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Choiceology: Season 2 Episode 8


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It’s a bias that’s been observed for perhaps thousands of years, a tendency to overvalue what we already possess.

“For most things are differently valued by those who have them and by those who wish to get them; what belongs to us, and what we give away, always seems very precious to us.” –Aristotle

In this episode of Choiceology with Katy Milkman, we look at the peculiar ways people tend to value the things they own.

  • The episode begins with a tour of the Sports Immortals Museum. Owner and proprietor Joel Platt claims it’s the largest and most diverse assortment of sports mementos in the world. You’ll hear Joel tell some amazing stories behind a few of his most prized pieces—stories about Babe Ruth, Muhammad Ali, Honus Wagner, Jim Thorpe and Jack Dempsey. Joel spent decades collecting memorabilia, much of which he believes is priceless. But it turns out there’s a disconnect between Joel’s valuation and those of independent appraisers and potential buyers.
  • Katy explores this disconnect with Nobel Prize­–winning economist Richard Thaler, who describes his inspiration to identify and measure the bias that can cause people to overvalue things they own. Richard Thaler is the co-author of Nudge: Improving Decisions About Health, Wealth, and Happiness.
  • Sally Sadoff of the Rady School of Management at UCSD joins Katy to discuss her research on performance bonuses for teachers. She explains how the effectiveness of these incentives can change dramatically depending on whether teachers are given the bonuses at the beginning of the school year or at the end. And it all has to do with how teachers perceive ownership of these bonuses.
  • Finally, Katy harkens back to the first episode of the season to explain some simple strategies to reduce the negative aspects of this bias.

Choiceology is an original podcast from Charles Schwab.

If you enjoy the show, please leave a rating or review on Apple Podcasts.

Click to show the transcript

Katy Milkman: We’re starting today with a brief tour of the Sports Immortals collection in Boca Raton, Florida.

Joel Platt: That’s a bell from the Jack Dempsey–Luis Firpo championship fight at the Polo Grounds, New York City, on September 14, 1923.

1923 recording: A terrific right by Firpo, and Dempsey goes flying out of the ring …

Joel Platt: Which Firpo knocked Dempsey out of the ring, and the crowd helped him back or else he would have been counted out. And then he knocked out Firpo for the heavyweight championship. We’re just passing Muhammad Ali’s wax figure head, and it looks like the champ is alive in there along with the torch from the Olympic Games in Atlanta signed by Ali.

Katy Milkman: That’s Joel Platt showing off just a few of the amazing items in his world-renowned sports memorabilia collection.

Joel Platt: So this is kind of a wall with pictures of me with Clemente and Pete Rose and Gordie Howe and Sugar Ray Leonard …

Katy Milkman: Today we’re looking at the peculiar way we value things we own. Whether that’s a nice house, a rare baseball card or a lowly coffee mug. I’m Katy Milkman, and this is Choiceology, an original podcast from Charles Schwab. It’s a show about decisions—from day-to-day choices to life-changing moments. It’s also a show about the subtle biases that influence those decisions. We isolate and explore these biases to help you make better choices.

Joel Platt: My name is Joel Platt, and I’m the founder of Sports Immortals. It is the largest and most valuable collection in the world.

Katy Milkman: You heard that right. Joel Platt believes he has the most valuable collection of sports memorabilia in the world. And he might be right. Joel has been collecting sports memorabilia since he was young. It started as a hobby shortly after a fateful visit to his uncles used-car dealership in 1943.

Joel Platt: I was a very hyperactive young man, and during the war my uncle had a used-car lot near Forbes Field, home of the Pittsburgh Pirates. One day he said to my mother, “Let me take little Joel to the garage to get him out of your hair.” I liked to play with matches, and my uncle got busy with a customer. I wandered into the garage, found an old car, within the glove compartment, found some matches, and went over to the gas tank, unscrewed the cap. I lit a match, dropped it in the tank.

And it blew the garage to pieces. Flames … blew me probably about 30 feet in the air. And this was during World War II, so a soldier was passing by, heard the explosion, came in, dowsed the flames, because I literally was on fire, and rushed me to the children’s hospital nearby.

