Michael Lewis, the author of such best sellers as Flash Boys, The Big Short, Moneyball, The Blind Side, and Liar’s Poker, is a consummate storyteller. In many fields algorithms may trump experts, but so far writing is not one of them. We still rely on skilled writers to tell us stories we need and want to hear. The Undoing Project is one of those stories.
Other than their brilliance and their commitment to the defense of Israel, Kahneman and Tversky had little in common. Kahneman was insecure, moody, “like Woody Allen, without the humor.” Yet he was a brilliant teacher and bounced from one enthusiasm to another, trying anything, readily accepting failure, moving on. Tversky was the life of the party, an intellectual magnet who “had a preternatural gift for doing only precisely what he wanted to do. … He didn’t pretend to be interested in whatever others expected him to be interested in—God help anyone who tried to drag him to a museum or a board meeting.”
The intense collaboration between these two men produced work that changed the way we think about decision making, risk taking, predicting, our own inherently flawed rationality. It gave rise, at least in some circles, to a collective self-doubt—doubt that we could make wise investing decisions, for instance. And to more of a reliance on models that may exploit cognitive biases but don’t themselves succumb to them.
Although Lewis describes some of the most important discoveries of Kahneman and Tversky, his book is at heart a poignant drama. Dare I admit I cried at the end?
For those who expect something other than emotion from me, here are some notes that Tversky took on conversations he had with Kahneman in 1972, “early fodder” for their paper on how people make predictions, usually quite badly.
People predict by making up stories
People predict very little and explain everything
People live under uncertainty whether they like it or not
People believe they can tell the future if they work hard enough
People accept any explanation as long as it fits the facts
The handwriting was on the wall, it was just the ink that was
People often work hard to obtain information they already have
And avoid new knowledge
Man is a deterministic device thrown into a probabilistic Universe
In this match, surprises are expected
Everything that has already happened must have been inevitable
Since I had no commitments on Thanksgiving, I spent the day reading The Undoing Project. It was a true feast. We should give thanks for people like Daniel Kahneman, Amos Tversky, and Michael Lewis.