hard to know who’s actually interested in me for me and who is, you know, just swiping right on me because I’m a woman on Tinder playing a numbers game.
Dr. Judd Kessler: Playing the numbers game. And so the apps, they realized this was something that was happening and they monetized it maybe, of course.
Dr. Judd Kessler: but they built in super swipes or super likes or roses, they’re called. Different things on different platforms.
Dr. Judd Kessler: but basically then the person has to pay money. Sometimes it comes with a subscription or you get one free per week or whatever, but you have to basically put your money where your mouth is and say, I’m using one of my costly swipes on you to signal that you are somebody I actually want to interact with.
Dr. Judd Kessler: It’s not just that I’m swiping right on everybody because it would be very costly to use a $5 swipe on every person.
Dr. Judd Kessler: and so that kind of signal comes up in a market where we have lost the signal, the regular signal is not working.
Dr. Judd Kessler: and so in that case, whether it’s a labor market or dating market or podcast booking market, we have to start to figure out what is that signal going to be.
Dr. Judd Kessler: So again, right now, detailed, thoughtful pitches is great. but maybe soon it’ll have to be engaging on social media or doing things that kind of can’t be easily.
Dr. Judd Kessler: You know, going to an in person event, to meet you live. Right.
Dr. Judd Kessler: Like things that can’t be replicated by a large language model or even an AI agent.
Melina Palmer: Right, Yeah, I have heard. Interesting. Not that it’s necessarily related to this, but where people are talking about how a lot of in person events and things are going to have another swing back around where it feels like, is anyone a real person anymore?
Dr. Judd Kessler: I think that’s going to be one of the upshots of the AI kind of revolution, is that we’re going to see the value of in person interactions again, that if you say to me, hey, you can either, do a zoom interview or you can come in person.
Dr. Judd Kessler: And we know you live kind of far from the offices, but, if you want to come in person, going in person will signal, oh, actually I care enough about this job to spend a day, you know, coming in and maybe when, when, when you do hire me, I will come into the office, you know, as many days a week as you ask me to, write, even though I live, you know, a bit of a drive or a bit of a subway ride or something.
Dr. Judd Kessler: and so, you know, these, these in person interactions are going to start sending those signals, I think, much, much, much in a way that will be even more valuable, in the future.
Melina Palmer: Yeah, for sure. And then just knowing too, for people, tips wise on this.
Melina Palmer: As you think about, I’m all about reciprocity and giving first, right?
Melina Palmer: And so if there is a place that you think you might want to work, or a podcast you might want to pitch to be on, or a thing that you’re interested in a couple years from now, start being visible to them, today, right?
Melina Palmer: Go comment on their posts, go share their stuff, go be a person that’s on the radar, that you can be giving a lot that then by the time you’re saying, oh, and actually, you know, I, well, I would love to work here, and they go, oh, you would, we’d love to have you here because we know you, right?
Melina Palmer: You’re, you’re in the group before you were trying to get something from us.
Dr. Judd Kessler: Yeah, no, I think that’s great. And it’s also, you know, there’s, I, I’ve talked a lot about the second side about getting, you know, signaling to the, the firm that you are interested in them and would, would take, take the job if offered.
Dr. Judd Kessler: But of course there’s the kind of more obvious one, the first one, which is be desirable to the firm.
Dr. Judd Kessler: And one of the ways to do that is, you know, develop skills, develop firm specific skills or firm specific relationships.
Dr. Judd Kessler: And those engaging in the ways that you described, those are doing both simultaneously.
Dr. Judd Kessler: They’re showing the firm that you are an engaged, thoughtful person who would add value.
Dr. Judd Kessler: And you’re showing them that, you know, you actually would be happy there.
Dr. Judd Kessler: You care enough about it that you’ve been kind of engaging with it for a while.
Dr. Judd Kessler: And then as you say, the reciprocity kicks in, right?
Dr. Judd Kessler: If we have a relationship and I’ve been doing nice things for you, maybe you’ll do something nice for me.
Dr. Judd Kessler: And maybe that’s giving you a chance even if you might not have hired me, based just on my background.
Dr. Judd Kessler: and those can be super powerful.
Melina Palmer: Yeah, definitely easy things. Right.
Melina Palmer: It doesn’t have to change the whole world to be able to do some of that.
