Dr. Kessler releases new book “Lucky by Design”

CHIBE affiliate Dr. Judd Kessler has a new book out called “Lucky by Design: The Hidden Economics You Need to Get More of What You Want.” In it, he discusses “hidden markets” that determine who gets what in everyday life.

The book comes out on October 14 and is available for pre-sale now.

CHIBE spoke with Dr. Kessler, who is the Howard Marks Professor at Wharton, about the book.

What inspired you to write this book?

A few years ago, when my son was applying for kindergarten, I found myself sitting in an elementary school auditorium listening to a department of education employee talk about how seats in the district’s school would be assigned to students.

The parents around me were frantically taking notes. This was a big decision, and they were stressed out, grasping for a better understanding of what they should do. But I was not nervous, because I knew (and just barely managed to resist yelling out to a room full of strangers) that all we had to do was rank our preferences honestly to the mechanism.

That experience made me realize how fortunate I was to have studied market design and to understand how markets work, particularly the “hidden markets” that allocate resources without relying on prices (including the centralized clearinghouse being used for the kindergarten seats, but much more than that).

People play in hidden markets regularly, but they may not have a framework for thinking about them. I wanted to write a book that would empower people to better understand hidden markets so they could feel more confident and be more successful in them.

Because these hidden markets are everywhere, the book covers a wide range of examples: snagging parking spots, getting restaurant reservations and live-event tickets, succeeding on labor markets and dating markets, being admitted to college (and to elementary school), and securing life-saving medical care or a deceased donor organ.

How do behavioral biases influence how people behave in hidden markets? 

One pattern that gives people trouble in hidden markets is that they often focus more on themselves than on other people. You might think a lot about what you want to get or achieve but ignore the preferences and actions of others. Many of the strategies I describe in the book relate to needing to be more thoughtful about what other people in the market want and taking that into account.

While I managed to write the whole book without using the term “game theory,” it’s not a coincidence the book opens with a story about teaching my youngest daughter how to play “rock-paper-scissors” (as an allegory for the book).

Your book covers restaurant reservations, lotteries, college classes, and more. Could you give us a health-related example and tell us if there are any practical strategies that people could use?

In the book I discuss hidden markets for scarce medical resources: life-saving organ transplants, medical care during the Covid-19 pandemic when we needed to ration hospital beds and ventilators and vaccines, and medical care in some hospitals around the world that have limited appointments with specialists.  

In all these markets, understanding the rules being used to allocate the scare resource is essential to access it. Thankfully, in many high stakes markets you have help (e.g., a doctor might advise you about whether to multi-list across transplant centers and whether to take a particular organ that is offered to you or wait for a better one to come along).

But sometimes you’re on your own. When you need to see a provider and get on her waiting list to be offered a canceled appointment, do you know how they office is giving them away? Are they going to email everyone about an opening and whoever logs into the portal first can claim it? Are they going to dial down a list of numbers until someone picks up the phone? Do you need to call in repeatedly to ask about availability? Knowing these market rules are incredibly important to know your optimal strategy (i.e., monitoring your inbox, keeping your phone ringer on, or making a habit of calling into the provider’s office). People can do better when they start thinking about the rules underlying allocations.

What is something you do differently after doing the research for this book? 

I talk in the book about the hidden markets that we get to control ourselves, including the market for our time and attention and the market for household production.

Applying the insights from the book to these markets has changed how I handle my email inbox, my calendar, and how my wife and I split our household chores, and I’m much better off for it.

I’m excited for folks to read the book, to become savvier market participants, to start seeing themselves as market designers, and to improve their own lives in the process.