What are the odds?
These books explore how we weigh risk and reward
I didn’t win the $1.6 billion Mega Millions lottery.
Neither did you, unless you did, in which case, get in touch, I’ve got some ideas to run by you.
I’m certain that I’m not the only one whose father called the lottery “the stupid tax,” and yet, even if you’re not a regular player and agree that it is essentially futile to play, when a billion-dollar-plus payout comes around, you grab a few tickets — just in case.
It’s like the famous scene from comedy classic “Dumb and Dumber”: When Jim Carrey’s dimwit Lloyd asks the beautiful Mary if there’s “one in a hundred” odds of them having a relationship, she replies, “more like one in a million.” Lloyd breaks into his chipped-tooth grin and says, “So you’re saying there’s a chance!”
Human beings are notoriously bad at understanding risk and reward, at making good choices, at acting consistently when faced the odds. We’re so bad at it, we need a special bookstore section on human decision-making.
“Thinking, Fast and Slow” by Daniel Kahneman is perhaps the best compendium of the problems of human decision-making. Kahneman delineates our two “systems” for making choices: “System 1,” which relies on instinctive response rooted in emotion, and “System 2,” which relies on logic.
You can imagine which system governs the snap choice to buy a Mega Millions ticket; it is, in fact, in charge most of the time. But even these two systems are complicated by cognitive biases that can even short-circuit our logical reasoning, despite our best intentions.
Our bookstore section will need an entire shelf dedicated to the books of Michael Lewis on this topic. “Moneyball” is essentially about how the Oakland A’s decided to adopt System 2 thinking to compete against richer teams who embraced a System 1 approach. Now, every team is immersed in analytics. When a manager goes with his gut, people call for a firing.
Lewis’ “The Big Short” covers how a few individuals were able to see past the groupthink and greed that fueled the subprime mortgage crisis. “Flash Boys” explores what happens when stock trading is outsourced to algorithms and the damage automation can wreak.
It’s not surprising Lewis wrote about the research partnership between Kahneman and fellow behavioral psychologist Amos Tversky in “The Undoing Project.” Even Lewis’ most recent book, “The Fifth Risk” — ostensibly about the dangers presented by the Trump administration’s failure to properly staff various federal government agencies — is at its core about the consequences of so many voters going with their gut to install Donald Trump as president.
The Nobel Prize-winning University of Chicago economist Richard Thaler and Harvard law professor Cass Sunstein believe the solution to helping people make better choices can be found in “nudging them” in the proper direction. Their 2008 book, “Nudge: Improving Decisions About Health, Wealth, and Happiness,” argues for particular policy recommendations that incentivize people to do the “correct” thing — whatever that is.
It may be tempting to remove ourselves entirely from decision-making, perhaps outsourcing our choices to algorithms to avoid human mistakes. But the occasionally illogical operations of our brains are why your humble Biblioracle will always be a superior guide to book recommendations. Amazon may offer suggestions based on data aggregated from other customers’ purchases, but letting a flesh-and-blood human help you pick leaves it open to one of those one-in-a-million surprises.