Time to go headhunting
Have you ever wondered just how irrational you really are? At least I have, and I’ve just started to realize that I’m nowhere near as rational as I thought I am after reading The Undoing Project: A Friendship That Changed Our Minds, by Michael Lewis.
In his book, Lewis talks about our rationality. First he talks about how our failure to think rationally may cloud our better judgment in the heat of the moment, and how that may have long term consequences.
Like for example, the recruitment process in baseball used to rely on industry experts’ opinion, headhunters as we sometimes call them, and that often lead them to look at players from the wrong perspective. Surprisingly enough, the statistics often weren’t as important as the looks of a player. The best looking player would get the spot over someone mediocre looking one. This was the early days, and we’re long past it now (or are we?), but that’s how it was.
This would later change into approach that took statistics more into account. The players statistic on how many points they accumulated per game was used as the benchmark. Overall, the quality of players improved, but then there were a couple of stinkers – those who just didn’t measure up to ‘their potential.’
As you might have guessed, this was later revealed to be an unjust system towards those who sat at the bench most of the match, but who might be better players overall. The system would later change into one where the player was judged on how many points per minute they could attain, and that made the whole headhunting process much fairer and, yes, more rational overall.
We are mostly irrational
Lewis then proceeds to talk about the main topic of the book, which revolves around the partnership between Amos Tversky, a brilliant psychologist, and Daniel Kahneman, the man who wrote fantastic book, Thinking Fast And Slow.
It used to be that scientist, marketers and economists all considered people to be rational thinkers, who used their left side of the brain to take all the information at hand into account before coming to a conclusion about their decisions. Kahneman and Tversky thought differently, and they would spend decades of their life proving that we’re almost the opposite of this.
I won’t go through everything that’s in the book, but I’ll give you an example that should get you thinking if you haven’t heard about it before.
Tversky and Kahneman coined many terms that are still being used in behavioral economics today. One of those terms is “heuristics,” a very relevant word even today, which describes the cognitive shortcuts people use when they make decisions. While they are mostly harmless, or even helpful because they help us reach conclusions faster, they can also be a danger.
One of the most well known heuristics is known as ‘Anchoring.’ This is something that happens in our thinking constantly. We try to measure the weight, height or price of an item based on our previous experience, or what is being presented to us. We adjust this number over time, perhaps when we get more information about the item, but the point stands that we started from somewhere, and that is what an anchor is.
Marketers use this to a great effect, as they know about anchoring. The cost of an item rarely actually is what it’s being sold at, there’s always room for haggling. The people who know about this use it to a great effect.
First they set their price so high that it almost sounds ridiculous, this is the anchor, but then they allow you to talk the price down a little bit, if you’ve got the guts for it. They already know at what price they will sell the item to you at minimum. Of course the marketer hopes you pay the full price, but at the same time they allow you the small sense of victory you get when you “win” at haggling, when in fact it was their plan all along. What you should learn is that the stuff on the shelves is almost never worth the asking price.
There are more types of heuristics, but I’ll let you discover those on your own. It is worth your time to do so, as you learn more about yourself in the process, which is always a fun time.
It was a good read
I truly enjoyed this book, as I learned more about my own behavior. I’ve now come to the conclusion I’m not nearly as rational as I thought I was, and for some reason I feel relieved after this revelation.
I feel like I can allow myself to make mistakes, because the basis of those mistakes is often times irrational behavior that is subconscious, and I can’t fully control it. What a joyous feeling!
If you want to experience something similar, I highly recommend you pick up The Undoing Project: A Friendship That Changed Our Minds for yourself and read it with thought.
That concludes my review and short summary on this book.
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