“Brilliant. . . . Lewis has given us a spectacular account of two great men who faced up to uncertainty and the limits of human reason.” William Easterly, Wall Street Journal
Forty years ago, Israeli psychologists Daniel Kahneman and Amos Tversky wrote a series of breathtakingly original papers that invented the field of behavioral economics. One of the greatest partnerships in the history of science, Kahneman and Tversky’s extraordinary friendship incited a revolution in Big Data studies, advanced evidence-based medicine, led to a new approach to government regulation, and made much of Michael Lewis’s own work possible. In The Undoing Project, Lewis shows how their Nobel Prize–winning theory of the mind altered our perception of reality.
Michael Lewis, is the best-selling author of Liar’s Poker, Moneyball, The Blind Side, and Flash Boys. He lives in Berkeley, California, with his wife and three children.
Date of Birth:October 15, 1960
Place of Birth:New Orleans, LA
Education:Princeton University, B.A. in Art History, 1982; London School of Economics, 1985
Introduction: The Problem that Never Goes Away 15
1 Man Boobs 21
2 The Outsider 52
3 The Insider 85
4 Errors 116
5 The Collision 142
6 The Mind's Rules 165
7 The Rules of Prediction 196
8 Going Viral 212
9 Birth of the Warrior Psychologist 238
10 The Isolation Effect 268
11 The Rules of Undoing 291
12 This Cloud of Possibility 313
Coda: Bora-Bora 339
A Note on Sources 353
“Lewis has written one hell of a love story.”Jennifer Senior - New York Times
“Intellectually mesmerizing and inspiring.”Harper's Bazaar
“Brilliant… Lewis has given us a spectacular account of two great men who faced up to uncertainty and the limits of human reason.”William Easterly - Wall Street Journal
“Compelling… The Undoing Project is a history of the birth of behavioral economics, but it’s also Lewis’s testament to the power of collaboration.”Peter Coy - Bloomberg Businessweek
“Mind-blowing… [The Undoing Project] will raise doubts about how you personally perceive reality.”Don Oldenburg - USA Today
“A fantastic read.”Jesse Singal - New York Magazine
“Tantalizing and tender… Lewis is an irresistible storyteller and a master at illuminating complicated and fascinating subjects.”starred review Booklist
“Fascinating stories about intriguing people.”Cass Sunstein and Richard Thaler - The New Yorker
“Lewis [is a] master of the character-driven narrative.”Charlie Gofen - The National Book Review
“Michael Lewis has a genius for finding stories about people who view reality from an unusual angle and telling these stories in a compulsively readable way.”Geoffrey Kabat - Forbes
“Hugely important.”Samantha Power - New York Times Book Review
“A must-read.”Greg McKenna - Business Insider
“Whatever subject strikes his fancy, Lewis renders it clear and understandable while showcasing its human drama. In the realm of exalted journalistic wizardry, he is surely kin to Tracy Kidder andDan Cryer - Boston Globe
Expert fatigue. That's what we have to blame for our lives being hijacked by algorithms. The faultless expert is a fraudster, a con artist playing on a rigged field. For years, degree-larded pundits, know-nothing know-it-alls, and other consultants of certainty have traded on biases and rules of thumb to our great grief. One antidote has come in the rise of data analysis, number crunching that bypasses opinion, to help uncover market inefficiencies and better evaluate ballplayers and businesses alike. This approach to making sense of the world has had its great benefits; read Michael Lewis's book Moneyball for a taste of its added value. Read it, too, for modeling data's limitations. The North Carolina legislature used a data-based, "Moneyball" approach "in writing laws to make it more difficult for African-Americans to vote." Comedian John Oliver "congratulated the legislators for having 'Moneyballed racism.' "
Lewis's The Undoing Project turns back from data to the problem that number crunching leaves unsolved -- to the human mind when it is faced with uncertainty, processing evidence, forming judgments and misjudgments, drawing conclusions, arriving at decisions, good and bad. Many voices and theories will be mooted, but the book is also a biography of two Israeli academics: Amos Tversky and Daniel Kahneman, economist and psychologist, Mutt and Jeff. It is a book about the mind and the marketplace (there is a long algebraic footnote on page 259, to emphasize that science is being spoken here, some of the time), but equally engagingly, it is a book about an unlikely and extraordinarily fruitful friendship. And, yes, as Lewis has demonstrated since Liar's Poker, he writes like a smoothie feels -- silken: "Danny was a refugee in the way that, say, Vladimir Nabokov was a refugee. A refugee who kept his distance. A refugee with airs."
