Saturday, January 07, 2017

Book Review: The Undoing Project

Michael Lewis is one of our finest non-fiction writers, and any book of his is well worth reading. His subjects are drawn from areas one might not suspect of being of general interest - markets and sports. He has the ability to find the telling human detail and combine that with deep insight into general phenomena. Three of his books have been made into successful movies: Moneyball, The Blind Side, and The Big Short. Not bad for books ostensibly about, respectively, baseball statistics, the importance of offensive left tackles in football, and the great crash of 2007.

Lewis's latest book, The Undoing Project: A Friendship That Changed Our Minds, was inspired, he says, by a review of Moneyball by Richard Thaler and Cass Sunstein, two University of Chicago colleagues of President Obama who led the introduction into economics and law of the ideas originating from two Israeli psychologists, Daniel Kahneman and Amos Tversky.

He begins with a story about basketball and the kinds of biases that inevitably creep into the crucial decisions about hiring talent.

The mere fact that a player physically resembled some currently successful player could be misleading. A decade ago a six-foot-two-inch, light-skinned, mixed-race guy who had gone unnoticed by major colleges in high school and so played for some obscure tiny college, and whose main talent was long-range shooting, would have had no obvious appeal. The type didn’t exist in the NBA— at least not as a raging success. Then Stephen Curry came along and set the NBA on fire, led the Golden State Warriors to an NBA championship, and was everyone’s most valuable player. Suddenly— just like that— all these sharp-shooting mixed-race guards were turning up for NBA job interviews and claiming that their game was a lot like Stephen Curry’s; and they were more likely to get drafted because of the resemblance.

Lewis, Michael. The Undoing Project: A Friendship That Changed Our Minds (pp. 41-42). W. W. Norton & Company. Kindle Edition.

After a few more example he moves on to his main characters, Kahneman and Tversky. They were both military veterans, like nearly all Israeli men, and psychology professors, but otherwise their lives diverged. Kahneman had narrowly survived the holocaust as a child in Nazi occupied France, while Tversky, was a native born Israeli, or Sabra. Kahneman, or Danny (as Lewis always calls him) was shy, diffident and uncomfortable in social situations. Tversky was the life of every party, a paratrooper who had flown on many a plane before he was on one that actually landed.

They did have one more commonality: they were both brilliant and perceived as such. Once they began collaborating they became inseparable, spending many hours each day locked in an office talking, laughing, and yelling. Their central interest was the ways that human reasoning went awry, especially the reasoning of purported experts. What they discovered turned out to have revolutionary import, not so much for sports as for economics, law, medicine and almost every area of human decision making.

The Israeli military had relied on tests and interviews to determine the roles of draftees in the military. Danny's studies showed that these were all but useless as predictors of performance. His new tests were based on measured correlations with performance and helped turned the Israeli military into the world's most formidable fighting force, pound for pound. Interviews were deprecated as introducing more bias than genuine information.

Perhaps the central finding of Kahneman and Tversky is that human reasoning is not usually based on rational computation, but on shortcuts called heuristics. These heuristics often give computationally cheap answers to complex problems, but ones that, especially in the modern world, are often wrong. Two fields profoundly affected are economics and medicine. Most of economics is based on the notion of efficient markets. Efficient markets might still work if the kinds of errors humans routinely made were random, but, as K&T showed, they are not - they are systematic biases. Recognition of this fact led to understanding of some types of market failures and the new field of behavioral economics.

Systematic biases in medicine are even more directly catastrophic. Medical errors are one of the largest causes of death in advanced economies. Studies originating in the K&T work have shown that many of these are preventable by application of a few data based principles. One of the principle foci of Obamacare was the notion of collecting medical data and analyzing in order to determine and propagate best practices. Medical practitioners despised this, partly because it meant that they had to spend time entering data into electronic records but also because it threatened their exalted status as unanswerable and unquestioned authorities. The Republican Congress demonized the process as "death panels." One can only imagine what will happen to this idea with President Know Nothing in charge.

Despite it's enormous intellectual impact, this collaboration eventually came apart, due mostly, I think, to those intractable human emotions, jealousy and envy.

The book is a fascinating read at both the human and intellectual levels, with many glimpses into aspects of Israeli and academic culture as well as a central problem in human decision making. T&K were often frustrated by an Israeli public that consistently voted for policies certain to lead to more war. Americans today can only gaze in despairing wonder at the folly of our fellow Americans' choices in 2016.