Michael Lewis discusses his new book, ‘The Undoing Project: The Friendship That Changed Our Minds‘
The Huffington Post calls Michael Lewis “one of the premier chroniclers of our age.” It’s hard to argue with that description. His best-selling books, including Moneyball, The Blind Side and The Big Short, have all been turned into blockbuster films. In his latest book, Lewis tells the story of two cognitive psychologists whose work more than a half-century ago on bias and critical thinking has left an indelible mark on a variety of disciplines. The Undoing Project: The Friendship That Changed Our Minds explores the fascinating relationship between Amos Tversky and Daniel Kahneman that helped produce seminal thinking about how the mind works – and how it can reach more accurate analyses. Lewis recently appeared on the [email protected] show on Wharton Business Radio on SiriusXM channel 111 to discuss the book and explain how his latest project is something of a prequel to the data analytics strategies found in Moneyball.
The Undoing Project: A Friendship That Changed Our Minds by Michael Lewis
Michael Lewis: Moneyball led to this book in an odd way. Moneyball is, in my mind, mainly about the way markets misvalue people. It happens to be baseball players, but it’s a story about this team, the Oakland A’s, that has fewer resources than the competition. They have to find different ways, better ways to find baseball players. They discover in the process that the market for baseball players is not efficient. There are good baseball players who aren’t appreciated, and there are not so good baseball players who are over-valued.
When they were doing their business at Oakland, they were aware that baseball scouts made systematic kinds of mistakes, and they were in the business of exploiting those mistakes. When Moneyball came out, there was a review by an economist named Richard Thaler and a lawyer named Cass Sunstein. They said, “Michael Lewis told a nice story, but he doesn’t seem to understand his own book.” They said that these biases that are in the mind of the scouts are cognitive biases, and they were described and uncovered by two Israeli psychologists named Amos Tversky and Danny Kahneman. I had never heard of these guys. I thought, “My God, how’d I miss that?” I never asked the next question, why? What’s going on in the mind? It hadn’t even occurred to me that anybody ever had.
It took eight years to do this book. I took a few years after that review to finally have the wits to call Danny Kahneman and say, “I want to just talk to you about this.” It turned out that he lived up the hill from me in Berkeley in the summers. So, I went up the hill and we had coffee.
All of the sudden we’re talking long walks in the hills, and I start to hear this story of his relationship with Tversky, and I realize that Moneyball and the whole phenomenon was one offshoot of their work, but that it crept into behavioral economics. It created behavioral economics. You found it had an influence in medicine and law and so on. I just thought the relationship, the characters were unbelievable, the relationship was this passionate kind of love affair without sex, but otherwise they were really kind of crazy about each other. And there was a great deal of drama in the relationship. It was an incredibly important scientific collaboration. Eventually, I got around to realizing that this is a book on its own. It’s a kind of prequel to Moneyball.
“The intuitive judgment of experts had this inherent fallibility in it.”
[email protected]: Their research and thinking happened 50 years ago, correct?
Michael Lewis: That’s about right. They collide in 1969 at the Hebrew University in Jerusalem, and the relationship starts to bust up in 1979, 1980, 1981, by 1981-1982. By then, they’re at Stanford and Princeton. Amos Tversky ends up at Stanford. Danny Kahneman eventually ends up at Princeton.
So yes, it’s work that was done a long time ago. It was all worked out in kind of arcane, boring psychology journals. The work itself was not boring, but the context was so tedious. It wasn’t really aimed at anybody outside of psychology except for one article they wrote for a general interest audience in Science magazine in 1974. That reached people in all kinds of different disciplines. What happened was they infected people’s minds, and this took a while. Sometimes ideas take a while to take hold.
They explained to a lot of people why expert judgment was flawed, why you had to be careful about it. The intuitive judgment of experts had this inherent fallibility in it. Then along comes the information revolution, the computer revolution, and it becomes cheaper and cheaper to generate both data and algorithms to make these analyses and decisions that were previously done by people. That’s what the Oakland A’s would do, right? They’re trying to find new and better ways to collect and grind baseball performance statistics. Those calculations end up being the basis of their investment decisions, as opposed to asking some scout, “Is he any good?”
[email protected]: Part of that was because the Oakland A’s didn’t have the big money to be able to invest. They had to figure out the best value for every penny in that team. That philosophy is now being used by so many baseball teams, even the ones that have millions of dollars to throw around.
Michael Lewis: There’s no reason to make stupid investments just because you have a lot of money. That’s what the Yankees and the Red Sox and the Chicago Cubs eventually figured out, and they hired kind of disciples of Billy Beane and people who were following the methods of the Oakland A’s front office. As a result, the Oakland A’s are in kind of a bad position again because the rich teams now have not only the money, but they also have the same kind of intellectual property.
[email protected]: You call Daniel Kahneman and Amos Tversky two of the most amazing characters you’ve ever been involved with. Why so?
Michael Lewis: Everything that came out of their mouths and their minds was interesting. I knew that if I just got their words and their behavior down on the page, their characters would infect people’s minds. That people would start to think, what would Amos Tversky say, or what would Danny Kahneman say?
The kind of things people said about them was extraordinary. There’s a psychologist at the University of Michigan named Dick Nisbett who, after he’d spent a lot of time with Amos, designed a one-line intelligence test. The test was: After you’ve met Amos, the longer it takes you to figure out that Amos is smarter than you, the stupider you are. Everybody who knew Amos said, “Yeah, that’s right.” He wasn’t obnoxious about it. It was just he was kind of annoying. He was actually a Spartan warrior in the Israeli Army.