🔀 Types of Hidden Markets: Waiting Lists, Lotteries, and Clearinghouses
Melina Palmer: so really quick, we don’t have to get into detail on them because that’s what the book is for.
Melina Palmer: But we, you talked about. So we had the, you, know, first come, first serve.
Melina Palmer: We had some choose me in there knowing, there’s, you know, chapters for each.
Melina Palmer: But what are the different types of markets that are, you know, on the horizon
Melina Palmer: But what are the different types of markets that are, you know, on the horizon for people?
Dr. Judd Kessler: Yeah, I mean we talked about some of them in passing, but there’s in addition to first come first serve races, there’s first come first serve waiting lists, and lines.
Dr. Judd Kessler: Right. Standing in line for something. We talked a bit about that.
Dr. Judd Kessler: Those are different ways that we resolve the scarcity in hidden markets.
Dr. Judd Kessler: There’s markets that use lotteries that use chance, kind of built into the allocation.
Dr. Judd Kessler: and it turns out there are strategies you can play in those.
Dr. Judd Kessler: They all kind of boil down to kind of figuring out how to enter multiple times.
Dr. Judd Kessler: Some, some market rules, not in an illegal way, but like, you know, me and my friend both want to see a show.
Dr. Judd Kessler: We both enter the, you know, for the ticket rush ticket lottery.
Dr. Judd Kessler: We get two bites at the apple and so of just one.
Dr. Judd Kessler: and it turns out there’s lots of, of lotteries, where you can kind of do that, that kind of strategy.
Dr. Judd Kessler: Some lotteries reward repeated entries over time, so you lose a lot of times, you get a higher chance of winning.
Dr. Judd Kessler: And knowing that that’s the case would encourage you to start entering earlier, than you might otherwise.
Dr. Judd Kessler: And then there’s the, class of markets that I mentioned at the very beginning that are kind of markets that have centralized clearinghouses that often have sometimes an academic economist, who is involved in the designing of the market so that it can achieve as get as close as possible to achieving efficiency, equity and ease for market participants.
Dr. Judd Kessler: Kind of this platonic ideal of a hidden market. and those, if they’re designed well, they should be very easy to participate in to just rank your preferences.
Dr. Judd Kessler: they’re not always designed well. It could be that you have to, do a kind of settle for silver, pretend that something you don’t love is your first choice.
Dr. Judd Kessler: but that will depend on the specific market rules and understanding what you should do and then making sure you do it.
Dr. Judd Kessler: and don’t display any behavioral biases about you Know, wanting, trying to outthink a ah, mechanism that you can’t outthink.
Dr. Judd Kessler: Right. Then those, that’s the strategy in those markets too.
Melina Palmer: Yeah.
Melina Palmer: And as we said that so many really great detailed stories throughout the book that people can get to see those in more depth.
⏰ Designing Your Own Market: Email and Recurring Meetings
Melina Palmer: as we, I would be remiss, it was a small piece of the book, but the tips about email and recurring meetings I know will be key for people listening and I really love the insight there.
Melina Palmer: Can you share a little bit about how this can apply to our everyday inboxes and meeting nightmares?
Dr. Judd Kessler: So, this is the last chapter of the book and I think the hope is that when you’re going through thinking about all of the times you participate as a market participant trying to get some scarce resource that a lot of people are competing for.
Dr. Judd Kessler: Right. If you flip it around a little bit you realize, well actually you are a market designer for the scarce resources you control.
Dr. Judd Kessler: And one of the things that is kind of the scarcest resource that you are most directly in control of is your time and attention, kind of what you devote your energy to on a day to day basis.
Dr. Judd Kessler: And so when I kind of started writing that chapter of thinking of all the ways that you are a market designer, can you use these principles to help you?
Dr. Judd Kessler: the first ones that came to mind were like okay, my inbox maintenance and my, my meeting, you know, my scheduled meetings and you know, the, for, for the inbox, you know I realized that all of the things that I did when I was responding to email were creating the worst possible incentives for market participants.
Dr. Judd Kessler: That it was bad for them, it was bad for me.
Dr. Judd Kessler: It was like I, if you send me more follow ups, I’m more likely to respond because I want to get your original email and all the follow ups out of my inbox.
Dr. Judd Kessler: But of course that creates incentives for folks to send more follow up emails.