Katy Milkman: Joel was bedridden for over a year, recovering from the burns he sustained in the explosion. He was so severely injured, he could only use one arm. His mother placed a bell over his bed that he could ring when he needed attention. Joel’s parents tried to figure out ways to keep him occupied through this long recovery period, and that’s where Joel got his first taste for collecting.

Joel Platt: My dad would come home every night and started to buy me baseball cards, and my first two cards were Babe Ruth and Lou Gehrig.

Katy Milkman: Babe Ruth and Lou Gehrig. Two of the most storied players in baseball history. These cards captured young Joel’s imagination. So much so that he had a dream.

Joel Platt: And that’s when I had the dream about Babe Ruth when he visited me in the dream and told me, “Kid, don’t give up, you could get better and someday be a Major League Baseball player. Or build a museum for sports greats.” That set me off on that two-pronged journey. Once I did recover, I kind of devoted my life to those two missions—and would practice three, four hours every day and really became an outstanding shortstop. They use to call me Young Honus, after Honus Wagner.

Katy Milkman: Remember that name, Honus Wagner. It’s an important part of Joel’s story. Joel practiced diligently as a baseball player. All the while building his collection.

Joel Platt: It evolved from cards to programs to autographs to actual mementos from the various greats. I started going to the hotels where the teams use to come in, and Pittsburgh was the Schenley Park Hotel across from Forbes Field. And I would take cards of the players and go and wait in lobbies of the hotels and get them signed. And it was a totally different situation back then because there weren’t that many people collecting. I remember going down to see the San Francisco 49ers. They had a famous quarterback, Frankie Albert, and a fullback by the name of Norm Standlee, and I had their football cards. And they were sitting on the porch of the Schenley Hotel, and I went up to them and recognized them, to their surprise, pulled out their football cards and asked them to sign it. After I was done, I politely said “Thank you, Mr. Alberts and Mr. Standlee.” They said, “No, thank you, kid.” I mean, they were so surprised that somebody recognized them. You know this is pre-television, so players weren’t really recognized like they are today.

I wanted to be a Major League Baseball player, and I became very good at a very young age and led every team I played for in hitting and was usually was Most Valuable Player.

Katy Milkman: But a life in the major leagues wasn’t in the cards for Joel.

Joel Platt: I ultimately wound up injuring my arm as I was being scouted by the head scout for the Boston Red Sox. It was devastating.

Katy Milkman: Joel Platt’s dream of becoming a professional baseball player was dashed.

Joel Platt: But my dad reminded me, he said, “Now, son, you remember you had two dreams, and this might ultimately not have been your main mission to be a Major League Baseball player, maybe it was to build the premier sports attraction that would honor and enshrine the world’s greatest athletes. So he re-motivated my second aspiration, and that was to build this monumental project. And full throttle ahead, I just concentrated my efforts to that end.

Katy Milkman: Joel is now focused on this one goal. But where to start?

Joel Platt: My first journey was to an area right outside of Pittsburgh to visit with Mrs. Honus Wagner.

Katy Milkman: Honus Wagner is considered by many baseball enthusiasts to be the greatest shortstop of all time. He hit over .300 for 17 seasons. He retired from the Pittsburgh Pirates with an all-time record for games, at-bats, hits, runs, stolen bases and total bases. He was one of the original Hall of Fame inductees. Wagner died in 1917, but he was survived by his wife, Bessy.

Joel Platt: I was 17 at the time, and I remember it was Mother’s Day, and I had made this little gift for Mrs. Wagner, drove out there unannounced, knocked on the door. She answered the door, invited me in, and I made my pitch, gave my gift to Mrs. Wagner, and told her my story about being called Young Honus and about my dream and how I got started, and she was most receptive and impressed with me and gave me a bronze mold of Honus Wagner’s hand, a bat and a uniform he had used. So this was a great first experience and million-mile journey.

Katy Milkman: Joel would travel more than a million miles over his lifetime in search of rare items. His collection now includes some of the most valuable memorabilia in the world—from the most iconic athletes in the history of sports.

