Speaker 1: Missed the first, got the second. That's a Stanley Cup–clinching record ninth goal.
Katy Milkman: On June 13th, 2023, the Vegas Golden Knights won the Stanley Cup finals against the Florida Panthers.
Speaker 1: It has happened in Vegas. The cup's going to stay in Vegas, and for the first time, the Golden Knights are Stanley Cup champions.
Katy Milkman: It was a remarkable achievement for a team that was only six years old. In this episode, we'll take a look at how the Golden Knights are managed, focusing on the way they built a powerhouse hockey team from scratch. Along the way, you'll learn about a way of structuring decisions that can affect the kinds of choices you make at the grocery store, in the boardroom, and on the ice.
I’m Dr. Katy Milkman, and this is Choiceology, an original podcast from Charles Schwab. It's a show about the psychology and economics behind our decisions. We bring you true stories of high-stakes choices, and then we examine how these stories connect to the latest research in behavioral science. We do it all to help you make better judgements and avoid costly mistakes.
Gary Lawless: The NHL was looking to expand. They wanted to grow their TV footprint, and they also wanted to collect the expansion fee, which was $500 million at that time.
Katy Milkman: This is Gary.
Gary Lawless: Hi, my name is Gary Lawless. I am a writer and broadcaster with the Vegas Golden Knights.
Katy Milkman: The Vegas Golden Knights is a relatively new team in the National Hockey League. They were founded in 2017 as an NHL expansion team. A consortium led by Bill Foley approached the NHL about setting up a franchise in Las Vegas. Foley had lofty ambitions.
Gary Lawless: Bill Foley, he made his fortune in insurance. He famously said, early on, that the team would make the playoffs in three years and would win the Stanley Cup in six years. Now, everybody laughed at him. Nobody in the hockey world thought the Golden Knights were going to be a playoff team.
Katy Milkman: New teams generally struggle to find their footing in their early years. In the NHL, new teams fill their roster with players from existing teams in what is called an expansion draft.
Gary Lawless: They had the ability to take a player from every team in the league. Every team could only lose one player and they could protect a certain number of defensemen or a certain number of forwards.
Katy Milkman: Existing teams would protect their star players, so the terms for new teams are not exactly great.
Gary Lawless: The expansion franchises were unsuccessful early on for the most part. It was like you were the new kid on the block, so you had to pay your dues.
Katy Milkman: The new team would have to make the best of a tricky situation.
Gary Lawless: So the Golden Knights were awarded a franchise that was going to start playing in the fall of 2017. They ramped up their staff early in 2016, and the first person hired to head up the hockey operations side was George McPhee. He was hired as the general manager. He wanted to get the best human talent available at every position.
Katy Milkman: Building the team from scratch presented many challenges, but for George McPhee, it also presented an exciting opportunity. He realized he'd be able to consider and acquire the key ingredients for a good team all at once, rather than constructing his dream roster bit-by-bit over multiple seasons.
Gary Lawless: There's so many things that, you don't want too much of the same thing, and you also want players that fit in your culture. They scoured the planet for a year looking for players and watching players. It was a very organized approach. They had an analysis of every team, of every player in that organization. How much money they made, what their statistics were, how had they played prior to joining that organization. They knew more about every hockey player in the world than any other organization in the world when they got to the expansion draft.
Katy Milkman: They looked everywhere, not only for hockey players, but also for the dozens of staff members needed to support a professional sports team.
Gary Lawless: They looked at strength and fitness, the medical staff and how they were going to support players, the nutrition. They hired people from Cirque du Soleil rather than from the hockey world. They hired the global staff to look at players all over the world.
Katy Milkman: Normally, hockey teams build their roster slowly over several years, trading players with rival teams and developing new talent in the minor leagues. Managers have to juggle overlapping contracts, players with free agency coming and going, and a multitude of other factors.
Gary Lawless: It's like any business. You look at your roster of people, and when there's a hole in it or a lack of production in a certain area, you determine you need to solve that, and you go into the marketplace and try and find a player that will fill that hole for you and make your entire team more successful. You can't just go to a store and buy players. It takes two to make a trade, so it's an ongoing process.
