Something You Should Know - Solving the Mystery of the Hamburger & Understanding the Risks in Your Life

Episode Date: May 13, 2019

If you want to learn something better and faster, there is a little trick that seems to work. We begin this episode by revealing some research from John Hopkins School of Medicine that says a slight change in the way you learn any new skill can make all the difference in the world. https://www.hopkinsmedicine.org/news/media/releases/want_to_learn_a_new_skill_faster_change_up_your_practice_sessions Nothing is more American than the hamburger. We eat a lot of them. So where did the hamburger originate? Who came up with the idea? How has it evolved over the years? Award-winning writer Chris Carosa, author of the book Hamburger Dreams:How Classic Crime Solving Techniques Helped Crack the Case of America’s Greatest Culinary (https://amzn.to/2Hevorp) did some good old fashioned detective work to uncover the real story of the hamburger. He joins me to discuss what he found.   Your life is full of risks. Almost everything you do has some risk in it- from what you buy in the store to investments to simply driving down the street. Alison Schrager, an economist and journalist joins me to help us all understand how risks work and offers advice on how we can handle risk better. Alison is the author of the book An Economist Walks Into a Brothel: And Other Unexpected Places to Understand Risk (https://amzn.to/2VUkjDZ). It seems most people are put off by the sound of someone slurping their food. Yet people do it and in some cultures it is considered quite normal. So why do people do it? Does it serve a purpose that only people who slurp know about? Listen to find out. https://www.rd.com/advice/relationships/annoying-eating-habits/ This Week's Sponsors -Capterra. To discover the best software for your business - for free - go to www.Capterra.com/something -Linzess. For information about your IBSC symptoms go to www.ohmygut.info/podcast. -Capital One. What's in your wallet? www.CapitalOne.com Learn more about your ad choices. Visit megaphone.fm/adchoices

Today on Something You Should Know, if you want to learn a new skill faster, there's a little trick I'm about to tell you. Then, the mystery of the hamburger. Where did it come from? Was it Hamburg, Germany? McDonald's in the 1960s went to Hamburg, Germany to give them some certificate thanking them for inventing the hamburger. And the mayor said, we didn't do that. it really came about in the late 1800s in America and it was an invention of necessity plus why do some people slurp their food and annoy everyone around them actually it's for a very good reason and understanding risk a lot of people don't like to take risks but you have to people who take regularly, like traders on Wall Street, or I think there's a really interesting paper by an economist named John List with people who

trade sports cards, that people who take risks regularly tend to be much smarter at it. All this today on Something You Should Know. As a listener to Something You Should Know, I can only assume that you are someone who likes to learn about new and interesting things and bring more knowledge to work for you in your everyday life. I mean, that's kind of what Something You Should Know was all about. And so I want to invite you to listen to another podcast called TED Talks Daily. Now, you know about TED Talks, right? Many of the guests on Something You Should Know have done TED Talks Daily. Now, you know about Ted Talks, right? Many of the guests on Something You Should Know have done Ted Talks. Well, you see, Ted Talks Daily is a podcast that brings you a new Ted Talk every weekday in less than 15 minutes.

Join host Elise Hu. She goes beyond the headlines so you can hear about the big ideas shaping our future. Learn about things like sustainable fashion, embracing your entrepreneurial spirit, the future of robotics, and so much more. Like I said, if you like this podcast, Something You Should Know, I'm pretty sure you're going to like TED Talks Daily. And you get TED Talks Daily wherever you get your podcasts.

Something You should know. Fascinating intel. The world's top experts. And practical advice you can use in your life. Today, Something You Should Know with Mike Carruthers. Hi, welcome. So I have two sons, and in the last year, both of them have decided to learn how to skate,

and now they're both playing hockey. And they're both pretty good at it, and they both really love it. So I've decided I better learn how to skate. So I'm now taking skating lessons. And so this really caught my eye. When you're trying to learn some new skill, like playing an instrument, using a computer, or learning how to skate, there's a way to speed up the process. All you have to do is change how you practice it. In other words, the next time you practice, do it a little differently than the last time. The changes have to be small,

like just adjusting the size or the weight of your baseball bat or tennis racket or soccer ball from one practice session to the next. According to research at John Hopkins School of Medicine, big changes don't help at all, like playing a game of badminton in between two games of tennis. Yes, the games are similar, but they're too different to help you learn. But in the research where two groups were compared trying to learn something, the group that made slight modifications to what they practiced

always learned faster than those who practiced the same way each time. So the takeaway is to shake up the routine, just not too much. And that is something you should know. Hamburgers are about as all-American as you can get. Or are they? Are hamburgers from Hamburg, Germany and that's how they got the name? Or were they first created here in the US? There are actually several conflicting stories about where and when the hamburger first surfaced.

