Book-The Undoing Project: A Friendship that Changed the World
Author: Michael Lewis
Publisher: Penguin/Allen Lane
Price: Rs 799
Michael Lewis’s new book is the back story of his 2003 success Moneyball: the Art of Winning an Unfair Game, which inspired the Hollywood hit starring Brad Pitt and Jonah Hill. It told the story of the Oakland Athletic baseball team, which turned itself around on a shoestring budget by abandoning received wisdom about player selection and turning to statistical methods using measurable data rather than legacy perceptions. In particular, the old methods relied on player characteristics which were easily observed (such as running speed) rather than those which actually mattered, and on irrelevant stereotypes like body shape.
The book caused a furore in sport management and changed the manner in which talent was hunted, but a review in The New Republic by Richard Thaler and Cass Sunstein, two of the brightest sparks at the University of Chicago, informed Lewis that there was nothing new under the sun. The ideas and methods which rejuvenated the Oakland baseball team went all the way back to the intellectual partnership between two of the finest minds in first-generation Israel, Amos Tversky and Daniel Kahnemann.
Their joint papers laid the foundation of behavioural psychology, the study of the tricks the mind plays on itself as it seeks order in a universe which, thumbing its nose at human expectations, seeks entropy — the annihilation of order and pattern. Their description of the irrational manner in which humans take decisions had a profound impact on economics, tearing it away from the Aristotelian idea that man is a rational animal. Now, Tversky and Kahnemann’s insights inform the modelling of every situation where humans take calls in an uncertain world, from buying clothes to making war. Donald Trump is an amplification of the phenomenon, not an aberration.
Lewis met Kahnemann only in 2007, 11 years after Tversky died, and the idea of a book came even later. He confesses to the feeling “that this story did not require a writer as it did a stenographer”. But he is a prince among stenos, able to take dictation from the finest minds and transform the transcripts into narratives that lucidly explain data science and its implications to the lay reader. Lewis is a financial writer and his most readable books concern money and greed. He made a name for himself with the semi-autobiographical Liar’s Poker, which laid bare the ectopically pulsing heart of Salomon Brothers and Wall Street, half a decade before Lehman Brothers went belly up and the end of the financial world seemed nigh. His last title before The Undoing Project, Flash Boys, explored the world of high speed trading at just under the speed of light, where an electronic sprint down the last mile of fibre-optic wins the deal. The phenomenon, and the “dark pools” or online sub-markets promoted by banks to make it lucrative, could be skewing global markets more than we suspect. This was news even to seasoned retail investors.
Now, in his latest book, Lewis focuses tightly on human psychology. It makes all the difference, on stock exchanges and playing fields, in companies and legislatures, and in the very game of life which we play every day, without quite being aware of it. His book is a ready reckoner for the post-truth world where the importance of facts, once sacred, have rapidly dwindled, and perception and narrative are everything.
The back story of Moneyball begins, appropriately enough, with sport — the principles developed by Daryl Morey, “the basketball nerd king”, of recruiting NBA teams. In 2003 the year Moneyball appeared, the Boston Celtics hired by algorithm for the first time. But in 2015, despite using the same methodology, Morey turned down Satnam Singh, who had been talent scouted from a small village in Barnala. He could not join the Houston Rockets, but the Dallas Mavericks welcome him to stardom.
This is a fine example of uncertainty, the very thing that the financial analyst and consulting partner is taught to deny, in order to claim allegedly accurate predictions for unknowables like the future price of oil or the demand for wheat. It also shows the mind tricking itself — Singh’s replies to the Rockets interviewers did not fall within the expected frame, perhaps because the farmer’s son was from a reality completely alien to the American experience.
The mind seeks patterns and imposes them on a random, uncaring universe. Mistaking coincidence for causality is the commonest source of error, but Kahnemann and Tversky were interested in trends that were almost as simple, like the gambler’s conviction that if a coin has landed tails three times in a row, the next throw must land heads up. Both were first-generation Israelis, and Kaufmann first engaged with human resource selection for the Israeli Defence Forces. He concluded that the perceptual manner in which commanders were selected was useless. In terms of personality and psychology, there was really no difference between a good tank commander and a successful infantry leader. And so statistics entered the world of the cognitive sciences and psychology.
The Undoing Project is a lucid introduction to ideas that will continue to inform how the human race tries to understand itself. It also opens a window to early Israel, a country built by holocaust survivors, where a paratrooper could become a world-altering cognitive scientist. This would be familiar to Lewis’s American audience, but to most Indian readers, it would be a brave new world.