Katy Milkman: The Golden Knights had a rare opportunity to build a team, a whole organization from the ground up. They would be hiring a complete set of players and support staff instead of hiring one person at a time.
Gary Lawless: It only happens in expansion that there's a new franchise that gets to pick new name, a new jersey, build a new stadium, create new traditions, and pick new players and put a new team on the ice.
Katy Milkman: After more than a year of research, analysis, and careful deliberation, the Golden Knights management was ready. They knew which players they wanted on their team.
Gary Lawless: On June 21st, 2017, the National Hockey League released the protected lists that showed the world what players were going to be available that the Golden Knights could pick from. And then that night they had a live televised event from T-Mobile Arena in Las Vegas where George McPhee, Kelly McCrimmon and team owner Bill Foley, announced the players that they were selecting. They came to the stage, and they said, "From the Los Angeles Kings …"
Speaker 4: From the Los Angeles Kings, the Vegas Golden Knights select Brayden McNabb, defenseman.
Gary Lawless: Golden Knights Select Brayden McNabb, defenseman.
Speaker 4: And he's here.
Gary Lawless: The Golden Knights select from the Pittsburgh Penguins …
Speaker 4: The Vegas Golden Knights select goalkeeper Mark-Andre Fleury.
Gary Lawless: Goalie, Mark-Andre Fleury, and on and on until they had selected one player from every team.
Speaker 4: 30 players now belong to the Vegas Golden Knights.
Gary Lawless: So, everybody, the whole world knew all at once who was going to be on the Vegas roster.
Katy Milkman: They made a lot of interesting decisions as they tried to forecast players' potential.
Gary Lawless: Internally, the Golden Knights, they looked for players that hadn't reached their peak because they hadn't been given opportunity, and if they were given opportunity, they would fulfill their potential. So no one really knew the formula that the Golden Knights were using. And as a result, they looked at the roster with doubt.
Speaker 4: From the Blue Jackets, the Vegas Golden Knights Select William Karlsson.
Speaker 5: Karlsson is a penalty-killing specialist.
Gary Lawless: They selected William Karlsson from the Columbus Blue Jackets. In his last year at Columbus, he had six goals. People looked at the players they selected and looked at their statistics, and they said they didn't draft a very good team.
Katy Milkman: But despite the unremarkable statistics of most of the players, the team as a whole worked really well together. That cohesive and well-functioning team allowed individual talents to shine. Remember William Karlsson, the player drafted from the Columbus Blue Jackets who had only scored six goals the previous season?
Gary Lawless: He got to Vegas, they gave him the offensive opportunity, he scored 43 goals the next year. A lot of the players that the Golden Knights selected hadn't been given as much opportunity with their own organization as they were about to be given with the Golden Knights. Midway through the season in December, the team won 10 games in a row, and all of a sudden people were like, "OK, how long is this going to last?" And then the team just kept continuing to win.
Katy Milkman: All of the potential that other teams had missed was being revealed in Las Vegas. One trio of players stood out.
Gary Lawless: Karlsson, Riley Smith, and Jonathan Marchessault all came from teams that didn't want to use them, and they all had had OK seasons in other places. Now they were put together, and the combination of the three of them became offensively dangerous and very difficult to score against. They put them together, and they became one of the best lines in the NHL.
Katy Milkman: The three players, and by extension, the team, garnered a new nickname.
Gary Lawless: The "misfit line," they became the poster boys. They were the golden misfits. The team said about themselves, "We're a bunch of misfits." They were banded together by the fact that nobody else wanted them, and they used that to fuel the emotion that is required to play in the NHL at a high level. And they did it night after night after night.
Katy Milkman: Behind the scenes, it was like something out of the TV show Ted Lasso—if Ted Lasso had been about hockey.
Gary Lawless: Every time they played another team, one of the players in the dressing room could stand up and say, "Those guys didn't want me." And the rest of the players would say, "OK, let's go win it tonight for him," and they would all band together and try and make the team that had left their teammate exposed, make them regret that decision. And they did it an awful lot.
