Book review, The Project About Thinking -
The Project About Thinking
A book about Nobel Prize-winning economist Daniel Kahneman and his close collaborator Amos Tversky, whose research developed into behavioral economics and later resonated around the world through Thinking, Fast and Slow.
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? 1. The background behind the publication of The Project About Thinking
2. About Danny, the author behind Thinking, Fast and Slow
3. About Amos, the co-researcher behind prospect theory
4. Collaborative research, between coolness and passion
5. Even if that person passes me by
For the second half of 2024, our book-study selection was Thinking, Fast and Slow. This is the third year I have been participating in the book study. So far, we have done three book studies under the theme of psychology, and this is the fourth.
Thinking, Fast and Slow deals with human intuition and bias. To explain them, it names the human thinking system System 1 and System 2, and describes them in detail - with a thickness perfectly suited to resting your head on the desk if you get tired while reading -. While reading it, I became curious about the background of the book itself, and while looking for related books...
I found a book called The Project About Thinking, which even repeats the same title motif. The author turned out to be none other than the famous writer of Moneyball, which had also been made into a film. Since that movie had left such a strong impression on me, this felt quite unexpected. Moneyball is widely known as a book about statistics, so I opened this one full of curiosity, wondering how the same writer had produced a book like this. The result far exceeded my expectations. I reorganized those fascinating contents in the order and amount I needed - especially since I was about to run a book study on Thinking, Fast and Slow -.
First, the writer generally known in Korea as Michael Lewis, Michael Monroe Lewis (October 15, 1960 - ), is an American nonfiction writer and financial journalist. He studied art history at Princeton University and later earned a master's degree in economics from the London School of Economics. He currently works as a columnist for The New York Times Magazine. (Text and image source: Wikipedia)
Moneyball (2003)
It is a book about how the American professional baseball team the Oakland Athletics tried to find a better way to evaluate players and strategy. Oakland had a smaller budget for player salaries than other teams, so it had no choice but to rethink the game. The club's management discovered new baseball knowledge in new data, old data, and analyses produced by outsiders, and because of that they were able to operate far better than other clubs. They found value in players other teams had released or ignored, and learned that much of conventional baseball wisdom was nonsense.
The Oakland Athletics model became a role model for many people and provided a great deal of insight into finding inefficiencies in markets through better data and better analysis. On that basis, it was also turned into a film (2011, Moneyball, starring Brad Pitt as the Oakland Athletics figure), and articles frequently appeared applying the idea to elderly medical insurance, golf, farming, publishing, presidential campaigns, government, and even banking executives' "Moneyball" methods.
But then in 2012, the offensive-line coach of the New York Jets complained, "Why is everyone suddenly trying to Moneyball offensive linemen?" Comedian John Oliver mocked North Carolina lawmakers for pushing a law that maliciously used data to make it harder for Black citizens to vote, calling it "Moneyball racism." In addition, when the approach was applied to risky decisions, it could be attacked simply because successful feedback did not appear immediately.
In fact, owner John Berry said in 2016 that they seemed to have depended too much on numbers and announced a return from data-driven methods to the old style of relying on baseball experts' judgment. Writer Nate Silver likewise argued that politics is fundamentally a human endeavor, so on-the-ground reporting cannot be defeated by prediction and logical judgment. He later left The New York Times and failed to predict Donald Trump's rise.
Some criticisms aimed at people who seek knowledge through data, or who exploit inefficiencies in their own industries for personal gain, are certainly valid. But whatever the Oakland Athletics used from the human soul in order to secure their own advantage, the thirst for experts who offer certainty has a way of lingering nearby even when certainty is impossible. It is like a monster in a movie that should have died, but for some reason always survives and carries out one last act.
Both professors agreed on one interesting fact: the professional-player market was so broken that even a poor club like the Oakland Athletics could beat rich clubs simply by making good use of market inefficiency. But they also said that the author of Moneyball seemed not to have grasped the deeper reason the baseball-player market was run so inefficiently. That inefficiency, they said, came from the way the human mind works.