And it's an important story because from that first hamburger has grown a huge appetite for more and a giant industry to satisfy that appetite. Writer Chris Carosa decided to do some detective work to discover just where the hamburger came from and to try and figure out which of the several stories circulating around is the true story of the origin of the hamburger. The results of his research is in his book, Hamburger Dreams.

Hi, Chris. Welcome. Hey, how you doing? Great, thanks. So, of all things to investigate, you chose the hamburger. How did you get this idea and decide that this was a story worth digging into? It's a kind of a weird story. I was a senior in college, and I was assigned to write a paper about the biography of my hometown of Buffalo, New York. And in that process, I looked at an old newspaper that said Buffalo is the place where the hamburger was made, first made. So I went and I told some of my roommates, and they said, no, New Haven was.

And then I forgot about it because it didn't have anything to do with the subject of the paper. But I remembered it, spent six years researching old newspapers, literature, interviewing people, trying to track down as best I could what story is most likely to be true. Let's step back a little bit and talk about the hamburger itself. I mean, people say that hot dogs and apple pie are all American, but I bet we eat a lot more hamburgers than we eat hot dogs. How did it become so American, do you suppose? Well, according to the research that I've done, it definitely was made in America, unlike what some people think. Some people think that it was made in Hamburg, Germany,

and that's how it got its name. And I tell the story in a book that was actually told in another book about McDonald's. McDonald's in the 1960s went to Hamburg, Germany to give them some certificate thanking them for inventing the hamburger. And the mayor said, we didn't do that. So it has nothing to do with hamburger Germany. And it really came about in the late 1800s in America. And it was an invention of necessity. At that point, people were eating on the run, kind of like what we do with fast food today. But it was just beginning. And so sandwiches were very popular. And just the idea of putting a patty together, putting it on a piece of bread and serving it,

that was a new thing. And it really took off, I think, probably, say, in the 1920s, when White Castle started their fast food franchise. And it just really blossomed after World War II, when everybody came home and everybody had cars, and all of a sudden fast food was a big thing, and the fastest of the food was a hamburger. Since it didn't come from Hamburg, Germany, why is it called a hamburger? There's no ham in it. If you make it right, there's no ham in it. So where does that name come from?

Well, there's lots of different stories. Each origin story has a different source of the name. Some of the stories say that it was named after Hamburg, Germany, because the German immigrants invented it. But that story was associated with an origin story that isn't true. The most popular story has to do with the actual location of the invention, which was in Hamburg, New York. Hamburg, New York is a town located just south of Buffalo

where the Erie County Fair is held every year. And in 1885, it wasn't just called the Erie County Fair, it was also called the Hamburg Fair. And all the signs said Hamburg Fair, not just Hamburg, New York, but Hamburg Fair. And when they invented it there, the story is they didn't have a name for it. Somebody said, hey, this is great. What do you call it? And they said, well, we don't know.

And they looked up. They saw Hamburg Fair. And they said, well, it's a Hamburg sandwich. And you might think, a lot of people think, oh, that's just too easy. That can't possibly be true. But here's what I found out. I went and I read a newspaper from 1885 that talked about that Hamburg Fair, the Erie County Fair, and it brought up an example of cheese. And it actually quoted people in this article saying, what do you call this cheese? And they said, well, let's see. We call it Hamburg cheese.

So we know that that was the sort of thing that they did at that fair at that time, so it's possible that's probably where the name came from. And so why are there all these conflicting stories about the origin? There's no smoking gun evidence as to what actually occurred and when it occurred. So we can't tell for sure who really made it. It's like if you ask the question, who invented the wheel? Well, you know, we didn't have 24-7 news, everyone with cell phones taking pictures back in the Stone Ages, so we can't tell who invented the wheel. Same thing with the hamburger, and nobody thought it was a big deal at the time. It didn't really make the kind of splash that you might expect that something as big as this might have made. So it went pretty much unrecorded until decades after the event

occurred. Even the people who would claim to be the original inventors of the hamburger did not tell the stories until nearly a half a century after they did it. Well, isn't it possible that more than one person came up with the idea? I mean, it's not that complicated of an idea. Actually, that's a good point, and that's how I ended the book. Oops, I gave away the ending of the book. But I tell a real story. A real story was I was a Boy Scout leader, and we had to eat breakfast on a cookout, and I didn't have any utensils. So what I did was I fried an egg and put it in between two pancakes, and everyone thought this was the greatest thing since sliced bread. They'd never had it before.

