Review: The Undoing Project

Michael Lewis wrote this 2016 book about the “intellectual love story” between Amos Tversky (AT) and Daniel Kahneman (DK), two Israeli psychologists who overturned our ideas about risk, decision making and the way we see the world. And by “our” I don’t just mean humans but also (to a degree) economists.

AT died in 1996, at 59 years old. DK won the economics Nobel in 2002, based (partially) on work that they did together. The story of their intellectual relationship has a lot to do with their different personalities: AT was exact, confident, and smart in a sharp, cutting way. DK wondered, full of doubt, into vagaries that ranged from silly to mind blowing. They got along because they forgave the other in ways that they did not forgive others. DK listened to AT’s criticisms without shying away; AT was willing to suspend his aggressive critical mind while DK “groped” his way thorough a forest of possibilities.

They worked most productively from the late 1960s until the 1980s, but then they had a falling out — somewhat predictably — when DK felt like AT was not giving him his due. Although they were mostly estranged in the years leading to AT’s death, AT spent more of his last days and hours talking with DK than he did with anyone else, as old partners come back together in times of need.

Lewis is a great story-teller, as usual, and I took a lot of notes:

  1. DK’s interest in human complexity dates from the moment at the end of WWII when a Nazi soldier, reminded by DK of his own son, hugged the young Jewish boy instead of shooting him.
  2. DK: By then the question of whether God exists left me cold. But the question of why people believe God exists I found really fascinating. I was not really interested in right and wrong. But I was very interested in indignation.
  3. The Gestalt psychologists and the behaviorists and the psychoanalysts might all be jammed into the same building with a plaque on the front that said Department of Psychology, but they didn’t waste a lot of time listening to one another. Psychology wasn’t like physics, or even economics. It lacked a single persuasive theory to organize itself around…Part of the problem was the wild diversity of the people who wanted to be psychologists—a rattle-bag of characters with motives that ranged from the urge to rationalize their own unhappiness, to a conviction that they had deep insights into human nature but lacked the literary power to write a decent novel, to a need for a market for their math skills after they’d been found inadequate by the physics department, to a simple desire to help people in pain. The other issue was the grandma’s attic quality of the field: Psychology was a place all sorts of unrelated and seemingly unsolvable problems simply got tossed.
  4. On DK: When someone says something, don’t ask yourself if it is true. Ask what it might be true of.” That was his intellectual instinct, his natural first step to the mental hoop: to take whatever someone had just said to him and try not to tear it down but to make sense of it.
  5. The University of Michigan psychologist Dick Nisbett, after he’d met Amos, designed a one-line intelligence test: The sooner you figure out that Amos is smarter than you are, the smarter you are… “He’d sit there quietly. And then he would open his mouth and speak. And in no time he became the light that all the butterflies fly to; and in no time everyone would look up to him wanting to hear what he would say.”
  6. On violations of transitivity (a key assumption in mathematical economics): “Is this behavior irrational?” he wrote. “We tend to doubt it. . . . When faced with complex multidimensional alternatives, such as job offers, gambles or [political] candidates, it is extremely difficult to utilize properly all the available information.” It wasn’t that people actually preferred A to B and B to C and then turned around and preferred C to A. It was that it was sometimes very hard to understand the differences. 
  7. But here’s a good way to think about it: When people picked coffee over tea, and tea over hot chocolate, and then turned around and picked hot chocolate over coffee—they weren’t comparing two drinks in some holistic manner. Hot drinks didn’t exist as points on some mental map at fixed distances from some ideal. They were collections of features. Those features might become more or less noticeable; their prominence in the mind depended on the context in which they were perceived. And the choice created its own context: Different features might assume greater prominence in the mind when the coffee was being compared to tea (caffeine) than when it was being compared to hot chocolate (sugar). And what was true of drinks might also be true of people, and ideas, and emotions.
  8. It is generally assumed that classifications are determined by similarities among the objects,” wrote Amos, before offering up an opposing view: that “the similarity of objects is modified by the manner in which they are classified.”… A banana and an apple seem more similar than they otherwise would because we’ve agreed to call them both fruit. Things are grouped together for a reason, but, once they are grouped, their grouping causes them to seem more like each other than they otherwise would. That is, the mere act of classification reinforces stereotypes. If you want to weaken some stereotype, eliminate the classification.
  9. DK thought of himself as someone who enjoyed, more than most, changing his mind. “I get a sense of movement and discovery whenever I find a flaw in my thinking,” he said. His theory of himself dovetailed neatly with his moodiness. In his darker moods, he became fatalistic—and so wasn’t surprised or disturbed when he did fail. (He’d been proved right!) In his up moments he was so full of enthusiasm that he seemed to forget the possibility of failure, and would run with any new idea that came his way. “He could drive people up the wall with his volatility.”
  10. Reforms always create winners and losers, and the losers will always fight harder than the winners.” How did you get the losers to accept change? The prevailing strategy on the Israeli farms—which wasn’t working very well—was to bully or argue with the people who needed to change. The psychologist Kurt Lewin had suggested persuasively that, rather than selling people on some change, you were better off identifying the reasons for their resistance, and addressing those.
  11. The more complicated and lifelike the situation a person was asked to judge, they suggested, the more insidious the role of availability [an image, example, or scenario]. What people did in many complicated real-life problems—when trying to decide if Egypt might invade Israel, say, or their husband might leave them for another woman—was to construct scenarios. The stories we make up, rooted in our memories, effectively replace probability judgments. “The production of a compelling scenario is likely to constrain future thinking.” 
  12. Historians imposed false order upon random events, too, probably without even realizing what they were doing. Amos had a phrase for this. “Creeping determinism,” he called it—and jotted in his notes one of its many costs: “He who sees the past as surprise-free is bound to have a future full of surprises.”
