Misbehaving

Almost six years ago, I wrote about my interest in the behavioral sciences, especially behavioral economics and finance.  I further mentioned books I'd read on the topic, notably a book titled Thinking, Fast and Slow by Nobel prize winner Daniel Kahneman.

Since then, I've read many other books related to behavior, including three by former poker player Annie Duke (Thinking In Bets, How To Decide, and Quit), and another by a journalist who became a poker player for a year, Maria Konnikova (The Biggest Bluff).  On the more data driven / less fuzzy side were books by Robert Cialdini (Influence) and another co-authored by Kahneman (Noise).

Now I've just finished a book on this topic that I've enjoyed probably only less than Thinking, Fast and Slow.  It's not a particularly new book (2015) by another Nobel prize winner, Richard Thaler, titled Misbehaving.

Thaler was an early collaborator with Kahneman and his longtime research partner, Amos Tversky.  Misbehaving reviews the early, largely ignored stages of behavioral science, and how it eventually grew to become accepted by all but the most hardcore intellectuals.  

Thaler is more widely known now for a later book he co-authored with Cass Sunstein, called Nudge.  While I also enjoyed reading Nudge (to the point I gifted it to clients), Misbehaving provides many more examples of how people will respond differently to a given set of facts, depending on how those facts are phrased.  This was a prime writing / teaching method of Thinking, Fast and Slow.

Here's one example:

600 people are sick from a disease, and a choice has to be made between two policies:

Would you rather take

A) policy will save 200 people for sure

B) policy will offer a 1/3 chance at saving everyone, but a 2/3 chance of killing everyone

Alternatively, would you rather take

C) policy where 400 people will die for sure

D) policy where there's a 1/3 chance of killing no one but a 2/3 chance of killing everyone

Logic demands that we take either A and C, or B and D, because they are effectively the same thing. But in group tests of this, we don't always do that, because we are not always rational beings.  We also care about things like what seems right, instead of just the logical.

The book reviews the decades-long conflict between the data-only 'econs' and the non-conforming behaviorist 'humans'.  Knowing about this conflict, and the sometimes illogical 'misbehavior' that humans follow, can be a very important advantage to those in a particular field.

Misbehaving has a large section on how this applies within the investing world, so if you're interested in that sort of thing (like me), read it!  Or as I said six years ago, don't read it, and I'll use it to my advantage.

Thinking, Fast And Slow

For the past month or so, I've been concentrating on reading books and articles broadly related to behavioral science.  More specifically, I'm interested in how and why people make the decisions they do, with a concentration on macro-economics and finance.

This is a field I've been interested in for some time.  Over the years, I can think of several books I've read that are generally related to behavioral science.  These include the Freakonomics trilogy of books:  Freakonomics, Superfreakonomics, and Think Like A Freak, by economists Steven Levitt and Stephen Dubner.  (In the past year I've also become a regular listener to the Freakonomics podcast, which has kept me interested during thousands of miles of travel.)

I'd also include the books The Tipping Point and Blink by Malcolm Gladwell in that list.  Those books are more about social science, but they provide real insight about way people behave the way they do.

The most recent book I've read is called Thinking, Fast And Slow by Daniel Kahneman, who previously won a Nobel Prize in Economics.  I thought the book would be good, but it was better than good.  It was a tour-de-force about how our brain works, and the many biases that affect it.

How the brain works is basically a matter of two 'systems' that Kahneman called System 1 (instinctive and emotional) and System 2 (deliberative and logical).  But after a few chapters about the science of that, the rest of the book focuses on psychological aspects of thinking -- the cognitive biases.  These include terms / effects like loss aversion, framing, anchoring, overconfidence, and sunk-cost theory.

Once you read about what these biases are and how they affect thinking, it becomes clear how economic / financial decisions (or are they gambles?) are made and why.  This is a good thing to know for me, both personally and professionally.

Thinking, Fast And Slow by Daniel Kahneman.  Read it.  Or don't, then I'll use it to my advantage.