Little did we know that about five years earlier, McDonald's had to come up with a similar McGriddle-type sandwich. So it's the same sort of thing. You just happen to have the same tools as everyone else, and you came up with the same idea. So it's very possible that these inventions all occurred serendipitous of one another. How all-American is the hamburger? It seems like you can find a hamburger in other places in the world, but that's perhaps more recent as fast food places have exported elsewhere. But have hamburgers been around in other places like they have been here?

Well, they didn't start in other places. They came from America. In fact, my research brought up or found a menu from the American restaurant in Manila in the Philippines. This is in the late 1890s. And on the menu was listed the Hamburg sandwich. So it was an American cuisine that was exported over to the Philippines so that Americans can eat this sort of food that supposedly Americans ate. And it really became popular. Like I said, it didn't become popular until early part of the 20th century. But after that, it really blossomed, and now it's a staple that everyone expects.

But is the hamburger so popular in the United States because people truly, truly love hamburgers? Or are hamburgers so popular because there's a lot of money to be made and fast food companies make a lot of money selling hamburgers to people and convincing them that they're so good? I think that's probably a chicken and egg type question. Here's why I say that. Certainly, if you look at the standard summer barbecue, the way we imagine it right now, hamburgers are part of that equation. And hamburgers were barbecued outside by people, you know, as early as the 1890s, if not before

then. So we know that's been going on. Do we know for sure that it was this big, pervasive type of culinary dish that everyone used at that time? It's kind of hard to tell. So it's kind of hard to tell if the hamburger became popular because of fast food or fast food became popular because of the hamburger. And I remember my parents, and I grew up in New England, but I remember my parents sometimes referring to a hamburger as a Hamburg.

We're having hamburgs tonight. Yes. Yes. That is definitely the vernacular, the way that they called the hamburger or the hamburger when it was first invented. There are pictures that I found from various festivals and fairs that referred to hamburgers as hamburgs. Like I said, that menu from Manila called it the hamburg sandwich. It was difficult for me to figure out when we switched from hamburg to hamburger as the term that everyone preferred, but that occurred probably into, say, the 1920s, that sort of period. Any sense as to why we added the er on the end? I don't know. I never tried to figure that one out. And then the whole sense of burger

coming after that, that's another change in the name, a shortened version of it. It's difficult for me to figure out exactly where that came from. Well, I guess because it's efficient. There's no other kind of burger. There's no, well, there is now, you know, veggie burgers and chicken burgers or turkey burgers, but at the time, a burger meant hamburger, so why say the whole thing? Right. And cheeseburger, you know, cheeseburger is another thing that people say came from Southern California. My guess is that the name cheeseburger came from Southern California. But the idea of putting cheese on a hamburger,

that comes back very, very early in the story. I have a newspaper article from the Chicago Tribune, I think it is, from 1894, that makes reverence to a street vendor who was cooking hamburgers and putting cheese on them. We are talking about the hamburger and where it came from. And my guest is Chris Carosa, author of the book, Hamburger Dreams. Tell me you're not swayed by online reviews. Of course you are. Everybody is. People like reviews and put a lot of stock in them because the best way to tell if you want to buy a product or service is to find out what other people think who've already bought it. And that's what makes Captera such a great idea. Captera is the leading free online resource to help you find the best software solutions for your business.

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at a picture of that first hamburger or one of the first hamburgers that was ever sold, would you look at it and say, oh yeah, that's a hamburger, or has it evolved into something else? I think that it has evolved, and it has evolved in this way. Not so much the hamburger itself. The patty has always been a patty. It's the bread that surrounds it.

