What are the odds?

These books ex­plore how we weigh risk and re­ward

Chicago Tribune (Sunday) - - THE BIBLIORACLE - By John Warner John Warner is the author of “Tough Day for the Army.” Twit­ter @bib­lio­r­a­cle

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.

YUOAK/GETTY

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.