Joel Platt: My collection covers the spectrum of all major sports greats. My favorites would be Muhammad Ali, Satchel Paige, Roberto Clemente, Mickey Mantle, Pele, Ted Williams, Jim Thorpe, Babe Didrikson, Honus Wagner …

Katy Milkman: You might have noticed Muhammad Ali’s name at the top of that list. There are many items in the collection from the famous boxer’s career, but one in particular ranks as Joel’s favorite.

Joel Platt: The most priceless, the one that I like the best, is his 1960 USA Olympic jacket. That’s one of my most coveted priceless items among many priceless items, but if somebody offered me $10 million for that jacket, I wouldn’t take it. And the reason for it—it’s signed twice by Ali. It says USA across the front, and there’s just very few Olympic items from 1960 from Muhammad Ali. To put it bluntly, it’s just priceless, and I think no money offer could obtain it from me.

Katy Milkman: A priceless item, at least from Joel’s perspective, but I want to take a second to think about that value judgment. He says he wouldn’t take $10 million to give up the jacket. We looked at several independent assessments of the jacket’s value. We even reached out to Brendan Wells at SCP Auctions. Most assessments we found came in at around $500,000. Even if the assessment were 10 times that number, it would still be far less than the price Joel places on it personally. Why the disconnect? Granted, it’s difficult to put a dollar value on these one-of-a-kind pieces of sports history. The market is constantly shifting, and many of the items in Joel’s collection were extremely hard to find or acquire.

Joel Platt: Well I guess the most difficult items would be, over a five-year period, I kept pursuing relatives of Jim Thorpe, because here I was creating a museum that would honor and enshrine the greatest athletes of all time. And the greatest athlete of all time was Jim Thorpe. At the time all I had was an autograph picture of him.

Katy Milkman: Jim Thorpe won the decathlon and pentathlon in the 1912 Olympics. And that was just for starters. He played 10 years of Major League Baseball with the Cincinnati Reds and the New York Giants, he’s in the pro football Hall of Fame, and he even played basketball in the early days of the sport. Joel considered Jim Thorpe to be the greatest all-around athlete who ever lived. So you’d better believe he would search hard for Jim Thorpe memorabilia.

Joel Platt: I visited numerous relatives and nobody had anything. And then I discovered his third wife, Patricia Thorpe, living in Cabazon, California. I knocked on the door. Patricia Thorpe answered, and I introduced myself. Told her about my mission in life to build the premier museum on sports, and she showed me all of Jim’s things. His Olympic scrapbook with letters from President Taft and his football jerseys and trophies and medals. I explained to her I’d like to obtain something of Jim’s, and she said, well, U.S. Steel offered her $500 at that time to use a negative of Jim Thorpe, and I said, well, I’m not U.S. Steel, but I’d be glad to compensate you in some way. And she said, well, it wasn’t about money, you know, and she would give it some thought. And I followed that up, and over a five-year period, three trips out to California, I never did get anything.

Katy Milkman: It seemed like a lost cause. But then ...

Joel Platt: Out of nowhere, I received a telegram. It said, “Am confined to bed. Come and get all Jim’s things. I want them to be enshrined in the Sports Immortals Museum. It was his Indian clothes. It was his medals, his trophies, his helmet and his shoulder pads with animal bones. It was just unbelievable experience—and one of the more rewarding experiences of my life, after five years of getting nothing and then winding up with all of Jim Thorpe’s mementos.

Katy Milkman: He was given these items for free. At least if you don’t count the cost of Joel’s years of failed attempts. But now that he has them, what are they worth?

Joel Platt: I would say Jim Thorpe’s Carlisle Indian football jersey is probably another item between a million and two million dollars. It’s the most valuable football jersey in existence.

Katy Milkman: Independent assessments of the value of Jim Thorpe’s Carlisle Indian football jersey again fall in the range of around $500,000. So quite a bit less than Joel’s value. Still, Joel Platt’s claim that Sports Immortals is the most valuable collection in the world becomes more and more believable as you learn about the items he’s acquired over the years.