So when we think of a hamburger today, we think of a patty on a bun, and that probably didn't come around until a little later, probably in the 1890s, certainly before the St. Louis World's Fair in 1904. I think that the first story that I saw said that people would cut loaves of bread and then make a wedge in them, and that's where they would put the meat. So inside this wedge of bread, other stories say they put it between toast, but certainly it's regular bread that you put the hamburgers on. The bun came around a little bit later, around the 1890s, and again, the first person who did that,

there's a story that says someone in Oklahoma did that first, and I wasn't able to determine really the origin of the bun. But certainly by the end of the 1890s, there were places that had hamburgers and buns on the menu. And then have people always put ketchup on them and other things, or did that... That's a great question. You know, everybody asks that question because you think, oh, there's ketchup, there's onions, there's pickles, all this kind of stuff. And the answer is no. In fact, some of the origin stories say it's not a hamburger if it has anything on it. That's the way they define what a hamburger is.

What I could say, though, is that in the early 1900s, when they were selling hamburgers at fairs and carnivals, they did have condiments on the side. Often you hear hamburgers mentioned in the same sentence as hot dogs, as if they're cousins or something. Oh, what are you having? Oh, we're having hamburgers and hot dogs, because somehow they go together. Why do they go together? There's a story, I think that there's a story that came out of the 1904 St. Louis World's Fair that both hamburgers and hot dogs were invented there. And that's not true. And that was actually explained well before I wrote my book. One of the other books that was written was written by a historian from Chicago, Pamela

Vaccaro, who tells us about hot dogs. Hot dogs, in fact, weren't invented necessarily in America. They came over from a German immigrant whose name I can't remember right now. But for the longest time, they were considered the American dish. you know, America's baseball, apple pie, and hot dogs. And I think that had to do with the whole sense of how easy it was to cook hot dogs, so you can cook them very fast, serve them fast, so they make a great ballpark type food. And by the way, this whole sense of fast food, the way we recognize it today, you know, I mentioned White Castle, and obviously we think of McDonald's and Wendy's and Burger King and all the rest of them. But well before that, after the

Civil War, there was a popularity that just sprung up of people going out to horse races, to eventually baseball games, to doing these activities outdoors. And they kind of sprung up this food vendor industry. And it's that industry where we got the hamburgers and hot dogs and all that kind of fun stuff. I just think that it's probably that the hot dogs were before the hamburgers. They came over well before the hamburger was invented. So they were a staple that people were used to seeing. So how many stories are there that people are very firm about that know the hamburger started here? How many different origins are there? I say that there's four and a half. And the reason why I put a half in there is because two stories overlap.

There's a story about the Erie County Fair in Hamburg, New York, a story about Seymour, Wisconsin, a story about Athens, Texas, which came by way of the St. Louis World's Fair, and a story about a lunch wagon in New Haven, Connecticut. And those stories are all, there are people who are very firm about each of those. Oh, sure. Yeah, they're very firm. They have the support of the local newspapers, or at least they had the support of the local newspapers. Each of the stories came out for different reasons. The New Haven story came out because they wanted to tear down the original lunch wagon and build a medical complex. And so a bunch of fans wrote several petitions and got it put on the New Haven, what do you call those, historical registers, even got the Library of Congress to indicate that it was the origin of the hamburger. And the one in Athens, Texas, came out of research from a columnist at the Dallas newspaper in the early 70s,

really who was spurred on by the owner of the Dallas Cowboys, of all things. The stories out of Hamburg, New York, and Seymour, Wisconsin, they actually were the first stories that were recorded. They were recorded in the 20s and 30s. They kind of fell out of favor after World War II. Nobody talked about them anymore, maybe because they were small market areas. But these other ones had national newspapers that really promoted them. Even the New York Times got involved. How did they get involved?

They told the story about the New Haven luncheonette, Louise Lunch, that's what it was called. And in there, they spoke not only about New Haven, but they also spoke about the St. Louis story. They brought in Hamburger University for McDonald's. It's really pretty fascinating. That's where I did a lot of the research, trying to track down the origin of these stories to see where they came from. Even the St. Louis story, which, like I said, has been discredited pretty much now. It's just fascinating why, when you go back in the newspapers, primarily after World War II, up until about 10 years ago, the de facto story was that the hamburger was invented in 1904 at the St. Louis World's Fair. Lastly, you mentioned the relationship between hamburgers and hot dogs.

What about the relationship between hamburgers and French fries? Because have they always gone together? When did they start going together? Any story there? Yeah, that's funny you ask that, because in the Athens, Texas story, supposedly the person who invented the hamburger from Athens, Texas, also invented the French fries, all at the St. Louis World's Fair in 1904. So that was a bit far-fetched.

