“No one writes with more narrative panache about money and finance,” said the New York Times about Michael Lewis. In his highly-acclaimed Moneyball, Lewis narrated how a poorly-rated baseball team (Oakland Athletics) used data in novel ways to identify market inefficiencies and thereby developed new approaches to playing strategies and player recruitment. The new knowledge brought Oakland astonishing success, and the information model came to be emulated by other teams and, Lewis argued in his book, could be applied to diverse other fields.
Moneyball spurred Lewis to explore the reasons behind market inefficiencies, especially the way the human mind worked in forming judgements and, inevitably, he was led to the work of Daniel Kahneman and Amos Tversky. The Undoing Project extends the academic thread of Lewis’s earlier book, while bringing to life the riveting story of that remarkable pair of Israeli psychologists.
Kahneman and Tversky were both descended from Eastern European rabbis; but in the Holy Land neither believed in god. Both had “shockingly fertile minds” that urged them to study psychology to unearth simple truths of human behaviour. They knew that they were smarter than most and sensed that they were destined for special things. Their similarities, however, ended there, and it remains a mystery how they formed one of the most influential intellectual partnerships of all time. Lewis dissects their complex relationship in this fascinating book.
Two of the brightest stars of Hebrew University in the 1950s, they were markedly different in comportment. Tversky was a swaggering native while Kahneman, scarred by the Holocaust, was a recent immigrant. Tversky was ebullient and cock-sure, while self-doubt and uncertainty were Kahneman’s hallmark. Everyone wanted (in today’s speak) to ‘friend’ the charming and extroverted Tversky, although his was “the most terrifying mind” they had encountered. Kahneman was a pessimist, withdrawn and painfully sensitive to criticism.
Until the day Kahneman invited Tversky to address the students in his psychology class, they had had little to do with each other. Tversky that day had the unprecedented and unsettling experience of not just having his presentation shredded by Kahneman’s interjections but of having to reorient his very worldview.
The regard that Kahneman and Tversky developed for each other at their first encounter led to their coming together a few months later to produce their first paper, ‘Belief in the Law of Small Numbers’ in 1971. Considered one of the most important theses ever written, it underscored the failure of human intuition in making judgements and reaching decisions. Simply put, they wrote that people mistakenly believed that a small sample taken at random would be representative of a large group – that it would have a similar distribution pattern, something that is manifestly not true.
People’s “intuitive expectations are governed by a consistent misperception of the world”, the paper concluded. Even statisticians, who should have known better, commonly succumbed to subjective interpretation of evidence, in other words to biases.
While their first paper showed how people overlooked statistically correct answers to problems, they next explored the systematic biases or cognitive limitations impairing real-world decision-making. Their research challenged the idea that human beings are rational actors and, exposing the flaws in existing concepts of human behaviour, they proposed more persuasive theories to explain how people make choices. All modern theories of decision-making have been guided by the rules of thumb that they formulated. They termed these “heuristics”.
They argued that when people make judgements they liken whatever they are judging to a representative prototype they bear in their minds. ‘Representativeness’ became the first heuristic. The next, ‘availability’, causes people to believe a familiar scenario to be more probable than it actually is. ‘Anchoring and adjustment’ let people’s ignorance colour their judgement.
Decisions in practically all high-level professional activities, the duo insisted, would be “significantly improved by making experts aware of their own biases, and by development of methods to reduce and counteract the sources of bias in judgement”. Even historians are prone to cognitive biases; to taking whatever facts they have at hand to formulate neat narratives. Lewis describes how Amos once lectured a gathering of historians leaving them “ashen-faced”.
“Eighty percent of doctors don’t think probabilities apply to their patients, just as 95% of married couples don’t believe that the 50% divorce rate applies to them.” Teasing out the frailties of human judgement, Kahneman and Tversky evolved a new approach to economic theory, their collaboration culminating in ‘the prospect theory’ (1979), which became the second most cited paper in all of economics.
Although they continued to publish together until Tversky’s untimely death, their partnership alas unravelled, becoming increasingly fraught in the last years.
While Lewis meticulously maps out the contours of the work Kahneman and Tversky did together, making it comprehensible – even enthralling – to the lay reader, what distinguishes The Undoing Project is the superb portrayal of the extraordinary synergy of two idiosyncratic and disparate geniuses.
“What they were like,” says Lewis, “in every way but sexually, was lovers. They connected with each other more deeply than either had connected with anyone else.” Both were family men, but their wives would admit that their mutual connect was more intense than a marriage. They were both turned on by the other and found each other more interesting than anyone else. “They’d become a single mind.”
Observers recall how Tversky and Kahneman completed each other’s sentences and seemed to think in tandem. Few had an idea of how they worked on their papers, except for noting roars of laughter and whoops of delight that emanated from behind the closed doors of seminar rooms in which the two spent hours together. Their ideas spawned and incubated with such spontaneity that it was impossible to attribute them specifically to either Kahneman or Tversky. In their joint papers they would appear as lead author alternately.
Perhaps the denouement was inevitable. Even they were not immune to the fragilities of the human mind. Tversky was the more brilliant, but without Kahneman’s ideas and intuition his output would have been decidedly less significant. Kahneman, on the other hand, realised that he could do without his partner and was wounded when the popular and out-going Tversky, inadvertently or otherwise, monopolised the limelight and seized the lion’s share of glory for their joint work. The break-up of Kahneman’s marriage and his leaving Israel physically separated the collaborators for the first time and drove a lasting wedge in their relationship.
Ironically, it was while working on ‘the undoing project’ – an exploration of the tendency of people’s minds to spin alternative realities in order to avoid the pain of emotion – that the wedge became unbridgeable. The ideas and sweat behind this project were all Kahneman’s, but Tversky neglected to give him the credit Kahneman expected. Kahneman would later confide that he regarded this as the beginning of the end.
The break had become almost total when Tversky was diagnosed with cancer in 1996 and given, at best, six months to live. Kahneman was the second person he called with the news. In the following months, a shattered Kahneman phoned his friend almost every day. Distraught, disoriented and dishevelled, he delivered the main eulogy at the funeral.
When Tversky, who never craved honours – they came to him unsought – was informed some days before the end that he was on a short-list for the Nobel Prize, he replied, “I assure you the Nobel Prize is not on the list of things I’m going to miss.” Kahneman, who believed that he had long deserved the prize, finally won it in 2002 – for work he had done with Tversky years before.
Govindan Nair is a retired civil servant who lives in Chennai after more than three decades in Uttar Pradesh, Delhi and overseas.