Katy Milkman: Some of the other most valuable pieces include …

Joel Platt: Lou Gehrig’s first baseman’s glove that he used in 1927, I would say that was probably an item that would be in excess of a million dollars as well. Along with a Honus Wagner card, which, our card, would be in the realm of a couple million dollars. But our total collection with our trademarks in total content and copyrights has been valued in excess of $200 million.

Katy Milkman: More than $200 million. OK. So Joel Platt has amassed an incredible collection. He and his son Jim have built their lives around this museum. Would they ever sell key pieces from the collection?

Joel Platt: People are always offering us insurmountable amounts of money for various items. People from all over the world have contacted us in reference to coveting or obtaining items of these greats. People were always inquiring about buying the superstars, such as Babe Ruth and Satchel Paige and Muhammad Ali and Jim Thorpe, Jesse Owens-type items, and it’s been north of a million dollars for certain Jim Thorpe items, for example. But the answer is always the same.

Katy Milkman: The answer has always been no.

Joel Platt: And we didn’t even give it any consideration.

Katy Milkman: Hard to believe that they’ve been turning down such large sums. Part of the reason is sentimental.

Joel Platt: Well, first off, my collection means a lot more to me than the monetary value.

Katy Milkman: Another big reason for Joel’s hesitancy in selling individual items is that he feels they’re more valuable as part of the collection. If he sells it, Joel wants the entire collection to live on as the Sports Immortals experience.

Joel Platt: It’s not my goal to siphon off items from the collection. We’ve had many offers over the years, and I’ve been accused sometimes of being too emotionally attached to my collection where no offer would be ever good enough. I always found a reason it wasn’t the right place, right people, right time. The collection is part of my DNA. The collection is priceless to me. I consider every one of the items in the collection as part of my, as I called them, my babies. I consider them as I do my own children.

Katy Milkman: Joel clearly feels incredibly attached to this collection. And why not? It’s his life’s work. That said, he and his son Jim are now entertaining offers for the collection from interested buyers. We’ll have to check back in to see if they ever sell.

As with all the stories we tell on Choiceology, there are a lot of factors at play here. Joel Platt poured his heart and soul, not to mention time, money and effort into assembling this incredible collection. But there is an interesting aspect to Joel’s reticence to sell off certain pieces. It might relate, at least in part, to the way we value things we already own.

Remember how the independent value assessments for various items of memorabilia discussed were all substantially lower than the values that Joel quoted? Those assessments don’t mean that Joel wouldn’t get the amount he’d want for the items in his collection, should he ever decide to sell, but they do point to a tendency we all have when assigning a value to things we already own.

I want to try to demonstrate this with a classic experiment involving something far less valuable and important than, say, a Mickey Mantle baseball card.

We assembled two groups of people. We gave one group some nondescript mugs to keep.

Participant 1: OK, I will do that, reaching into the box, a lime green, no it’s a yellow, sunshine yellow mug.

Katy Milkman: And told the other group that the very same mugs would be available to them for purchase if they’d like. The people who had the mugs given to them as gifts kept them for a while and tested them out.

Moderator: So basically your job right now is to take the mug, use the mug, put some coffee in the mug, and then we’ll check in Thursday. How does that sound?

Participant 1: Uh, that sounds fantastic. I will drink as much coffee as I possibly can from this mug.

Katy Milkman: Then we asked them if we could buy them back, and if so, how much would it cost?

Participant 2: So I think I’ll try to get $10 for it.

Participant 3: I’d say 12 bucks.

Participant 1: Uh, do I have to give them the coffee, as well?

Moderator: I guess it’s up to you.

Participant 1: OK, so that might be an added bonus. So how much would I sell this mug for?

Moderator: Yeah.

Participant 1: I think I’ve grown so fond of this mug, I’m gonna say at least 10 bucks.

Katy Milkman: Sounds reasonable for a mug. But here’s where things get interesting. Listen to how much the participants who didn’t receive the mugs as gifts but were just offered a chance to buy them, would be willing to pay for those same mugs.

