Friday, May 31, 2019

The Undoing Project

Amos Tversky and Daniel Kahneman were both born in Israel and later studied psychology there. Beyond that, they seemed to have little in common. Kahneman lived in France during World War II and had experiences running from Nazis. He tended to be more to himself, while Tversky seemed to know everything and be more social. Once they met, they found they had a great meeting of the minds and were able to achieve more together. They wrote a number of influential papers in their time together. They gradually drifted apart as Tversky received more public recognition. However, he died of cancer, and it was Kahneman that later received the Nobel prize.
Michael Lewis starts The Undoing Project by providing anecdotes of showing the fallacy of human judgement. In sports, picking the right players can have a serious impact on the success of a franchise. However, scouts are prone to use their gut, often missing out on great players. Using data can help avoid some of the human fallacies - but even the data requires some human judgement. The narrative then dives in to the biography of the psychologists.
Both Kahneman and Tversky had a rebellious streak. They didn't fully trust common theories - especially full rationality. People are prone to many biases that allow them to be fooled. When discussing a past event, people often engage in hindsight bias, exaggerating their perceived odds that the event would have occurred. When choosing among multiple items, it is not uncommon for people to prefer A to B, B to C and C to A, seemingly contradicting basic logic. Due to endowment and sunk costs, people are more likely to hold on to something they already have - even though they would never purchase it. The fear of loss is more powerful than the desire for gain. Even if two outcomes are the same, most people would much rather avoid the outcome with loss rather than one with a gain.
The title comes from one of their final works together. What does it take to mentally "undo" something. People experience much more grief if they appear close to gaining something than if they were nowhere near. Missing a winning lottery number by one digit would be traumatic, while missing it by 5 would barely be noticed. However, both cases have the identical outcome of no win. In one, it was just easier to visualize moving over. When undoing events, we often look at the most proximate, easy to visualize causes, even if they are not the most probable.
Knowledge of inbuilt human biases can be used to help improve decision making. However, these same biases can also be used to manipulate people.

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