Katy Milkman: In fact, the remarkable team that was pulled together in a single season with one set of hires had great success. The Golden Knights made it to the Stanley Cup playoffs in their first year. It was an incredible accomplishment. They were playing against the best of the best and winning.
Gary Lawless: In the first round of the playoffs, the Golden Knights played the Kings. The Los Angeles Kings had won Stanley Cups. They won in 2012 and 2014 and were still considered one of the best teams in the NHL. The Kings' star defenseman, Drew Doughty, earlier in the season said, "The Golden Knights are a cute story, but we all know who the better team is. And when we get to the playoffs, we play them, we'll show them who the better team is."
Katy Milkman: The Golden Knights surprised everyone and won the first three games against the Kings. They only needed one more to win the series, and it turns out they would only need to score one more goal to do it.
Speaker 1: Doughty gets it ahead, Kopitar drops it off, round. Pearson shoots, saved by Fleury, the rebound cleared by Vegas, another great chance for the Kopitar line. Now back comes Karlsson. Karlsson, Smith across, scores! Brayden McNabb buries it, and Vegas leads one-nothing.
Gary Lawless: In the final game, Brayden McNabb, who the Golden Knights selected from the Kings in the expansion draft, scored the goal. It was a one-nothing victory. It was that kind of moment where everyone kind of said, "Huh, the Golden Knights did a great job in the expansion draft." The Golden Knights were not a cute story anymore; they were a contender.
Katy Milkman: And they just kept going.
Gary Lawless: After they beat the Kings, the next round was the San Jose Sharks. They beat them. That got them to advance to the Western Conference final against the Winnipeg Jets. The Jets were a powerhouse, they had finished ahead in the standings, so Vegas had to go on the road, played the first two games in Winnipeg. Winnipeg is this ferocious white-out crowd where everybody wears white, and they are very loud. It's a small arena. They're right on top of you. Everyone kind of thought, "Oh, this is all over." The Golden Knights story is … it struck midnight. While the Golden Knights won Games 2, 3, 4, and 5 and dispatched the Jets in five games. The Winnipeg Jets were out, and the Vegas Golden Knights were going to the Stanley Cup.
Speaker 1: … line eight to the front of the goal, a bouncy puck at Scheifele’s feet, and it's over. And the Vegas Golden Knights will play for the Stanley Cup.
Katy Milkman: This is where the Golden Knights would finally lose, just one step away from winning the championship.
Gary Lawless: They lost to the Capitals, who were a powerhouse led by Alexander Ovechkin.
Katy Milkman: Still, this upstart team, barely a year old, had made it all the way to the Stanley Cup Finals.
Gary Lawless: Normally, a hockey season is considered a failure if you don't win the championship. This was one of those years where the team that finished second might just be remembered more than the team that actually won.
Katy Milkman: You'll recall that owner Bill Foley had predicted that the Golden Knights would make the playoffs within three years.
Gary Lawless: He was ridiculed for his statement around the sporting world, and now he's been proven to be a bit of a prophet.
Katy Milkman: Foley had also predicted that the team would win the Stanley Cup within six years. Amazingly, the team pulled it off in 2023, six years after their founding.
Speaker 6: It's just nasty. And wow. How about Vegas delivering on the promise from Bill Foley? They get a cup within six years …
Speaker 4: Ladies and gentlemen, the Stanley Cup …
Gary Lawless: It's not opinion. It is fact that they are the second-most-successful franchise in the NHL in terms of wins and losses since they joined the league, and they have now won a championship. They've done it all.
Katy Milkman: Gary Lawless works for the Las Vegas NHL hockey team as the official Vegas Golden Knights Insider, where he writes columns, features, and stories on the team and files video recaps from games and events. You can find links to Gary's work and the Golden Knights website in the show notes and at schwab.com/podcast.
The Golden Knights remarkable rise was undoubtedly due to a number of factors: clever scouting, good management, and excellent support staff—and luck. But their story also suggests that, here at least, there were benefits from hiring a whole team of players at once rather than hiring players one at a time or in smaller sets over many seasons, the way most established teams operate. What we know from decades of research on decision-making is that when we make choices in sets rather than singletons, it can change our perspective.
