Book Review – The Undoing Project by Michael Lewis

If you have ever:

• Gambled – not just casino-style, but on a hunch, a business idea, a theory, a project etc.
• Interviewed for staff
• Negotiated anything from some money off at a store to a £multi-billion contract
• Tried to weigh the odds of one event happening versus another
• Are involved in any legal “encounters”
• And many other life situations requiring a decision to be made too numerous to mention …

you need to read this book and then “Thinking Fast and Slow”. If you get through them both (and really internalise what they say!), it will totally change your understanding of how people make decisions. Important wouldn’t you say?

This is the equivalent pop-management book of “Thinking Fast and Slow”, by the Nobel Prize-winning author, Daniel Kahneman – which is definitely not pop-management, but is ground-breaking – or would be if people could i) understand it, ii) break through the dry presentation approach he uses. A review of this book will come later, so back to The Undoing Project.

It is in the typical style of Lewis (of “Moneyball” and “The Big Short” fame), which makes it an easy read. It is really a story of two brilliant outsiders working in the field of psychology and their institution-busting ideas, but starts with a theme from Moneyball to set the context. He introduces an outsider named Daryl Morey who worked up the numbers (on a statistical basis) on how to select would-be star players for the Houston Rockets basketball team – using the model he had built, rather than what most managers used such as “experience”, “the look of the player”, “how the player walked and talked”, “what others said about him”. Morey saw conventional “wisdom” for what it was – bullshit!

He moves on to introduce us to Daniel (Danny) Kahneman and Amos Tversky. The main gist of the story starts with their impact on the Israeli Military. One of the changes they made that persists until today is they stopped senior officers in the Air-force from beating up on pilots when they did badly (“because they always did better afterwards”), and praising them when they did well (because they almost always did worse after the praising). Kahneman and Tversky simply saw things for what they really were – regression towards the mean. The more times a pilot flew the more times he did roughly equally well and equally badly around an average performance! They just had some good days and some bad days!

How often do we see this happen in the business world today? I was working with a large infrastructure management organisation and a senior manager always thought that because he gave his team a “good talking to” when they did badly, they always did better because of his rant! And this person was promoted into an even larger infrastructure management company based on his “results”.

We then get treated with some of the simple experiments they carried out on students and professors they knew in the academic world, and then extended those experiments into the real world – with incredibly bizarre and unexpected results. They blew the lid off the existent wisdom that the human mind was a rational calculating machine. Instead they offered a small number of critical biases and heuristics that played tricks on pretty well EVERYONE’S mind on this planet. So as not to spoil the book, I’ll quote only one of these highly challenging (and when you get it, highly amusing) examples Lewis refers to towards the end of the book. It’s now known as the “Linda Problem”.

Linda is 31 years old, single, outspoken and very bright. She majored (you will have to work with the American view of the world!) in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations.

To what degree does Linda resemble the typical member of each of each of the following classes:

1. Linda is  teacher in elementary school
2. Linda works in a bookstore and takes yoga classes
3. Linda is active in the feminist movement
4. Linda is a psychiatric social worker
5. Linda is a member of the League of Women voters
6. Linda is a bank teller
7. Linda is an insurance salesperson
8. Linda is a bank teller and is active in the feminist movement.

Almost every person who took this test made the same mistake. I’ll leave it with you for now and reveal the mistake when I review Daniel Kahneman’s book.

But for all its examples of what breath-taking discoveries Kahneman and Tversky made about the human mind and decision-making, the story is really one of two human beings who worked and lived very closely together to make a potentially massive and positive impact on our world. It is now our job to go out and make that potential a reality.