Moderator: You know, pick up that mug, take a look at it, and tell me what you would pay for that mug if you were to go to the store to buy it.

Participant 4: For this mug, I would probably say $3, I guess.

Participant 5: 5 bucks, tops.

Participant 6: As a British person who drinks a lot of tea, I end up collecting quite a few different mugs. I’d probably pay $4, $4.50 for it.

Katy Milkman: Now, we didn’t have a very large sample size for this experiment, but it’s a replication of a classic study that’s been run hundreds, if not thousands, of times with the very same results. On average, people who already owned the mug placed a considerably higher value on it than their non-mug-owning counterparts. What gives?

This experiment illustrates something called the endowment effect. This is a phenomenon where people tend to place a higher value on things they already own than on things they could own. The key reason this happens was actually covered in a previous episode of Choiceology. Remember when we talked about loss aversion? That’s this bias in the way we value gains and losses. Losing something roughly offsets the happiness we get from gaining it in the first by a factor of two to one. In other words, if I find $10 on the street in the morning, and then drop it in the afternoon on my commute home, I’ll end up considerably worse off than if I’d never found it in the first place. So much for the old saying “’Tis better to have loved and lost than to have never loved at all,” right?

So what does this have to do with valuing things we own more than things we could buy? Well, once we own something, thinking about selling it feels like a loss. Whereas when we don’t own it yet, the chance to get it feels like a gain. So now this tendency to value losses roughly twice as much as equivalent gains creates a problem. And of course if you add sentimental attachments to items we own into the mix, then things get really crazy. It’s a bias that has been around for as long as our species, presumably. But it was noticed and termed the endowment effect for the first time by Nobel Prize–winning economist Richard Thaler in 1980.

The classic mug study demonstrating its potency came about a decade later in collaboration with another economics Nobel laureate, Danny Kahneman, and a third researcher named Jack Knetsch. Richard Thaler joined me to chat a bit about the origins of that study.

Richard Thaler: Danny Kahneman and I went to a conference in Pittsburgh that Al Roth had organized. I was talking about the endowment effect, and they were saying, “No, you guys don’t have the goods on that.” I said, “Why not?” And they said, “Well, you need an experiment in which there’s real money at stake, there’s an opportunity for learning, and there are markets.” Why we needed that was not clear, but it was … we sort of took it as a challenge. This was during a year where I was living in Vancouver visiting Danny. We went back to Vancouver and talked to our friend Jack Knetsch who had done an early endowment effect experiment. We figured out a design, and then I ran the first one in a class at Cornell after I got back from Vancouver.

Katy Milkman: The idea was to find a simple object that had some value to students, and then place that object on every other desk, and then conduct a market where the people who had the object could sell it and the people who didn’t could buy it. But what to use?

Richard Thaler: I went over to the campus bookstore to figure out what kind of object we could use, and the constraints were that it had to be not too expensive, somewhat attractive to a group of students, not too heavy, and I’m looking around and I spot a ceramic Cornell insignia coffee mug of the sort you can see in any campus bookstore, I think, anywhere in the world. And so I said, “Oh, yeah, that could work.” The funny thing is, as you know there have now been hundreds of endowment effect experiments, and they all use coffee mugs—I mean, it’s just so weird. I mean, you’d be hard pressed to find an experiment about the endowment effect that doesn’t use coffee mugs, and it’s all because some coffee mug caught my eye in the Cornell bookstore.

So that’s why it’s mugs. And by the way, if you ever are in Stockholm, when you win the Nobel Prize, there’s a museum, and winners are asked if they want to donate some artifact. And I gave the last mug. The original Cornell coffee mug is on display in the Nobel museum in Stockholm.

So anyway, well, let’s get to the result of the experiment, which was what we had expected, which is, the people who had randomly been assigned to have a mug on their desk mostly kept them, and the people who didn’t get a mug mostly didn’t buy any. And why is that? Well the people who had the mugs were demanding about twice as much to give one up as the people who didn’t have a mug were willing to pay to get one. And that is the endowment effect.