Dr. Judd Kessler: It’s, it’s not necessarily equitable because some, some of my students know they have to do that and some don’t.
Dr. Judd Kessler: or it’s not easy to kind of remember to ping me multiple times.
Dr. Judd Kessler: and so you know, that was one where it’s like, okay, I’m going to just stop doing that.
Dr. Judd Kessler: I’m going to start kind of triaging my emails differently.
Dr. Judd Kessler: I I think a lot about kind of the timing of when I respond to things I use, last in, first out, which is how most email, inboxes are kind of set up with the most recent one at the top.
Dr. Judd Kessler: it’s not particularly equitable to respond in that way. But if there’s a bunch of important emails, I respond to the one that came in most recently because potentially the person is still working on the thing they emailed me about.
Dr. Judd Kessler: And it’s actually the most efficient thing to get them a snappy reply.
Dr. Judd Kessler: If you emailed me last night might be important, but it might not be something I have to deal with instantly because it’s not going to help you in the moment.
Dr. Judd Kessler: You have to turn back to it, and start working on it again for my reply to be helpful.
Dr. Judd Kessler: and then the meetings thing. I, realized when I was thinking about different market rules.
Dr. Judd Kessler: there’s a market rule that is called, first in time, first in. Right.
Dr. Judd Kessler: This is how historically water rights from the Colorado river were allocated to the states in the region that, tap the river.
Dr. Judd Kessler: And those rules, when they were in place, gave priority to California over everybody else because California was the first US State to, divert, water from the river for agriculture.
Dr. Judd Kessler: and when they did that, the city of Phoenix, Arizona had less than 10,000 people living in it.
Dr. Judd Kessler: now Phoenix, Arizona, almost 2 million. but if there, when those rules were in place, when there was a drought, California got their full water access.
Dr. Judd Kessler: They got like, as much as they always got, and it was Phoenix that had to cut back.
Dr. Judd Kessler: And it was a race that was played 120 years ago, determined allocations today.
Dr. Judd Kessler: And I was like, oh, my God, that’s so silly. Why would anybody do that?
Dr. Judd Kessler: those rules don’t make any sense. They’re not equitable, they’re not efficient.
Dr. Judd Kessler: And then I was like, oh, my God, that’s what all my recurring meetings are.
Dr. Judd Kessler: I made a recurring meeting for a project a year ago.
Dr. Judd Kessler: It’s on my calendar, Thursday at 10am and it is always there and it always has rights to that spot, whether the, whether the project is, you know, needs the time or not.
Dr. Judd Kessler: And when I schedule something else, I have to work around that meeting.
Dr. Judd Kessler: And it’s like, this is not, this is not right for Colorado river water.
Dr. Judd Kessler: It’s definitely not right for my time. so I’ve gotten rid of basically anything that isn’t teaching that recurs on my calendar.
Dr. Judd Kessler: I’ve, I’ve done away with and tried to kind of make sure each week I’m allocating my, my time efficiently and equitably, across, you know, people and projects and myself.
Melina Palmer: Yeah, I love that. And I think, I hope people have, you know, wheels turning and realizing, oh, my gosh I’m going to change my approach.
Melina Palmer: The point I think with any of it as we already talked about and there’s a reason every episode of the brainy business ends with be thoughtful.
Melina Palmer: Right? As that’s what we’re here for. know, take the time to consider how you want to approach your email and your meetings and the signals you are intentionally and unintentionally sending and how it might be benefiting or not benefiting you.
Melina Palmer: And those who are sending those emails are on the other side of those meetings. Right.
Melina Palmer: Like you said, the it may not be realizing like you are actually incentivizing people to send you a lot of emails.
Melina Palmer: If you only respond once you’ve gotten a lot of emails. which is very obvious when you say it.
Melina Palmer: But when you’re just in the like email, email, email mode, you don’t feel it in that same way.
Melina Palmer: But if you take a moment and say no, I’m not going to do that.
Melina Palmer: like you said, if people are asking me about something that is on the syllabus, I am not going to respond promptly to that.
Melina Palmer: And they can know that that’s a, that’s a three day response and like you missed it, you had to go find it yourself and you won’t ask me these sorts of silly questions again.
Melina Palmer: or you can just send back, you could I guess send the like Google it link.
Dr. Judd Kessler: You know I had that in the book and my editor made me take it out.
