Israeli psychologists Amos Tversky and Daniel Kahneman transformed academic assumptions that we are rational beings as they invented the field of behavioural economics. Their Nobel Prize-winning work showed we imagine things to be more likely if they’re fresh in our memory – such as terrorist attacks – and that we often make decisions based on the first piece of information we get, rather than all of it. They also had an intense but turbulent relationship, as the best-selling author of The Big Short, Moneyball and The Blind Side, reveals in his new book, The Undoing Project (Allen Lane, £25).
Not everyone will have heard of Tversky or Kahneman. Why did you decide to write a book about them?
I realised that they had showed how the human mind was capable of systematic misjudgement and systematic bad decisions and they found all kind of things out about the human mind and human nature that spoke to a lot of things I had already written. I didn’t think it was a book until I realised the depth of the relationship, and then I had on my hands both a story of people figuring out what made people tick and how the human mind works, and a really great love story, and that the two were intertwined in all kinds of interesting ways.
Why do you think people need to know about this story?
You cannot fully appreciate what your mind is doing and the mistakes
it’s capable of when it’s dealing with any form of uncertainty – which includes who you vote for, who you marry, what investment decisions you make, where you live, what job you take. Your whole life is a series of decisions made under conditions of uncertainty. These guys explain to you what your mind is doing when it’s making those decisions. So if you want to lead a self-aware life, I don’t see how you can do it without understanding their work.
How has their work influenced the Behavioural Insights Team, which applies behavioural economics to citizens and public policy in the UK?
What Danny and Amos showed in an extreme way was that the decisions people make can be radically influenced by the way the decision is presented to them. People don’t choose between things – they choose between descriptions of things, which is terrifying if you think about it. When you realise when the doctor says we have this operation that can cure you of this deadly illness, there’s a 90 per cent chance you can survive it, then you can respond one way. But if he says there’s an operation that will cure you with a 10 per cent chance the operation will kill you, you respond another way. Even though it’s the same thing, the decision in a life or death situation will be shaped by the words used. Everybody who’s in the business of creating the architecture for decisions, for creating the choices people make, has a huge responsibility in the way they frame those choices.
Should Donald Trump read Tversky and Kahneman?
I think it might just confuse him. Donald Trump never thinks slow. He’s got no deliberative abilities – he’s just got instinct. And he’s pretty unreliable on top of it. They’re exploring the weaknesses of intuitive judgement and how it works. Since all Donald Trump does is make intuitive judgements, I don’t think you can understand him completely unless you understand Danny and Amos’s work. What they’re describing is the mental processes. Would he benefit from a little self-awareness, or self-knowledge? It’s a good thought, but I wouldn’t hold out a lot of hope. If Danny and Amos taught us anything, it’s that nobody knows. Do not give yourself over to an expert of any sort. There are uses for experts, but they need to be modified by outside checks. One takeaway from their work is you should never go there as a society – you should never put yourself in the hands of a single person who supposedly knows because he doesn’t know. As a footnote to that, what’s driving a lot of our faith in this person, and this person’s faith in themselves, is overconfidence. Danny and Amos both thought overconfidence is at the bottom of a lot of problems that people get themselves into.