Did they always go together? Not necessarily. I think that came about over time. Again, my research didn't go into where the french fries came from, but if I look at the original plates or the original meals that came with the hamburgers, hamburgers were sold by themselves. It wasn't until when you got into the fast food business or era that you started seeing French fries being sold with hamburgers. If you look at McDonald's original menu, and when I say their original menu, it's the one that predates McDonald's as we know it. It's before Ray Kroc. The original menu was very large and included French fries and all these other things.

The thing that really brought McDonald's into the forefront was they reduced their menu to essentially hamburgers, french fries, and a shake. And that's, I think, when you got that kind of juxtaposition between hamburgers and french fries. Yeah, that makes sense. You need to sell something to go along with it because you can make more money if you sell something, and that goes with it. So sell that. That's right. So from your research, you're convinced that the hamburger started at the Erie County Fair in Hamburg, New York. Others will contend that it started in New Haven. Others will contend it started in St. Louis. Others think it's Wisconsin. And we'll see where it all goes.

Chris Caroso has been my guest. He is a writer and author of the book Hamburger Dreams, How Classic Crime-Solving Techniques Helped Crack the Case of America's Greatest Culinary Mystery. And you will find a link to his book in the show notes. Thanks, Chris. Thank you very much. Since I host a podcast, it's pretty common for me to be asked to recommend a podcast. Thanks, Chris. Thank you very much. course, a lot of podcasts are conversations with guests, but Jordan does it better than most. Recently, he had a fascinating conversation with a British woman who was recruited and radicalized by ISIS and went to prison for three years. She now works to raise awareness

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check out Disney Countdown wherever you get your podcasts. Just about everything you do involves some risk, and there are some things you can do to lessen the risk. For example, you buy a newer car because there's less risk that something will go wrong compared to an older car. Or you pay a little more to buy a name-brand product because you perceive that there's less risk that it will break than if you bought the same thing from some no-name company. You're constantly weighing risks and deciding if it's worth it to pay more. Alison Schrager is an award-winning journalist and economist who's about to help you and me understand how this works in everyday life and why it is so important.

Allison is the author of a book called An Economist Walks Into a Brothel. Hi, Allison. Hi, thanks for having me. So let's start with the title of the book, An Economist Walks Into a Brothel. What is that telling us about risk? Well, it teaches us, I think, one of the most central lessons of finance. And this lesson of finance that sounds so simple, and you think you understand it, but it's actually deceptively difficult, and actually the principle in which all financial asset pricing is based on,

which is that you pay to reduce risk. You know, it sounds so obvious, yet somehow we often forget it. And, you know, I initially went to the brothel, uh, because they invited me to study negotiate their negotiation training program because they, uh, all the women have to negotiate every transaction. Um, so they train them in negotiation skills. So that's initially why I went, but when I was there, I was shocked at how much they could charge. Like, you know, three, four times what you would pay for a sex worker in your local illegal market. And it turns out that's one big risk premium. Like sex worker customers pay to reduce the risk of seeing a sex worker.

They can go in assured that this is safe. But they pay a significant premium for it. Well we all do that right? We all. Totally. Yeah we do that all the time. We pay more. But we know we're taking less risk.

That things will go wrong. Well we do. But often those prices are more hidden. Another example I talk about. Is you know when you buy. Remember the guy who was dragged off the plane? Yeah. Because he was bumped? Right.

So we don't realize it, but, you know, when you buy the discounted airfare in the fine print, there is the, we have an option to bump you if the flight is oversold. And the lower your fare class, the higher you're going to be on that bump list, right? So what you're doing is whenever you buy an airline ticket, you're also selling an option on giving up your seat. And the less you pay, the more likely that option is to be in the money. So you're actually taking on this risk. I mean, it's a small risk. Usually the flight will go and you'll be on it. But that discount is you selling a more valuable option. Well, that's the whole concept of insurance, right? Totally.