There has not always been a great deal of hobnobbing between economists and psychologists, but inroads have been made in identifying biases that lead to market inefficiencies. The only way to counter the unconscious power these forces have over our decisions, writes Lewis, is to understand where they come from. So begins a grand tour through the wacky world of bias, the warping of judgment, and why we should reach to secure our wallets when we hear the word "expert."
Lewis offers up a rogues' gallery of prejudices and evaluative short-circuits. What makes them so insidious is that you don't realize they are at work. There is confirmation bias: "The human mind was just bad at seeing things it did not expect to see, and a bit too eager to see what it expected to see." There's subjective probability, or the odds you assign when you are more or less guessing, and the endowment effect, when people "attached some strange extra value to whatever they happened to own, simply because they owned it." We use hindsight bias everyday, revising our narratives to fit whatever just happened. "Historians imposed false order upon random events, too, probably without even realizing what they are doing . . . 'Creeping determinism.' " The story is not all about our foibles and follies. Systematic bias may be wrecking much of our good work and intentions, but Tversky and Kahneman also had prospect theory to offer, which poses that people make decisions based on potential value and loss, and that these decisions are often sabotaged by heuristics -- shortcuts that help us navigate life but can also send us astray. For example, good judgment can be undermined by the use of representative prototypes, the influence of similar events that spring to mind, or the tendency to put too much credence on the first piece of information that comes our way. This is real-life, descriptive decision making at work, as opposed to the optimal, prescriptive, normative models. It was the glimmering start of behavioral economics, which identifies the emotional-impact factors in decision making. Those with a jones for economic theory will be in heaven; those without will find themselves unexpectedly ensnared.
There's more here, however, than the lessons: the story of Tversky and Kahneman's friendship is tear making in its humor and pathos. They were schooled all over the place, but the most endearing is the rubber-bands-and-tape Hebrew University in the years after Israel's nationhood. Kahneman recalled that his "professors were less an assemblage of specialists than a collection of characters, most of the European refugees . . . They had lived big lives." Kahneman is a genius, a connoisseur of human error, a devotee of doubt, comfortable in the messy of life and weird human ways. Tversky (who died in 1996) was a genius, a war hero, enthusiastic and optimistic, a burning star. One dished out criticism at a blink, the other was almost undone by any suggestion his work had flaws. They loved one another; they wrote their bevy of peerless papers sitting together at one typewriter.
" 'We just found each other more interesting than anyone else,' said Danny. 'Even if we had just spent the entire day working together.' " They'd become a single mind, creating ideas about why people did what they did, and cooking up odd experiments to test them." There was also a snake in the grass. Tversky, likely because he was so publicly brilliant, was lavished with honors. Kahneman rarely appeared on the dance card. Envy broke up their relationship -- "I am very much in his shadow in a way that is not representative of our interaction . . . There is envy! It's just disturbing. I hate the feeling of envy . . . I am maybe saying too much now," said Kahneman, saying too much -- though it was put to rest in the last months of Tversky's life, before he died of cancer at age fifty-nine. Kahneman then went on to garner a Nobel Prize in economics, despite being the psychologist of the two. He wound up teaching at Princeton and published the much-respected Thinking, Fast and Slow.
Tversky died as they were writing their last coauthored piece. "In their final conversation, Danny told Amos that he dreaded the thought of writing something under Amos's name of which Amos might disapprove. 'I said, "I don't trust what I am going to do," ' Danny said. 'And he said, "You will just have to trust the model of me that is in your mind," ' a good, doubt-free behavioral economist to the end.
Peter Lewis is the director of the American Geographical Society in New York City. A selection of his work can be found at writesformoney.com.