  13. One of my favorite observations: The secret to doing good research is always to be a little underemployed. You waste years by not being able to waste hours. It is sometimes easier to make the world a better place than to prove you have made the world a better place.
  14. AT found it troubling to think that “crucial decisions are made, today as thousands of years ago, in terms of the intuitive guesses and preferences of a few men in positions of authority.” The failure of decision makers to grapple with the inner workings of their own minds, and their desire to indulge their gut feelings, made it “quite likely that the fate of entire societies may be sealed by a series of avoidable mistakes committed by their leaders.”
  15. DK was stunned: If a 10 percent increase in the chances of full-scale war with Syria wasn’t enough to interest the director-general in Kissinger’s peace process, how much would it take to convince him? That number represented the best estimate of the odds. Apparently the director-general didn’t want to rely on the best estimates. He preferred his own internal probability calculator: his gut. “That was the moment I gave up on decision analysis,” said Danny. “No one ever made a decision because of a number. They need a story.”
  16. If you follow the rule that you take any bet with a positive expected value, you take the bet. But anyone with eyes could see that people, when they made bets, didn’t always act as if they were seeking to maximize their expected value. Gamblers accepted bets with negative expected values; if they didn’t, casinos wouldn’t exist. And people bought insurance, paying premiums that exceeded their expected losses; if they didn’t, insurance companies would have no viable business. Any theory pretending to explain how a rational person should take risks must at least take into account the common human desire to buy insurance, and other cases in which people systematically failed to maximize expected value…. The marginal value of the dollars you give up to buy fire insurance on your house is less than the marginal value of the dollars you lose if your house burns down—which is why even though the insurance is, strictly speaking, a stupid bet, you buy it… You place less value on the $1,000 you stand to win flipping a coin than you do on the $1,000 already in your bank account that you stand to lose—and so you reject the bet.
  17. Expected value theory [EVT] blew up the theories of rational choice and expected utility [EUT].. which the entire economics profession, seemed to take as a fair description of how ordinary people faced with risky alternatives actually went about making choices. That leap of faith had at least one obvious implication for the sort of advice economists gave to political leaders: It tilted everything in the direction of giving people the freedom to choose and leaving markets alone. After all, if people could be counted on to be basically rational, markets could, too.
  18. Of course, EUT also predicted that people would take a sure gain over a bet that offered an expected value of an even bigger gain. They were “risk averse.” But what was this thing that everyone had been calling “risk aversion?” It amounted to a fee that people paid, willingly, to avoid regret: a regret premium.
  19. The gambles that economists studied were choices between gains. In the domain of gains, people were indeed risk averse. They took the sure thing over the gamble. Danny and Amos thought that if the theorists had spent less time with money and more time with politics and war, or even marriage, they might have come to different conclusions about human nature. In politics and war, as in fraught human relationships, the choice faced by the decision maker was often between two unpleasant options.
  20. The reference point was a state of mind. Even in straight gambles you could shift a person’s reference point and make a loss seem like a gain, and vice versa. In so doing, you could manipulate the choices people made, simply by the way they were described. This one they called “framing.” Simply by changing the description of a situation, and making a gain seem like a loss, you could cause people to completely flip their attitude toward risk, and turn them from risk avoiding to risk seeking.
  21. Economists assumed that you could simply measure what people wanted from what they chose. But what if what you want changes with the context in which the options are offered to you? “It was a funny point to make because the point within psychology would have been banal,” the psychologist Richard Nisbett later said. “Of course we are affected by how the decision is presented!
  22. The imagination obeyed rules: the rules of undoing. One rule was that the more items there were to undo in order to create some alternative reality, the less likely the mind was to undo them. People seemed less likely to undo someone being killed by a massive earthquake than they were to undo a person’s being killed by a bolt of lightning, because undoing the earthquake required them to undo all the earthquake had done. “The more consequences an event has, the larger the change that is involved in eliminating that event,” Danny wrote to Amos. Another, related, rule was that “an event becomes gradually less changeable as it recedes into the past.” With the passage of time, the consequences of any event accumulated, and left more to undo. And the more there is to undo, the less likely the mind is to even try. This was perhaps one way time heals wounds.
  23. Two cultures: We tried to create a psychology and economics seminar at Yale. We had our first meeting. The psychologists came out completely bruised. We never had a second meeting.” In the early 1990s, Amos’s former student Steven Sloman invited an equal number of economists and psychologists to a conference in France. “And I swear to God I spent three-quarters of my time telling the economists to shut up,” said Sloman. “The problem,” says Harvard social psychologist Amy Cuddy, “is that psychologists think economists are immoral and economists think psychologists are stupid.” In the academic culture war triggered by Danny and Amos’s work, Amos served as a strategic advisor. At least some of his sympathies were with the economists. Amos’s mind had always clashed with most of psychology.
  24. We think we know things we don’t. We think we are safe when we are not. “For Amos it was one of the core lessons,” said Redelmeier. “It’s not that people think they are perfect. No, no: They can make mistakes. It’s that they don’t appreciate the extent to which they are fallible [read The Black Swan or Fooled by Randomness]. ‘I’ve had three or four drinks. I might be 5 percent off my game.’ No! You are actually 30 percent off your game. This is the mismatch that leads to ten thousand fatal accidents in the United States every year.”
  25. DK made a rule about his fantasy life: He never fantasized about something that might happen. He established this private rule for his imagination once he realized that, after he had fantasized about something that might actually happen, he lost his drive to make it happen.</em

Luckily, I did not fantasize about writing this review. I just wrote it. FIVE STARS.

Here are all my reviews.

Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

Leave a Reply

Your email address will not be published. Required fields are marked *