I mean, insurance, what it does is it's the price of downside risk, eliminating it. And you get a price on that and you pay to reduce it. And an option is an insurance contract. So it's the exact same thing. Talk about the paparazzi. So I spent some time, and it was really fun, following around the paparazzi in New York. Because if you think about it, they have a very hard risk problem. Their income is incredibly variable. One day they might happen upon some star canoodling with someone they

shouldn't and they could become wealthy for life. But most days they don't see anything at all. So they face two main sources of risk, which is what we all face. One is idiosyncratic risk, which is the risk in stock markets that an individual stock will rise or fall, like if you buy Facebook. And the paparazzi face that issue too, which is a single paparazzo is wandering the streets of New York or Los Angeles on any given day, and they might just randomly happen upon someone, or they might be waiting for this one celebrity, and they might go out a different door, or they might be standing at a wrong angle. So it's all this very random idiosyncratic risk. And the way you manage risk in markets is through diversification, which is

you buy an index fund or mutual funds, and you can totally eliminate idiosyncratic risk when you do this. And it turns out the paparazzi do the same thing. And what they do is they form these alliances of other paparazzi, and they share tips, or they might share royalties, depending on the arrangement. And these little alliances even get formal names, and they might last for years. And what it does is it averages out their risk because one paparazzo's luck gets spread across everyone's luck. But the problem is that because you get such a big premium for getting an exclusive shot, that these alliances are inherently very unstable. So they're always on the verge of falling apart and tend to fall apart fairly

regularly. But that's not even the biggest risk they face. Right now they're facing something we call systematic risk, which in markets is the risk the whole market will collapse like it did in 2008. And there's huge cycles in the market for celebrity photos. In the Britney Spears, Lindsay Lohan heyday, which they call the gold rush era, they would get maybe $15,000 for what we call just like a shot, which is a picture of a celebrity just doing something normal. Now they'll get maybe $5 for that because the market's just imploded. And it's impossible to diversify away that risk. They have to be a lot more creative, work a lot harder, or a lot of them are just leaving the industry. Is that because everybody has a phone with a camera now,

so getting those pictures is easy? You would think so, but it turns out no, because you still, you can't just, like you or I couldn't just take a picture and sell it online. You know, you need a relationship with the agency. There actually is a fair amount of skill. You need the right camera, the right lens. You need to know just what to look for,

where to stand, where to hide. So it's less that and more that, you know, the move to online, people buy, spending less money on glossy magazines. And to some extent, the fact that celebrities are Instagramming and, you know, usually a good way you could hedge that systematic risk is like certain classes of pictures are pretty invariant to the market. A picture of a new celebrity baby, you know, is always going to pay off no matter what's happening to the market. But you know, you have like Beyonce posting pictures of her twins on Instagram. I mean, she just blew the income of some paparazzo somewhere. So what is this all teaching us other than it's kind of interesting to

view it through this lens, but what's the point here? The point is that we can manage risk and make smart risk decisions. We don't have to just sort of be passive in our lives when it comes to risk, and we should feel more comfortable taking it on. And often we don't have a choice when it comes to retirement. We're all stuck with this risk decision. Aren't there, though, a lot of things in life that you can't manage the risk? The risk is the risk. We just don't know, and there's no way to mitigate that. It's risky. Some risks are easier to manage than others. Some risks are easier to measure than

others. Risk is technically, as I define it, just a measurement of uncertainty. So we never know what's going to happen, but we can take a guess of what we think is going to happen, which is the range of things and how probable they are. But some problems are better for measurement than others. In my book, I talk about the movie industry, which is such an impossible, whether or not a movie is going to do well is really hard to predict. It's impossible to measure. And there's this long, very boring history of insurance companies or, you know, various hedge funds coming go anywhere. Most of the outcomes are in the loss category. But then there's this really long tail, which is somewhere between just barely breaking even and just a complete blockbuster or unicorn.

And it's really hard to know where in that tail you're going to be. So what you find is both with movies and with venture capital is they just invest in a lot of them and just hope that unicorn pays off for all the clunkers. And that's a strategy that works. But you think it could be better. Like you watch that bad movie and think about all the great ones with like a great script that, you know, all those struggling talented people in Hollywood who never get their due. So, I mean, it works, but maybe it could work better if we could measure risk better. Well, it does seem, I mean, that always fascinates me how TV shows as well, and movies in particular, of when they get panned, it's so universally panned.