Reviewer: Peter LewisThe Barnes & Noble Review
At its peak, the book combines intellectual rigor with complex portraiture…During its final pages, I was blinking back tears, hardly your typical reaction to a book about a pair of academic psychologists. The reason is simple. Mr. Lewis has written one hell of a love story, and a tragic one at that. The book is particularly good at capturing the agony of the one who loves the more.The New York Times - Jennifer Senior
Lewis is the ideal teller of [this] story. Dating to his 1989 debut, Liar's Poker…he has displayed a rare combination for a writer. He immerses himself in big ideasabout finance, technology, sports and, ultimately, the human conditionand then explains them to readers with sophistication and clarity. But he is also a vastly better raconteur than most other writers playing the explication game. You laugh when you read his books. You see his protagonists in three dimensionsdeeply likable, but also flawed, just like most of your friends and family.The New York Times Book Review - David Leonhardt
Lewis (Flash Boys) deftly explores a timeless and fascinating subject—human decision-making—through the intellectually intimate collaboration of two influential psychologists, Daniel Kahneman and Amos Tversky. The pair met in 1969 and worked together until a few years before Tversky's death in 1996. As Lewis explains, they discovered that people do not make decisions as economists long believed—as "intuitive statisticians"—but rather in a chaotic fashion shot through with confirmation bias, fears of regret, sensitivity to change, the desire to avoid loss, and a propensity to mentally undo distressing outcomes. Through interviews with Tversky and Kahneman's friends, family, colleagues, rivals, and critics, as well as the psychologists' own recollections, letters, and published papers, Lewis seamlessly pieces together an informative and engagingly paced story. He begins with a step-by-step explanation of why both human minds and statistical models so often fail to produce the best choice. He then interweaves the psychologists' early lives, military service in defense of the young state of Israel, and professorial careers in both Israel and the United States with their questions, theories, and startling conclusions about how people actually make decisions. Lewis' latest effort is a joy to read, packed with "aha!" moments, telling and at times hilarious details, and elegant explanations of complex experiments and theories. (Dec. 6)
“Lewis is the ideal teller of [Tversky and Kahneman’s] story… You see his protagonists in three dimensionsdeeply likable, but also flawed, just like most of your friends and family.”David Leonhardt - New York Times Book Review
The bestselling author combines biography with recent intellectual history in a saga about the influential Israeli psychologist team of Daniel Kahneman and Amos Tversky. Tversky died in 1996, before Lewis (Flash Boys: A Wall Street Revolt, 2014, etc.) even recognized his name. But Kahneman is still living, and Lewis spent lots of time with him studying his theories of how the human mind works while making decisions ranging from product purchasing decisions to choosing a marriage partner. Lewis' fascination with Tversky and Kahneman began with a reference in a review of his bestseller Moneyball, a book that explained how the Oakland Athletics organization overhauled its decision-making processes in order to sign the best athletes possible on a limited budget. The review praised Lewis for explaining how most baseball executives had been choosing players using irrational criteria. The review also emphasized that the author seemed unaware that the techniques were grounded in the decades-old research of Tversky and Kahneman. That research demonstrated the irrationalities of the human brain and recommended how such irrational thinking could be minimized. By the time Lewis approached Kahneman, the potential book subject had won the Nobel Memorial Prize in Economic Sciences, despite identifying as a psychologist. However, he had not yet completed his bestselling book Thinking, Fast and Slow (2011), so Lewis would be chronicling an individual nearly unknown outside academia. The result is largely successful. As always, Lewis' writing style is engaging and mostly irresistible. The opening chapter is slightly disorienting because it never mentions the book's subjects; instead, the author chronicles the journey of a professional basketball executive hoping to construct a systematic method of choosing players. However, after Lewis eases into the main subjects, he ably captures their outsized personalities, explaining how they came to collaborate and how that collaboration slowly frayed. Kahneman and Tversky approached their personal lives and their research in extremely divergent manners. At times, Lewis' details about the unlikely coupling overwhelm the larger narrative, but that is a minor complaint in another solid book from this gifted author.