Read More Dave Barry

I don't read as many books as I should, but when I do, I stick with non-fiction things related to history or finance or humor.  In the latter category, my favorite humorist has always been Dave Barry.  In the 80s and 90s, Barry wrote a hilarious, weekly syndicated column for the Miami Herald, which I always read because it was printed by the Des Moines Register.  At the same time, he authored many humor books that I read, some original and some a collection of his Miami Herald columns or essays.

Unfortunately, Barry dropped off my map in the late 90s when he gave up his weekly column, at which time he continued to write a variety of fictional books.  In the past several years, he's been using social media more, and gone back to writing more non-fiction again.  He's published a new humor book in each of the past two years.

With that as background, I recently took his newer books with me on a trip, and it was just like old times.  It is very, very hard to write in a way that's laugh-out-loud funny, but Barry and his books will do it.  It's impossible to fully describe his observational writing style, but he gets help from his "many alert readers" who send him crazy newspaper stories.  Among his favorite topics are exploding or flaming items (including cows, toilets, Pop-Tarts, and Barbie dolls), and the emotional differences between men and women.

He also has a few common sayings.  For example, when distinguishing fact from hyperbole, Barry frequently asserts, "I am not making this up."  Also, "would be a good name for a rock band" is a statement Barry often applies to certain phrases.  (This reminds me of a softball team I once coached, where the first name had to be a color and the nickname was an action.  Our team drew the name 'Purple Riot' which I immediately said would be a good name for a rock band.)

If you have a chance, and you want a good laugh, read more Dave Barry!

The Ten, Make That Nine, Habits of Very Organized People. Make That Ten.

Just finished reading Steve Martin's new book, The Ten, Make That Nine, Habits of Very Organized People.  Make That Ten.  Just that title should be enough to make you laugh and want to read it.

If the title isn't enough, then how about this:  It's a book of some of his tweets over the past year, and it takes less than an hour to read.

Anyone who follows him on Twitter know his tweets usually come in bunches, over the course of a day, typically on a single event or topic.  You don't need to be a lifelong Steve Martin fan like me in order to appreciate how he uses social media for both his own enjoyment, and the enjoyment of others.

Here's an example of a stream of his Tweets from the book, about the iPhone:

"A watched iPhone never syncs."

"My iPhone is now lip-syncing."

"iPhone just synced perfectly with toaster. All is well."

"iPhone and computer heading off to hotel spa for leisurely afernoon sync. Back in 4 hours, they said."

"iPhone and computer came back from spa with DIFFERENCT DONNECTOR CORD. Is something going on?"

Now that's tweet comedy!

Some Of You Should Read This Book

Six years ago, the writers of The Daily Show With Jon Stewart published one of the best books of political satire I've ever read, America (The Book). This so-called "Citizen's Guide to Democracy Inaction" chronicled the history and workings of democracy in civics textbook form, including inforgraphics and sidebar opinions (from the likes of Stephen Colbert).

Spring Break gave me a chance to finally read through the latest book from the writers of The Daily Show, Earth (The Book). This "Citizen's Guide to the Human Race" may be the most entertaining, sharpest, and cleverly written book I've ever read. It again takes the textbook format used in the prior book, but this time to an even higher level.

Earth (The Book) is aimed at an audience of aliens who find the Earth deserted after the human race spectacularly manufactures its own demise. The subject matter has shifted from US politics and education to the planet and world civilization. And while America (The Book) was mostly written with many text passages and included commented infographics, Earth (The Book) is basically the opposite, with more commented infographics making for dozens of satice-laced jokes per page.

To give the history of the world some focus, the chapters are broken down into things like society, religion, science, and culture. A great example of the book can be found in the chapter on commerce, where newspapers float in the high-supply, low-demand quadrant of a supply/demand graph, just below ketchup packets and slightly above blogs.

One warning about this book - it will help tremendously if you have above-average intelligence, enjoy satire, follow pop culture, and have watched The Daily Show. If you aren't into any of those things, you aren't going to get this book. If you are into at least 2 of those 4, you will be entertained.

4 out of 4, and it will be one of the best books you'll ever read.