Dr. Judd Kessler: Let me Google that for you. Where you just. It’s a gif of somebody googling your question.
Dr. Judd Kessler: I really like that. but yeah, I love it.
Melina Palmer: I almost said you could have just Rickrolled everybody which is its own.
Dr. Judd Kessler: If you ask me something on the syllabus you will get a Rick roll.
Melina Palmer: That’s what’s happening. As it should be. That’s the new best response for everything.
Dr. Judd Kessler: I love it. I love it.
📚 Concluding Thoughts and How to Get Lucky by Design
Melina Palmer: Well, I know everyone who’s listening is so excited to learn more to get their copy of Lucky by Design.
Melina Palmer: So they can be making it more likely they’re going to be lucky in these sorts of things.
Melina Palmer: When they understand those markets they want to follow you all the things. We’ll have links in the show notes.
Melina Palmer: but what are the best ways for people to learn more? Get the book. All the things.
Dr. Judd Kessler: Perfect. So my, my website is Judd B. Kessler. B is my middle initial.
Dr. Judd Kessler: juddbkessler.com I also when I realized the title was going to be Lucky by Design I got the URL getluckybydesign, dot com.
Dr. Judd Kessler: So that is a direct link to the book page on my website.
Dr. Judd Kessler: But yeah, those are the places to go, to get lucky by design.
Melina Palmer: Awesome.
Melina Palmer: Well, thank you again, Judd for joining me on the show.
Melina Palmer: We know we will continue and have many conversations down the road.
Melina Palmer: I can tell because this was just way too much fun. but thanks for joining me on the show today.
Dr. Judd Kessler: So happy to be here. This, this was a blast. Thank you.
Melina Palmer: Thank you again to Dr. Judd Kessler for joining me on the show today.
Melina Palmer: What got your brain buzzing in today’s conversation? For me, I’d have to say that it definitely comes down to how our brains are wired to feel like all the rules out there are fixed.
Melina Palmer: But they’re often design. And while it may seem, seem like the person designing them must know all the best options and design accordingly, more often than not they don’t know.
Melina Palmer: So we’re actually living in a non optimized world of sloppy design.
Melina Palmer: This gives an opportunity to pause and ask, are we playing the game the way we should be or is this a design someone built?
Melina Palmer: And if it was built, is it optimal for the game I ultimately want to win or is it about what they want to win?
Melina Palmer: And if those things don’t line up, what options do I have?
Melina Palmer: How can I look at this in another way to get my own best outcome?
Melina Palmer: And of course I absolutely love the idea of deciding when you want to go for gold and when it’s actually better to settle for silver.
Melina Palmer: When you know what matters to you most. Often your best outcome is what feels like silver to everyone else.
Melina Palmer: So you can win and move on. And when you can reframe what, what might feel like a silver outcome.
Melina Palmer: To use the Costco example, parking far from the door and find a way to make it your gold.
Melina Palmer: Maybe you’re going to get more steps or have a moment for a calm stroll. Less stress.
Melina Palmer: It’s actually quicker in and out because you aren’t waiting for everyone else that’s fighting for a spot by the door, you can actually make it your gold pretty easily.
Melina Palmer: Whether it’s parking spots, dinner reservations, job searches, or so many opportunities.
Melina Palmer: Judd’s work reminds us that when you know the hidden market and you know the odds, sometimes you can change the game itself.
Melina Palmer: And all of it can be set up to cater better to what you are trying to accomplish.
Melina Palmer: What stood out most for you? Was it this gold and silver concept?
Melina Palmer: Or maybe something else I would love to hear about it.
Melina Palmer: So please come share it with me on social media.
Melina Palmer: You’ll find me as the Brainy biz pretty much everywhere and as Melina Palmer, on LinkedIn.
Melina Palmer: There are of course links in the show notes to make it easy, along with links to my top related past episodes and books including Lucky by Design and more.
Melina Palmer: It’s all waiting for you in the app you’re listening to and at thebrainybusiness.com 554 and thank you again to Judd Kessler for joining me on the show today.
Melina Palmer: It was a delight to chat with and learn from you. Join me next time.
Melina Palmer: Time for another brainy episode of the Brainy Business Podcast. It’s going to be a lot of fun.
Melina Palmer: You don’t want to miss it. Until then, thanks again for listening and learning with me and remember to be thoughtful.
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