The Vegas Golden Knights management likely brought a different outlook to hiring decisions at the start of the franchise because they were bringing in a whole team rather than filling a single gap in their lineup. They were focused on how their choices would complement each other and eager for a diversity of skills and talent to build a robust team. Rather than blowing their budget on a couple of all-star players, they chose lesser-known players with untapped potential and varied skills.
You may remember that, on previous episodes of Choiceology, we've talked about people's tendency to engage in what behavioral economists call mental accounting. This term describes our tendency to treat resources like money and time as if they are labeled and belong in separate mental accounts or buckets. We act like our travel money is separate from our rainy-day money, for instance. Even though these kinds of monetary resources are technically fungible or interchangeable.
Mental accounting affects the way we make hiring decisions, too. When an established NHL team trades a player, they may be overly focused on that player's specific talents or that player's cost to the team's bottom line. Another way of putting this is to say that hiring a single player may cause us to narrowly bracket our decisions in separate mental accounts without focusing more broadly on the team as a whole. But in the case of the Golden Knights, player selection was done in aggregate, and when we make hiring decisions in aggregate, we tend to think about them in one mental account, bracketing all of the decisions together and considering their interactive effects.
That approach here may have been what helped the team prioritize how players would work well together and the need for diverse skill sets that might not have been as apparent if players had been individually selected over multiple seasons. My next guest is here to explain the impact of making selection decisions using wider versus narrower choice brackets.
Erika Kirgios is an assistant professor in the behavioral science department at the University of Chicago Booth School of Business. And, full disclosure, my former PhD student at Wharton. Hi, Erika, thank you so much for joining me today.
Erika Kirgios: Thank you for having me, Katy.
Katy Milkman: I'm really excited to talk about choice bracketing, and I was hoping we could start by just defining it. What exactly is choice bracketing?
Erika Kirgios: Choice bracketing is the idea that when we make decisions, very often in life we have the option between thinking pretty locally about an individual choice or thinking more globally. So, for example, I might think locally about whether to buy coffee in the morning, and that means today I wake up, I realize that I'm in a rush to get to work. Should I stop at Starbucks, or should I make myself a coffee at home? And there are all sorts of reasons why I might decide that stopping at Starbucks makes more sense, but if I look back over the course of a whole week or a whole month or a whole year, will I think differently about those individual choices to go get coffee and buy it from Starbucks rather than make it at home? Maybe so, and that kind of local-versus-global thinking can apply in all sorts of decision-making contexts because we very often make repeated choices and think about each of those choices individually more often than we're thinking about the aggregation of those choices.
Katy Milkman: Right, so in the context of the Starbucks example you gave, I guess if I were thinking globally about it, I might think, "Wow, that's a really big expense if I do that every day," but if I'm thinking locally, I might think, "It's going to save me time, and it'll taste better than what I can make at home." Is that kind of the idea?
Erika Kirgios: Exactly. That's exactly right.
Katy Milkman: So would you characterize choice bracketing as a bias? And if you would, I'm curious what kinds of mistakes you think it leads people to make?
Erika Kirgios: Yeah, so this is actually a great question that I think people disagree on, even researchers disagree on, because there are cases where you might want to make choices more locally and cases where you might want to make them more globally. But I think in general, on average across most decisions, making choices globally, so bracketing broadly, generally leads to better outcomes. I made a kind of silly example of coffee, although that really can add up financially if you think about it.
But there are more consequential decisions where this applies, too. So for example, if you think every day individually about the decision to go to the gym, it's very obvious to you that going to the gym can bring you some discomfort. Maybe it's annoying. Maybe you feel like you don't have a lot of time. Maybe the idea of getting on the treadmill is just exhausting to you, and you're like, "OK, losing one gym visit, not that big of a deal." But again, if you think about it over the course of a month, a year, 10 years, you might think very differently about the cost versus benefits of going to the gym.
Or if you think about a stock portfolio—you think that AI is a really good investment right now, and you look at a set of stocks, and you decide to invest in one, and then you make another decision another day and then another decision another day. And if you don't think about your portfolio globally, you might find that it's not diversified enough, and you're not well insulated against risks in a particular market. So, in general, I would say that on average, yes, it is a bias. It is a mistake not to take a global, bird's eye view when you're making choices.