I don’t know whether you’re old enough to remember this Stephen Stills song “Love the One You’re With.”

Katy Milkman: Yeah, sure, I know it. I’m not that young.

Richard Thaler: So, you know—love the mug you’re with. [laughs]

Katy Milkman: Richard Thaler is both a master of wit and a Nobel Prize–winning economist who works at the University of Chicago. He’s also the co-author of the best-selling book Nudge: Improving Decisions About Health, Wealth and Happiness, which I highly recommend.

I’m Katy Milkman, and this is Choiceology—an original podcast from Charles Schwab. If you’d like to hear more about how the phenomena we explore in this show might be costing you money, check out our sister podcast, Financial Decoder. Mark Riepe, head of the Schwab Center for Financial Research, hosts the show. Mark and his guests consider questions like, “What investments should you sell?” and “When should you take Social Security?” to help you mitigate biases and strive for better financial outcomes. You can find it at or wherever you listen to podcasts.

Katy Milkman: I want to dig into some other examples of the endowment effect that are a bit more consequential than coffee mugs and a bit more relatable than million-dollar baseball cards. So I’ve asked Sally Sadoff, professor of economics at the Rady School of Management at the University of California at San Diego, to tell me about a study she co-authored about teacher incentives.

Sally Sadoff: So there’s a lot of work on offering teachers performance pay or merit pay, and there’s a lot of controversy around it, in part because most of the experimental studies to date have shown that merit pay or performance pay isn’t that effective. So offering teachers bonuses based on how well their students perform or how much they learn over the course of the year doesn’t seem to have a large effect on student performance. And one idea we had, drawing from the large literature using laboratory experiments, is that, could we harness this bias of the endowment effect to make these bonuses more powerful?

Normally what happens in merit pay is, at the end of the year, based on how well your students perform, you as a teacher receive a bonus. We did test that. We also tested the exact same amount of money for the exact same amount of learning by students, but instead of giving teachers the bonus at the end of the year, we actually endowed them with a bonus at the beginning of the year. So on average we expected teachers to earn $4,000 from the experiment.

In the group where we were testing the endowment effect, we gave teachers $4,000 at the beginning of the year. We wrote them a check for $4,000—they could put it in their bank account, cash it, use the money, but at the end of the year, if their students hadn’t met their performance targets, they would have to pay us the difference between $4,000 and the bonus they had earned. If their students had over-performed, then we would give them additional monies on top of the $4,000 we had given them at the beginning of the year.

And we find that changing just that, just changing the timing and the framing of the reward, has a really large impact on student performance.

Katy Milkman: So why is endowing people with this money and then telling them that they could lose it so much more potent than just giving them a bonus at the end of the year for their performance?

Sally Sadoff: I think the teachers saw that money sitting in their bank account, and they were really worried about having to pay it back. So when we asked them in March—three quarters of the way through the year—how much of the money they had spent, most of them said they hadn’t spent any of it.

Katy Milkman: But does giving the bonus at the beginning of the year and then forcing teachers to pay back any difference if the students under-perform—isn’t that kind of punitive?

Sally Sadoff: So a big question about these bonuses is, OK, it looks like they’re really effective at making teachers work harder, but the reason they’re working harder is because they’re really anxious about having to pay the money back. So a concern from policymakers in school districts is, “Should we be giving these kinds of bonuses to teachers because they may work harder, but they may be much less happy?” And the problem with that is we’re concerned about teachers’ welfare, but we’re also concerned about, if we as a school district or a company offer these kinds of bonuses, maybe people won’t want to work for us. Or after they go through this kind of bonus system, maybe they’ll be more likely to leave and go to another school district or another company that doesn’t offer these kinds of bonuses that make them feel really anxious all year long.

So we’ve done some studies on that to understand, before people get into these situations, do they recognize that they’re going to be subject to the endowment effect. So we asked people, “Would you rather work under a contract where you get the money up front or you get the money at the end of the year?” And we’ve done this both in laboratory experiments and in the field, and in the lab we find that people, surprisingly, actually prefer contracts where they’re going to get the money up front. Which was a surprise to us, because theory would predict that you shouldn’t want to work under these contracts because they make you very anxious and they reduce your welfare.