Morey attended nearly every player-selection interview involving millions of dollars. He tried many things to keep decisions as grounded in statistics as possible and to avoid heuristic guesswork and biased choices.
Whenever a statistical model reached its limit, human judgment had to be brought back into decision-making, whether it helped or not. Morey began the hardest effort of his life to mix subjective human judgment into his model. This was not only about building a better model. It was an effort to listen to both the model and the scouts at the same time.
When scouts observed a player, they often formed an almost immediate impression, and then all the other data tended to be organized around that impression. This was the phenomenon called confirmation bias. The human mind is clumsy at detecting what it did not originally expect, and skilled at detecting what it already expected. As Morey put it, "Confirmation bias spreads quietly. You don't even realize when it is appearing." Once a scout forms a fixed view of a player, the evidence gets arranged to support that view. "It happens all the time. If they don't like a candidate, they say he has no position that fits him. If they do like him, they call him a multi-player. If they like him, they compare his body type to a successful player. If they don't, they compare him to a failed one." Even when prejudice negatively affects one's own judgment, it is hard to give up because people keep looking for what confirms it.
Recognizing bias did not mean that one could overcome it.
The expected value of a draft pick far exceeded the value that people themselves assigned to the player they were giving up in return. Their judgment about Kyle Lowry seemed distorted simply because they already owned Kyle Lowry.
Morey came to understand the behavioral-economics concept called the endowment effect. To fight it, he forced the scouts, and even his own statistical model, to evaluate the draft-pick value of players Houston already possessed.
Before the trade deadline in the following season, Morey listed every bias that could distort judgment on a blackboard in front of the staff: the endowment effect, confirmation bias, and many others. There is also what is often called present bias, the tendency to value the future less than the present when making decisions. There is also hindsight bias, the tendency to insist after an outcome that you knew it would happen all along. Statistical models do not show such fluctuations the way humans do, but by 2012 the model itself seemed to be nearing the limit of what information could do in evaluating player value. "Every year we talk about what to take out and what to put into the model, and every year it becomes a little more disappointing."
What ultimately changed decision-making not only in professional sports but in many other fields was an understanding of how the human mind operates under uncertainty. It took quite a long time for that way of thinking to seep into society, but now it seems naturally mixed into the air we breathe.
Regarding the fact that people do not properly recognize what is happening inside their own minds, Morey once said this:
It is like a fish that does not know it is breathing in water until someone tells it.
Looking back, the author says this:
To be honest, I had not deeply considered the psychological side of the Moneyball story. The baseball-player market was full of inefficiencies. Why was that? Oakland's management spoke of the biases that appeared in the market. A player's speed was overvalued because it was easy to see, while a batter's ability to draw walks was undervalued because the act was easy to forget. It might even be better for a batter to do nothing at all. Fat or oddly shaped players were easy to undervalue, while handsome, well-built players were easy to overvalue. I found these biases interesting, but I did not go further and ask where they came from or why people showed them. I mainly wanted to talk about the ways markets work, or fail to work, when they evaluate people.
But another story was hidden inside that one. It was a story I had not examined and had not told, about the way the human mind works, or fails to work, when making judgments and decisions. Whether in investment, in evaluating people, or in anything else, how do people make decisions when they face uncertainty? How do they process the evidence that comes out of baseball games, earnings reports, trials, health diagnoses, or group meetings? How do even so-called experts end up misjudging things in ways that allow people who ignore expertise and rely only on data to take advantage of them?
And how were two Israeli psychologists able to say so much about these issues, to the point that it almost seems as though they foresaw that decades later a book about American baseball would be written from them? What seized those two people in the Middle East so strongly that they sat face to face trying to figure out how people's minds work when judging baseball players, investments, or presidential candidates? And how did a psychologist end up winning the Nobel Prize in economics? That is the story I now want to tell.