Katy Milkman: Those are really great examples. Thank you for walking through those. Could you describe some of your favorite research that demonstrates people engage in choice bracketing?
Erika Kirgios: Oh, yeah. So one study that's kind of canonical in this space and that everybody thinks of when they think about choice bracketing is the decision between snacks. So some researchers went to their classes and told their students, "We'll bring you a free snack every week for the next three weeks," which is an amazing treat. And they either had their students decide on week one what snack they wanted for the next three weeks, or they decided every week what snack they wanted that week. So either you're thinking globally—you're deciding what snacks you want in a three-week period—or you're thinking locally, what snack do I want this week? And then the next week, what snack do I want this week? And so on and so forth.
Katy Milkman: And just to clarify in both cases, right, if it's three weeks, say the first week of March, the second week of March, and the third week of March, I can make three different choices. It's just that they're varying the timing of when the choice is happening, either all made at the beginning of March or made weekly, am I thinking about that, right?
Erika Kirgios: Yeah, that's exactly right. So, for example, I might give you a list. I say, "I, as your professor, am doing this wonderfully kind thing for you. You can decide whether you want a bag of potato chips, a Twix bar, a Snickers bar, an apple, or a bag of pretzels," and you either say which of those five items you want on week one, two, and three all at the same time on March 1st, or you make a decision on March 1st between those five items, another on March 8th, and another on March 15th." And what they find is that when people make all three decisions at the same time, so they're thinking globally about the decision, they choose a lot more product diversity. So you're more likely to choose an apple and a Twix bar and a bag of chips. But if you make those choices separated over time, a choice on March 1st, a choice on March 8th, a choice on March 15th, then you're more likely to choose a Twix bar every single time.
Katy Milkman: Erika, what do you think drives this effect? Why is it that we think differently about choices when we make a series of them that will take effect in the future versus when we make them one at a time?
Erika Kirgios: When you're making many choices at once, you can make trade-offs between choices that you can't make when you're just making one choice at a time. So, for example, I keep thinking of food now, I must be hungry. If you're deciding what to eat on a given day, you're trying to maximize lots of things, like how tasty it is, how healthy it is, what mix of nutrients you're getting, whether you have enough carbs in the meal and proteins in the meal. But if you're making your meal plan for the whole week, you might be able to balance some of those trade-offs better and say, "OK, this is a day where I'll have more carbs. I'm going on a run the next day. Then the next day I really want to prioritize getting more proteins in my meal." And you can make those trade-offs in a wiser way when you're thinking globally than locally.
And instead, when you're thinking locally, what you might do is say, "What's the best possible choice? Even though it requires me to sacrifice all sorts of things." OK, I'll make that choice and then I'll make it over and over. But actually, probably it would be better if you thought about the trade-offs and made a balanced set of decisions across a period of time.
Katy Milkman: That's a really great example to illustrate where this comes from. I want to turn to talking about a related bias that we've studied together, Erika, which is the isolated choice effect. And I was wondering if you could first just define what that is and explain how it relates to choice bracketing.
Erika Kirgios: Oh, absolutely. So the isolated choice effect is the idea that when people make personnel decisions, so like a hiring decision or a promotion decision in isolation, so they're just responsible for making one hiring choice, they're much less likely to prioritize and think about and choose diversity than when they're making a collection of choices.
So, in one study run with Edward Chang and Anish Rai, who are two of our incredible collaborators, we have people come to take our experiment and we tell them, "You're a hiring manager at this major tech company, and you're trying to put together a new innovation team," and we either tell them "Your responsibility is just to select one person for this team," let's say the head software engineer or the product manager or the UX designer, or "You're going to be responsible for staffing up the whole team."
So, for each role, we showed people three potential candidates, and what we find is that people are systematically more likely to include women in the team, and they include more women when they make five decisions all at once than when we aggregate together five decisions made by different people.
Katy Milkman: I really love that study, and I think it's such a fascinating demonstration of this phenomenon. I want to pivot away a little bit from this specific work and ask you how you think our listeners should, reflecting on what you've described, maybe make different choices in their own lives. What would you recommend people do differently now that they know about the power of choice bracketing?