Katy Milkman: OK, so in this artificial setting, people aren’t all that bothered by the prospect of anxiety over having this endowment they could lose, but they focused more on the economic benefits of having cash in their pockets sooner?

Sally Sadoff: When we brought that out into the field and asked community college instructors about these contracts, we find that, as theory would predict, they don’t want to work under these contracts. They were actually willing to give up about 10% of the bonus in order to get the money at the end of the semester, which is a surprise to economists because we think, “Oh, everyone would always want money sooner.” But in this case, they were very nervous about working under these contracts and didn’t want to.

Katy Milkman: Oh, wow. What a cool flip. So these results in the field are surprising to old-fashioned economists, because who wouldn’t want more money right away when they could be earning interest on it, right? But the teachers are going to have to live with that anxiety all year—they had a different reaction to it than the people in a more artificial lab setting. For them, loss aversion was a bigger deal. That’s so interesting.

Sally Sadoff: What we found really surprising, though, was after they worked under this contract for a semester, they actually learned to like those contracts and then became indifferent between getting the money at the beginning or the end of the semester. And we think these results suggest that after you go through these contracts, maybe you learn that you work harder under them, and even though it’s caused by this bias, maybe you use them as some sort of commitment device, where you want to work harder, and so you know that actually you can use this bias to motivate you to work harder and earn a larger bonus.

Katy Milkman: Sally, thank you so much. I really appreciate you joining.

Sally Sadoff: Thanks, Katy. It’s great talking to you.

Katy Milkman: Sally Sadoff is an assistant professor of economics in strategic management at the Rady School of Management at the University of California at San Diego.

I’ve got a link to the paper on teacher incentives in the show notes and at

So how can you fight back against the endowment effect? Well, a really interesting series of studies by John List, an economics professor at the University of Chicago, offers one hint.

List went to sports memorabilia marketplaces, and he replicated past results on the endowment effect. Real participants in those markets were randomly given one piece of memorabilia. Most people became attached to it and were unwilling to part with it when a second prize was offered in exchange. What’s really interesting about these studies, though, is who didn’t show the endowment effect. The dog that didn’t bark. List found the endowment effect went away among extremely experienced market participants—sports memorabilia dealers and other folks with many years of trading experience weren’t biased. This suggests that experience or practice selling things you own may be one way to overcome the endowment effect. One other tip I have for you will be an echo of advice I offered in our first episode this season, which was all about loss aversion. As I mentioned earlier, a key reason people show the endowment effect is that they’re loss averse. That is, losses loom larger than gains. And giving something up, or selling it, feels like a loss. So we can use some of the same tricks to help combat loss aversion and the endowment effect.

You might remember that I asked you to imagine that you purchased a bottle of wine years ago and the price has since sky rocketed. But let’s imagine that this time it’s a house. Let’s say that your son suggests that you sell it so you can move to a nice retirement community with some extra money in the bank for vacations. But you can’t bear to part with your home. The key question you need to ask yourself to defend against the endowment effect is this: Would you buy the house now at its current price? If the answer is no, bias might be at play. You’re unwilling to give up or lose the house even though you don’t value it enough to buy it again. That doesn’t make sense, but that’s the endowment effect. If, on the other hand, you would buy the house again at its current price, then it isn’t the endowment effect. You aren’t making a mistake and you should keep the house.

You’ve been listening to Choiceology, an original podcast from Charles Schwab. That’s it for Season 2. And now that we’ve made it, we wouldn’t sell what we’ve created for any price. Here’s some good news on Season 3. We’ve already got new episodes in the works. The new season will launch on March 18th. Subscribe for free on Apple Podcasts, Google Podcasts or wherever you listen, and new episodes will be delivered to you as soon as they’re out.

If you’ve enjoyed the show, leave us a review on Apple Podcasts. It helps other people find us. I’m Katy Milkman. Talk to you soon.

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Important Disclosures

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