by Michael Lewis, Vanity Fair
We’re obviously all at the mercy of forces we only dimly perceive and events over which we have no control, but it’s still unsettling to discover that there are people out there—human beings of whose existence you are totally oblivious—who have effectively toyed with your life. I had that feeling soon after I published Moneyball. The book was ostensibly about a cash-strapped major-league baseball team, the Oakland A’s, whose general manager, Billy Beane, had realized that baseball players were sometimes misunderstood by baseball professionals, and found new and better ways to value them. The book attracted the attention of a pair of Chicago scholars, an economist named Richard Thaler and a law professor named Cass Sunstein (now a senior official in the Obama White House). “Why do professional baseball executives, many of whom have spent their lives in the game, make so many colossal mistakes?” they asked in their review in The New Republic. “They are paid well, and they are specialists. They have every incentive to evaluate talent correctly. So why do they blunder?” My book clearly lacked a satisfying answer to that question. It pointed out that when baseball experts evaluated baseball players their judgment could be clouded by their prejudices and preconceptions—but why? I’d stumbled upon a mystery, the book reviewers noted, and I’d failed not merely to solve it but also to see that others already had done so. (...)
Kahneman and Tversky were psychologists, without a single minor-league plate appearance between them, but they had found that people, including experts, unwittingly use all sorts of irrelevant criteria in decision-making. I’d never heard of them, though I soon realized that Tversky’s son had been a student in a seminar I’d taught in the late 1990s at the University of California, Berkeley, and while I was busy writing my book about baseball, Kahneman had apparently been busy receiving the Nobel Prize in Economics. And he wasn’t even an economist. (Tversky had died in 1996, making him ineligible to share the prize, which is not awarded posthumously.) I also soon understood how embarrassed I should be by what I had not known.
Between 1971 and 1984, Kahneman and Tversky had published a series of quirky papers exploring the ways human judgment may be distorted when we are making decisions in conditions of uncertainty. When we are trying to guess which 18-year-old baseball prospect would become a big-league all-star, for example. To a reader who is neither psychologist nor economist (i.e., me), these papers are not easy going, though I am told that compared with other academic papers in their field they are high literature. Still, they are not so much written as constructed, block by block. The moment the psychologists uncover some new kink in the human mind, they bestow a strange and forbidding name on it (“the availability heuristic”). In their most cited paper, cryptically titled “Prospect Theory,” they convinced a lot of people that human beings are best understood as being risk-averse when making a decision that offers hope of a gain but risk-seeking when making a decision that will lead to a certain loss. In a stroke they provided a framework to understand all sorts of human behavior that economists, athletic coaches, and other “experts” have trouble explaining: why people who play the lottery also buy insurance; why people are less likely to sell their houses and their stock portfolios in falling markets; why, most sensationally, professional golfers become better putters when they’re trying to save par (avoid losing a stroke) than when they’re trying to make a birdie (and gain a stroke).
Read more:
Patrick Ecclesine
We’re obviously all at the mercy of forces we only dimly perceive and events over which we have no control, but it’s still unsettling to discover that there are people out there—human beings of whose existence you are totally oblivious—who have effectively toyed with your life. I had that feeling soon after I published Moneyball. The book was ostensibly about a cash-strapped major-league baseball team, the Oakland A’s, whose general manager, Billy Beane, had realized that baseball players were sometimes misunderstood by baseball professionals, and found new and better ways to value them. The book attracted the attention of a pair of Chicago scholars, an economist named Richard Thaler and a law professor named Cass Sunstein (now a senior official in the Obama White House). “Why do professional baseball executives, many of whom have spent their lives in the game, make so many colossal mistakes?” they asked in their review in The New Republic. “They are paid well, and they are specialists. They have every incentive to evaluate talent correctly. So why do they blunder?” My book clearly lacked a satisfying answer to that question. It pointed out that when baseball experts evaluated baseball players their judgment could be clouded by their prejudices and preconceptions—but why? I’d stumbled upon a mystery, the book reviewers noted, and I’d failed not merely to solve it but also to see that others already had done so. (...)Kahneman and Tversky were psychologists, without a single minor-league plate appearance between them, but they had found that people, including experts, unwittingly use all sorts of irrelevant criteria in decision-making. I’d never heard of them, though I soon realized that Tversky’s son had been a student in a seminar I’d taught in the late 1990s at the University of California, Berkeley, and while I was busy writing my book about baseball, Kahneman had apparently been busy receiving the Nobel Prize in Economics. And he wasn’t even an economist. (Tversky had died in 1996, making him ineligible to share the prize, which is not awarded posthumously.) I also soon understood how embarrassed I should be by what I had not known.
Between 1971 and 1984, Kahneman and Tversky had published a series of quirky papers exploring the ways human judgment may be distorted when we are making decisions in conditions of uncertainty. When we are trying to guess which 18-year-old baseball prospect would become a big-league all-star, for example. To a reader who is neither psychologist nor economist (i.e., me), these papers are not easy going, though I am told that compared with other academic papers in their field they are high literature. Still, they are not so much written as constructed, block by block. The moment the psychologists uncover some new kink in the human mind, they bestow a strange and forbidding name on it (“the availability heuristic”). In their most cited paper, cryptically titled “Prospect Theory,” they convinced a lot of people that human beings are best understood as being risk-averse when making a decision that offers hope of a gain but risk-seeking when making a decision that will lead to a certain loss. In a stroke they provided a framework to understand all sorts of human behavior that economists, athletic coaches, and other “experts” have trouble explaining: why people who play the lottery also buy insurance; why people are less likely to sell their houses and their stock portfolios in falling markets; why, most sensationally, professional golfers become better putters when they’re trying to save par (avoid losing a stroke) than when they’re trying to make a birdie (and gain a stroke).
Read more:
Patrick Ecclesine