Erika Kirgios: Yeah, so I think when you're thinking about your own life and your own individual decisions, I think there's a lot of value in thinking about when global properties of your decisions might matter. So is this a decision that could become a habit? And in that case, I should think globally about what kinds of habits I do and don't want to build. Or is this a decision that contributes meaningfully to a bigger team or a bigger endeavor, a bigger effort? In that case, I want to think about it within the context of that bigger global effort or team, right? I think about this when I'm hiring people or when I'm choosing, for example, PhD students. I think about not just that individual, but what's the team? What's the cohort going to look like? How can I build a team or a cohort that's going to be best able to support each other?
One thing that I try to stress and that I think would be valuable for listeners to stress, too, is when my team and I are all going off and making individual choices that will end up affecting each other, it is worth having at least a meeting or a person responsible for looking at what the totality of those decisions look like. So I say I would really like to hire this PhD student, and my three colleagues make three other choices. It's a really good idea to have somebody who oversees the whole process and tells us, "Hey, wait, look at what this team looks like. Let's think about that."
Katy Milkman: So, in short, to put this in investment speak, is it fair to say life is a portfolio? And that means we need to think about our investments not just as individual choices, but about how they'll affect that portfolio whenever we're making a decision about anything?
Erika Kirgios: Absolutely.
Katy Milkman: I really like that as a place to end. This has been such a wonderful conversation. Erika, thank you so much for taking the time to talk with me today.
Erika Kirgios: Of course. Thank you.
Katy Milkman: Erika Kirgios is an assistant professor in the behavioral science department at the University of Chicago Booth School of Business, and I'm proud to say my former Wharton PhD student. You can find links to our work with Edward Chang and Anish Rai on the isolated choice effect in the show notes and at schwab.com/podcast.
The decisions you make when assembling an investment portfolio depend on a variety of factors: your goals, risk tolerance, time horizon, and underlying philosophy. So how do professional money managers make those decisions? On a recent episode of the Financial Decoder podcast titled "How Can You Think Like a Fund Manager?" host Mark Riepe talks to two fund managers— one who manages active funds; the other, passive. To find out how their approaches vary, check it out at schwab.com/financialdecoder or wherever you get your podcasts.
When we make decisions about all the activities we'll do on weekends over the course of a month versus making weekend plans one weekend at a time, our schedule may turn out quite differently. Likewise, when we populate our playlist in advance, rather than picking one artist to listen to at a time, it can really affect what we hear. Grouping decisions leads us to think about the diversity of the set of weekend activities, music, or even hires we're picking and how they'll fit together.
Making choices one at a time, in isolation, leads us to focus on whether a given activity, meal, or hire is the one we're most narrowly excited about. Choosing one at a time, you might always visit the same park, listen to the same musician, or hire the same type of employee. But if you group your decisions, you may visit a wider range of venues, enjoy a more varied set of musicians, and hire more diverse people. Understanding choice bracketing is simply understanding that sometimes we can't see the forest for the trees, but you can choose to focus on sets of decisions to force yourself to see the forest.
When you hire a whole group of employees or players at once, you'll focus more on their diversity and complementarities, and the same will be true for meal decisions, weekend activities, musical choices, and stock selections. Broader bracketing tends to be better, so look for opportunities to expand your perspective and think about the portfolio you're creating whenever possible.
You've been listening to Choiceology, an original podcast from Charles Schwab. If you've enjoyed the show, we'd be really grateful if you'd leave us a review on Apple Podcasts, a rating on Spotify, or feedback wherever you listen. You can also follow us for free in your favorite podcasting app. If you want more of the kinds of insights we bring you on Choiceology about how to improve your decisions, you can order my book, How to Change, or sign up for my monthly newsletter, Milkman Delivers, at katymilkman.com/newsletter.
Next time, a story about the deceptive simplicity of a cup of coffee and why we often struggle to explain things we think we understand. I'm Dr. Katy Milkman. Talk to you soon.
Speaker 8: For important disclosures, see the show notes or visit schwab.com/podcast.