Well, how come they couldn't have had shown this to some people before they released it and said, you know, and this isn't going to work? Well, in some degree to reduce their risk as well. That's they tend to follow trends and hop on trends for way too long. And, you know, that's the other, you know, because there's all this uncertainty because this tale is so unpredictable. But the hope is that this might change. Like I said, there's a long history, as long as Hollywood's been Hollywood, there's been people coming saying, I can predict the future of movies when they can't. And even when people say, oh, it's all going to be Marvel movies, you know, everyone I spoke to in the industry was like, we see so many trends come and go, they eventually play out. But this time

might actually be different just because of streaming. The data is so much better now and that you can see there's very fine demographic categories of whether or not people finish movies. And therefore you have much better data to see how people respond to movies and what they like, that maybe it will be different in the future. What's the price of risk-free? What could be wrong with risk-free? If there's no risk, then everybody wins, yes? Well, it's expensive. That is this trade-off. So the risk-free asset is really, as I said, the foundation of all financial decisions. But things go wrong with a risk-free asset. One, if people think something's risk-free and it's not, or they have the wrong risk-free asset for them. So, like, for example, you know, if you want to have the same amount of money you have today that you have in four months, you know, a savings bond or a treasury bill is your risk-free asset.

You know that's not going to lose money. But if you're saving for 20 years, that's not a great risk-free asset because you have inflation risk. But how we define risk-free can be in any market. Even the decision about whether or not to go out to a party, that's a risky decision. You could get hit by a car, it could be great, or it could just be boring. As opposed to you could argue a night in with Netflix is the risk-free option because you pretty much know what kind of evening that's going to be and probably fairly enjoyable because TV has gotten better. But on the other hand, if you stay in every night, your life will never go forward. So that's why the risk-free is sort of the foundation of all decisions but also leads us astray if we choose the wrong risk-free asset

or something's not as risk-free as we thought. But it does seem that we're not very good at understanding risk, especially if the consequence of taking the risk and losing comes much later, like smoking or something like that. Often it comes down to how it's framed. For instance, like a lot of people don't smoke now because there's been a really effective public health campaign educating people of the risks involved. So, you know, smoking rates have really gone down. I think one reason why we tend to underestimate the risks of driving is, you know, it's something we do every day. So we don't really think of it as risky because, you know, it going wrong is a tail event as opposed to a plane crash. You know, you fly less frequently, but the images of plane crashes are super salient.

So it really depends on how risk is presented to us. But that also makes us really vulnerable, especially as we're moving into the age of big data where risks can be presented to us all number of ways. And that's why we really need to take the time to understand it better because that gives us more power and more control. Is being able to understand and mitigate risk what makes a good poker player a good poker player? Yeah. I mean, I spent time talking to Phil Helmuth, who is one of the best poker players of all time. He says the key to playing poker to win is to be really patient. He only pays 12% of his hands, which is way lower than the average, which is between 30% and 50%.

One problem with poker is there's this behavioral bias called loss aversion, where it's just people really hate to lose. It feels worse to them than the joy of winning. So if they're down, they will take bigger risks to avoid a loss. And you can imagine in poker, this is a real problem because you tend to play more aggressively when you're losing. And if you're going to be successful like Phil Hummeth, you can't fall into that trap. So he's spent years and there's evidence that, you know, anyone who takes risk regularly tends to get better at it of making sure that he doesn't fall into this trap and plays consistently whether he's up or down. And he has all these little tricks. Some is just pure practice and awareness. Others is making sure he goes into

every poker tournament without too much of his own money at stake. He gets investors to stake him or he cuts side deals with the other poker players. So he locks in some downside protection and all of this allows him to stay very rational and overcome all the biases that we all have. Did you just say a moment ago that the more risks you take, the better you get at it? Yes. There's a lot of, I said, because we have all these biases. That is true. Said there's the loss aversion. There's our inability to really understand probabilities, depending on how they're presented. But there is evidence that people who take risks regularly, like traders on Wall Street, or I think there's a really interesting paper by an economist named

John List at University of Chicago with people who trade sports cards, that people who take risks regularly tend to be much smarter at it. What about the strategy that you often hear of hedging your bet? Is that a good risk mitigator? It's a great risk mitigator. I define two risk mitigators. One is insurance and the other is hedging. And hedging is just taking less risk. So if you had a portfolio of stocks, investing a little bit in bonds is a hedge and you give up some upside, but you get rid of downside. And that's a great way to reduce risk. Of course, you know, you do get less upside and where that balance is between risk and reward has to really depend on you. And it's not always obvious. And so knowing what you know, and having looked at this from so many different angles,

what's the lesson here? When the dust all settles, I mean, do you now approach risk differently? I mean, it's always been an evolving thing for me I've been studying it so many years I don't think writing the book changed it much for me it definitely made me more open to other people's ideas and understanding different industries but you know as I said it's like the more risk people take the more you understand risk the better you take it I mean in some ways it's a strange thing to spend so many years writing a book, which is inherently a very risky activity with no real hedge or downside protection. So, I mean, I guess I'm living it. Who do you think, who do you admire, who can you point at that's a good risk taker because they know how to play the game and usually come out ahead?

