The Mini-Malcolms

But are nudges enough to protect us from ourselves? And can we rely on the private sector to push us in directions that serve our own interests? Given that our mistakes can harm others—witness the subprime mortgage crisis—shouldn’t we hope that the most harmful choices will be removed from the menu? These boundaries of influence are difficult to draw. ("We are not for bigger government," Messrs. Thaler and Sunstein insist.) But Nudge helps us understand our weaknesses, and suggests savvy ways to counter them.

 

IF NUDGE WAS WRITTEN WITH EMPLOYERS AND lawmakers in mind, Sway seems like a beach read for M.B.A. students and CEOs in training. Ori Brafman, a business strategist, and his brother Rom Brafman, a psychologist, have crafted a very readable, anecdote-heavy look at the latest research into our counterproductive instincts. It’s a slim, informative, coattail-riding "greatest hits" book about our biases and presumptions, cobbled together from the studies of others. (Dan Ariely’s Predictably Irrational, similar but better, came out earlier this year.)

The Brafmans tell the story of a mysterious street violinist in a D.C. metro station in 2007. Over 1,000 people passed the nondescript performer, but hardly anyone stopped. Alas, the man playing Bach’s notoriously challenging "Sonatas and Partitas for Unaccompanied Violin" on a $3.5 million Stradivarius was the virtuoso Joshua Bell. The study, conducted by The Washington Post, reveals the power of "value attribution," by which we discern the value of something from its context, rather than by judging it on its own merits. This is also why we’ll buy a shirt in an expensive boutique that we might overlook at a stoop sale. It’s logical to correlate value with price, but too clumsy an assumption only creates an incentive for retailers to bump up their prices.

The pratfalls of misper
ception feature prominently in Sway. We cling to labels at the expense of contradictory evidence ("diagnosis bias"), and we fail to ignore sunk costs and let go ("loss aversion"). The brothers write about Captain Jacob Van Zanten, an accomplished pilot who became hotheaded when his 747 aircraft was detoured in 1977. Reluctant to lose more time, he made a tragic mistake that killed his entire crew and all of his passengers—584 people total. So much for averting loss. But like the similarly unempirical example of the Vietnam War dragging on and on, this anecdote is based purely on rearview mirror speculation. Even as a metaphor it’s fatuous, as Leonard Mlodinow, author of The Drunkard’s Walk, would surely argue.

It’s easy to construct a neat explanation for what happened yesterday—"but this logical picture of events is just an illusion of hindsight with little relevance for predicting future events," writes Mr. Mlodinow, a trained physicist. In fact, our lives are governed by chance, which makes it impossible to know what will happen next. We routinely misinterpret patterns of randomness as signs of success or failure, mainly because it feels terrible to think we don’t have control over what happens.

 

THE DRUNKARD’S WALK IS LESS ABOUT economics than probability and decision-making, but it scratches the same itch—that is, the mistakes we all make. Mr. Mlodinow takes us on a chronological tour of various theories of randomness, lavishing affection on the odd men who cooked them up. (Blaise Pascal became a bit of a nutter before he died at 39; most of the others were serious gamblers.) There’s some interesting math here, much of it befuddling. "Our brains are just not wired to do probability problems very well," as one Harvard professor remarks.

Mr. Mlodinow’s point is that the more we understand about randomness patterns, the more skeptical we will be about both explanations of the past and prophesies of the future. "[W]e often misjudge people by thinking that the results must reflect the person," he observes. Succumbing to "value attribution," we assume rich and successful people are incredibly talented, and poor or marginal folks are getting what they deserve. But a chance happening—such as IBM seeking out Bill Gates in 1980 after the companies’ first contract fell through—can dictate the course of a life. Many a best-selling novelist had her first manuscript rejected over and over. It’s better, in short, to judge ability than achievement.

A nice thought. Easier said than done. Firing a CEO after a couple of bad years, even though before that he had a long run of good years, ignores the unlucky inevitabilities of probability—but what other metrics are there for measuring performance? Charisma? Good intentions? As for the existential can of worms opened here (what control do we have, anyway?), Mr. Mlodinow explains that since chance plays a role, an important factor in success is "the number of chances taken, the number of opportunities seized." The more times we flip the coin of our lives, the more often it will come up heads. Just keep going for it.

Indeed, there’s one trend we can predict with certainty: There will be many more attempts to cash in on the fruitful conjunction of psychology and the dismal science. Our self-help solipsism looks dapper in a lab coat.

Emily Bobrow is an arts contributor to The Economist and editor of More Intelligent Life (moreintelligentlife.com). She can be reached at books@observer.com.

The Mini-Malcolms