What are the key takeaways from this Masters in Business episode?

Key insights include: **Disposition Effect Persistence:** Investors consistently sell winning stocks too early while holding losing positions too long, a pattern documented since 1985 that appears identically in modern Robinhood data and international markets, costing investors significant returns through poor timing decisions.; **Institutional Investor Selling Mistakes:** Analysis of portfolios averaging $600-700 million shows fund managers add 100-200 basis points of value through stock purchases but lose equivalent amounts on sales. Random portfolio selling would outperform actual manager decisions by approximately 200 basis points annually.; **Retirement Savings Architecture Impact:** Changing default settings from cash to target-date funds in 401k plans created approximately $2 trillion in retirement savings, with 40% of the $4.7 trillion in these funds attributable to automatic enrollment and default investment choices rather than active participant decisions.

What did Economists Richard Thaler discuss on Masters in Business?

Richard Thaler and Alex Imas discuss their updated edition of The Winner's Curse, examining how behavioral economics anomalies from the 1980s-90s remain unchanged despite thirty years of research, affecting institutional investors and retail traders alike. Key topics include: **Disposition Effect Persistence:** Investors consistently sell winning stocks too early while holding losing positions too long, a pattern documented since 1985 that appears identically in modern Robinhood data and international markets, costing investors significant returns through poor timing decisions.; **Institutional Investor Selling Mistakes:** Analysis of portfolios averaging $600-700 million shows fund managers add 100-200 basis points of value through stock purchases but lose equivalent amounts on sales. Random portfolio selling would outperform actual manager decisions by approximately 200 basis points annually..

How long is this episode of Masters in Business?

This episode is 86 minutes long. SignalCast provides an AI-generated summary so you can get the key insights in about 3 minutes.

Masters in Business

How Investors Fall Into Bias Traps with Economists Richard Thaler & Alex Imas

January 16, 2026

86 min episode · 2 min read

Economists Richard Thaler

Episode

86 min

Read time

2 min

Topics

Personal Finance, Investing, Fundraising & VC

AI-Generated Summary

Published Jan 17, 2026

Key Takeaways

✓Disposition Effect Persistence: Investors consistently sell winning stocks too early while holding losing positions too long, a pattern documented since 1985 that appears identically in modern Robinhood data and international markets, costing investors significant returns through poor timing decisions.
✓Institutional Investor Selling Mistakes: Analysis of portfolios averaging $600-700 million shows fund managers add 100-200 basis points of value through stock purchases but lose equivalent amounts on sales. Random portfolio selling would outperform actual manager decisions by approximately 200 basis points annually.
✓Retirement Savings Architecture Impact: Changing default settings from cash to target-date funds in 401k plans created approximately $2 trillion in retirement savings, with 40% of the $4.7 trillion in these funds attributable to automatic enrollment and default investment choices rather than active participant decisions.
✓NFL Draft Prediction Accuracy: Teams selecting players have only 53% accuracy in predicting whether an earlier pick will outperform the next player at the same position, barely better than random chance, yet consistently trade valuable assets to move up in draft order.
✓Mental Accounting in Spending: People spend approximately zero additional dollars when home values increase but spend roughly half of lottery winnings or stock sale proceeds, demonstrating that wealth location matters more than total wealth amount for consumption decisions.

What It Covers

Richard Thaler and Alex Imas discuss their updated edition of The Winner's Curse, examining how behavioral economics anomalies from the 1980s-90s remain unchanged despite thirty years of research, affecting institutional investors and retail traders alike.

Key Questions Answered

•Disposition Effect Persistence: Investors consistently sell winning stocks too early while holding losing positions too long, a pattern documented since 1985 that appears identically in modern Robinhood data and international markets, costing investors significant returns through poor timing decisions.
•Institutional Investor Selling Mistakes: Analysis of portfolios averaging $600-700 million shows fund managers add 100-200 basis points of value through stock purchases but lose equivalent amounts on sales. Random portfolio selling would outperform actual manager decisions by approximately 200 basis points annually.
•Retirement Savings Architecture Impact: Changing default settings from cash to target-date funds in 401k plans created approximately $2 trillion in retirement savings, with 40% of the $4.7 trillion in these funds attributable to automatic enrollment and default investment choices rather than active participant decisions.
•NFL Draft Prediction Accuracy: Teams selecting players have only 53% accuracy in predicting whether an earlier pick will outperform the next player at the same position, barely better than random chance, yet consistently trade valuable assets to move up in draft order.
•Mental Accounting in Spending: People spend approximately zero additional dollars when home values increase but spend roughly half of lottery winnings or stock sale proceeds, demonstrating that wealth location matters more than total wealth amount for consumption decisions.

Notable Moment

When asked how he would spend his Nobel Prize money, Thaler responded he would spend it as irrationally as possible, later realizing he should have opened a dedicated account to track Nobel-funded purchases, highlighting how mental accounting enables guilt-free spending.

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Episode Transcript

I'm Hannah Fry, and I'm on a mission to find out about a mysterious day called Q Day, which experts think could be the moment our most precious encrypted data is suddenly at risk. Learn more later in the podcast. Did my card go through? Oh, no. Your small business depends on its Internet. So switch to Verizon Business, and you could get LTE business Internet starting at $39 a month when paired with select business mobile plans. That's unlimited data for unlimited business. There we go. Get the Internet you need at the price you want. Verizon Business. Starting price for LTE Business Internet, 25 megabits per second unlimited data plan with select Verizon Business smartphone plan savings. Terms apply. Support for the show comes from Public. On Public, you can build a multi asset portfolio of stocks, bonds, options, crypto, and now generated assets, which allow you to turn any idea into an investable index with AI. It all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index, and lets you back test it against the S and P 500, then you can invest in a few clicks. Generated assets are completely customizable and based on your thesis, not someone else's. Go to public.com/market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com/market. Paid for by Public Investing, brokerage services by Open to the Public Investing Inc, member FINRA and SIPC, advisory services by Public Advisors LLC, SEC registered advisor, generated assets as an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or advice. Complete disclosures available at public.com/disclosures. Bloomberg Audio Studios. Podcasts, radio, news. This is Masters in Business with Barry Ritholtz on Bloomberg Radio. This week on the podcast, two extra special guests, Alex Emas and Richard Thaler, took Richard's book, The Winner's Curse, and really completely rewrote it and updated it for 2025. I've been privileged to speak with doctor Thaler a number of times over the past few years. He's been a guest both both here and live in Chicago, a number of times. Always a fascinating conversation. And Alex Emas is this really interesting professor who I had no idea I have used and relied on his previous research. Selling fast and buying slow is a chapter in my book. Just an amazing coincidence. Both fascinating people, and I thought this conversation was a lot of fun. And I think you will also, with no further ado, Alex Emis and Richard Thaler on The Winner's Curse. Thanks, Barry. Great to be back. Yes. It's so great to have you. So you started you wrote this book, it's thirty years ago already. We're gonna get to to this in a bit. Before we do, I …

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