Well, in the book, I talk about Kat Cole, who is a famous executive. She started as a Hooters waitress, a 19-year-old Hooters waitress, and worked her way up from being a Hooters waitress to running Cinnabon at 30. And what makes her a great risk taker isn't the fancy stuff. It's not the hedging. It's not the insurance. It's not a complex option strategy with some sort of triple-levered fund on top of it. It's not the hedging. It's not the insurance. It's not a complex option strategy with some sort of triple levered fund on top of it. She's just really clear on why she's taking a risk. And you need to really take a risk with a goal in mind that's something you actually want. And it sounds so obvious, but it's honestly where I think 90% of risks go astray.

It does seem in business anyway, when you hear about the big success stories, that it isn't so much a strategic calculated risk as the stories are about somebody who just took a chance, took a wild chance, or took enough chances until something stuck. It wasn't so strategic as it was gutsy. Yeah. Although even with business people, when you hear big success stories, they always talk about this crazy risk someone took and it worked out. But I think the better stories, the business stories we should look more closely at are

when people took risks in a smart way. I also talked to Arnold Donald, who's the CEO of Carnival, and he's a very risk averse person. You know, he takes some risks, but he hedges a lot. I mean, he really, but you know, that works for him. You know, he'll go big and bold, but then he hedges. And you know, it's not as flashy and as interesting as these normal stories of risk takers, because we normally think of risk as this binary thing, either you're risk averse or you're a risk taker. But this huge middle ground of taking a risk and then hedging it gets a lot less attention, but I think it's a lot more important and a lot more useful. What's your all-time favorite risk story? Somebody that took a risk,

knew what they were doing, and hit it out of the park. I think one of my favorite stories was H.R. McMaster, President Trump's last national security advisor. And he told me this story about how it really made his careers when he was a colonel in the army in the first Iraq war. And he had his orders in the Battle of 73 Eastings, this famous battle to a famous battle, to attack Saddam's Republican guards. And he was only supposed to go so far. But the battle was going really well, so he defied his orders and went another three kilometers, which doesn't sound like a big deal to me, but in the military, this is a huge deal. You really have to follow your orders to the level.

He really risked lives doing this, but he knew it was the right thing to do because he went with his instincts. And he still stands by this decision today because he says if we hadn't done it, the Republican Guard could have reformed and come after us. So I think I love that story because it highlights what I think people misunderstand about risk and risk models. Risk models allow flack for being imperfect, but they said they just are guidance and you have to know when to abandon them and when to go for more yeah well you know every story of success it probably involves some risk and and when when success happens it's wow isn't that fabulous had they failed they people would say oh well see i i knew that wasn't going to work yeah exactly and often the difference between those two is luck. But if you hedge and you insure, then you definitely increase your

odds of success. Well, it's clear that risk is such an important part of so much of our lives. Everything we do, it seems, involves some kind of risk to a greater or lesser degree. And it's important to understand how it works. And I think you've done a great job explaining it. Alison Schrager has been my guest. The book is called An Economist Walks Into a Brothel, and you'll find a link to her book at Amazon in the show notes. Thank you, Alison. Thank you. This was fun. There's probably nothing more annoying than eating with or near someone who slurps their food. And yet people do it, and in some cultures it's considered quite acceptable to slurp your food. But the big question is why?

Is there something so special, such a great reward from slurping, that it's worth alienating everyone in the room? And the answer turns out to be yes. Slurping makes food taste better. Mechanically, slurping helps the flavor and smell of the food get to where it's supposed to be, according to Sean Adibi of the University of Texas Health School of Dentistry. Slurping agitates the food in your mouth and allows the food to spread out homogeneously

over the tongue, touching all the taste buds. As it does so, it increases the secretion of the salivary glands. And when people do it long enough, it just becomes a delicious little habit, and they often don't even notice they're doing it. And that is something you should know. If you are on Twitter, so are we. We're at SomethingYSK. Check us out. I'm Micah Ruthers. Thanks for listening today to Something You Should Know. Hey, hey, are you ready for some real talk and some fantastic laughs? Join me, Megan Rinks. And me, Melissa D. Montz, for Don't Blame Me, But Am I Wrong? We're serving up for hilarious shows every week designed to entertain

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