Michael Lewis could spin gold out of any topic he chose but his best work has shone a spotlight into corners of the world that weren’t getting enough attention until Lewis came along. Liar’s Poker described bond trader Lewis Ranieri and the way securitisation revolutionised Wall Street in the 1980s. Moneyball covered baseball manager Billy Beane and anticipated the “quants” taking over the world. And The Big Short depicted Steve Eisman and Michael Burry, the men who spotted the financial crisis coming and bet vast sums on it.
When Tversky died young, in 1996, he was on the secret shortlist for a Nobel memorial prize in economics, and received a detailed obituary in The New York Times. Kahneman won the Nobel economics prize in 2002 and published his own bestselling book, Thinking, Fast and Slow, in 2011. Their ideas are everywhere; it’s almost impossible to find a book in the “smart thinking” section of a bookshop that doesn’t cite Kahneman and Tversky: an irony, since their work highlights many of the ways in which our thinking isn’t smart at all.
For example, they identified the “representativeness heuristic” — our tendency to make judgments by comparing an example to some mental model. When we meet a nervous, geeky-looking gentleman we note that he matches our stereotype of a programmer and, therefore, probably is a programmer. We forget that most of the people we meet are not, in fact, programmers, no matter how much they might resemble them.
This matters, because when judging probabilities we often skip over the real question, “Is this likely?”, in favour of a representativeness question: “Does this match my preconceptions?”. “Is the lump likely to be a malignant tumour?” becomes “Does the lump match my idea of what a malignant tumour looks like?”. It’s a reasonable rule of thumb that can lead us seriously astray.
All this is well known to anyone who has read Kahneman himself or popularisations of his work, so what does Lewis add? He’s a far better writer than most, meaning that even the familiar is fresh. And there is a great deal here that feels new. Lewis has done his homework; he has evidently talked to the right people — with the inevitable omission of the much-missed Tversky — and he knows how to tell a story simply, powerfully and with an eye for the telling detail.
Yet The Undoing Project gets off to a shaky start with a chapter discussing the selection of basketball players and the way in which basketball scouts commit various cognitive errors. Perhaps the success of Moneyball encouraged Lewis and his editor to think this was wise but it adds very little to our appreciation of the main characters, and much of the chapter is baffling unless one happens to be a fan of American sports.
All is forgiven in chapter two, when we meet the young Danny Kahneman, a Paris-raised Jew whose family spend the war dodging the Nazis and their sympathisers. No matter how many accounts one reads of such horrors, the reader is filled with sadness and a kind of awe at the survivors. At the age of seven, Danny was caught on the streets after curfew by an SS soldier. The man didn’t notice the yellow star under his sweater; instead, he hugged little Danny and, full of emotion, showed him a photograph of another young boy. Then he gave Danny some money and sent him on his way. “People were endlessly complicated and interesting,” Kahneman recalled.
Tversky is no less deftly portrayed: as a child, he was so bullish that he was willing to leap from a high diving board despite being unable to swim — he simply arranged for a bigger boy to be on hand to drag him to safety. As a soldier, Tversky saw a comrade pull the pin on a grenade-like explosive, then faint. As his commanding officer yelled orders to stay put, Tversky dashed forward, dragged the stricken man a few yards away, then dived to cover him, taking the shrapnel into his own body. Yet he berated his own men for carelessly taking risks. “If a bullet is going to kill me, it has my name on it anyway,” they would say. Tversky, a quick wit, reminded them that many bullets were addressed “To Whom It May Concern”.
Today, Kahneman and Tversky’s view of human psychology is widely accepted, and thanks to his longevity and his Nobel Prize, Kahneman is a more famous figure than Tversky. But Lewis takes us back in time, conjuring up the 1970s, when their ideas were new and controversial, they were operating in the backwater of Israeli academia, and when it was the mesmerising Amos rather than the quiet Danny who won all the attention.
Behavioural economics itself is not a major part of the book. Richard Thaler, the most important intellectual conduit between Kahneman and Tversky and economics, does not appear in the story until the closing chapters. While Tversky loved to have an intellectual foe to slay, it would diminish his work with Kahneman to define it merely as a takedown of textbook economics. By writing less about behavioural economics Lewis gives Kahneman and Tversky’s ideas room to breathe.
Lewis admires his subjects and believes they are right about everything important. He has no time for rational economic man, and brutally dismisses one noted critic of Kahneman, the psychologist Gerd Gigerenzer. But this isn’t a hagiography. Tversky is depicted as intellectually aggressive, contemptuous of many academics and perversely compelled to needle the vulnerable Kahneman. Meanwhile, a new side to Kahneman emerges. In my limited personal experience, Kahneman seems wise, kindly and stoic in the face of his advancing years. But Lewis describes the younger Kahneman as depressed, envious of his celebrated partner and desperately needy.
Nevertheless, it is clear that Lewis is cheering our heroes on, and the reader cannot help but join him. The story he tells of their intellectual love affair, and its painful disintegration, is vivid, original and hard to forget.
Written for and first published in the Financial Times.