Newsletter

Weekend Reading & Selected Links

Here are some links to things I've been reading or watching that you might also enjoy:

1. My podcast with Daniel Kahneman (at the bottom of this email, I've reprinted two of my favourite exchanges from the conversation).

2. 'How to Build a House in One Day', an excellent new blog post by Austin Vernon.

3. 'Mentorship and protégé success in STEM fields', an important 2020 article by Yifang Ma, Satyam Mukherjee and Brian Uzzi.

4. The Reserve Bank of Australia's latest Financial Stability Review.

5. Eric Weinstein on portals. Via Cam Wiese.

Have a great weekend,  


Joe


Exchanges from my podcast with Kahneman

1. On pairs [09:55 - 17:55]

JOSEPH WALKER: Was there anything important that The Undoing Project missed?

DANIEL KAHNEMAN: Well, The Undoing Project, it’s not fiction, it's non-fiction, but the characters are drawn to be quite extreme. There are quite a few things where I would have written that differently.

WALKER: In what specific ways?

KAHNEMAN: Well, there is an incident at the very end of the book when Amos, who had been my closest friend and was then, he was like a brother to me of course… We had been for each other, I think, the most important person in each other's life, because we had done so much to change each other's life. We were having a conversation — that must have been a couple of days before he died, about three days. He said, “I wanted you to know that of anybody I've known, you are the one who caused me the most pain.” And I answered without hesitating: “Ditto. The same.” Michael couldn't bring himself to write that. He softened this, although I had told him “ditto.” I was quite annoyed with him because the ditto was… That expressed our interaction, of course: Amos expected me to say ditto, and we went on and talked as if nothing had happened.

WALKER: I see.

KAHNEMAN: That's the one thing, actually, that I felt Michael shouldn't have done.

WALKER: When you say that was characteristic of your interaction with Amos, is that like an Israeli thing or was that special about your interaction?

KAHNEMAN: It's an Israeli thing, but we were really very close and very open with each other. It didn't come as a huge shock when he told me what he told me, and I'm sure it didn't shock him to hear my answer. It was the kind of interaction we had.

WALKER: I have some questions I really want to ask you about the concept of great partnerships, and speaking here about great partnerships, like world-class partnerships, as opposed to merely good partnerships: Watson and Crick, Lennon and McCartney, Amos and Danny. In a strange way, I almost feel jealous of your partnership with Amos. I hope that I can find that at some point in my life.

KAHNEMAN: Yeah, I think you're right to be jealous. It's an extraordinarily fortunate thing when it happens.

WALKER: Yeah. I want to ask whether we can systematise the formation and maintenance of world-class partnerships or whether, on the other hand, there's just something kind of mysterious and ineffable and unpredictable about them.

KAHNEMAN: Well, I mean, it's clearly unpredictable, and I'm not sure that it's the same everywhere, although quite possibly it's true for the better ones. The mechanism in my interaction with Amos, I think what happened was that very often he understood me better than I understood myself. There is a stage in creative thinking when you say things that later turn out to be important, but you don't yet understand what you've said. You have a glimmer. And he would immediately see through the fog of what I was saying much more clearly than I did. And that is an intense joy, and it also really allows a kind of creativity that a single person doesn't have.

WALKER: Was that the key way in which you were complimentary? Were there any other ways?

KAHNEMAN: We were complementary in many ways. We had different styles. I was better at intuition, I think; he was better at precision, and that was very clear. At the same time, I could understand his precision and he could appreciate my intuition, and I had a lot of precision and he had a good intuition. But we were… to some extent, we were different people, although we could complete each other's sentences.

WALKER: Have you read Montaigne's essay ‘On friendship’?

KAHNEMAN: I must have done it when I was a child, but I wouldn't remember.

WALKER: There's this lovely passage where he talks about his best friend. They only became friends as adults. His best friend's name was Etienne De La Boétie.

KAHNEMAN: Oh, Étienne De La Boétie. Oh, yes.

WALKER: Yeah, he's obviously famous in his own right. There's this lovely line where Montaigne is trying to articulate what made their chemistry so special. He says, “I feel that it cannot be expressed except by replying: ‘Because it was him; because it was me.’” That reminded me of your partnership with Amos.

KAHNEMAN: Beautiful. That is beautiful. Indeed, there is something that feels unique about the interaction, but at the same time, it was fairly clear while it was happening that why we were… And clearly we were better as a pair than either of us was. We did good work individually, separately, but the work we did together clearly is one step beyond and in a combination of amused creativity and a fair amount of precision. That combination really came from the interaction.

WALKER: That leads me to my next question, and that is: are pairs the fundamental creative unit? So, all else being equal, would it actually be better just to have two people working on a problem or a new idea than, say, three or four?

KAHNEMAN: I think it would be very unlikely — it would be very difficult — to imagine a threesome interacting in that particular way. I'd never thought about it that way. I'm inclined to agree that this particular kind of interaction where you build on each other and you improve each other in the interaction, that feels like a pair interacting.

2. On prospect theory [1:02:28 - 1:06:26]

WALKER: So, as you know, Nassim Taleb argues that we underestimate tail risks. Does that contradict prospect theory?

KAHNEMAN: Well, no, I would say. In prospect theory, you overweight low probabilities, which is one way of compensating. Now, what Nassim says, and correctly, is, “You can't tell — you really cannot estimate those tail probabilities.” And in general, it will turn out — it's not so much the probabilities, it's the consequences. The product of the probabilities and consequences turn out to be huge with tail events.

Prospect theory doesn't deal with those — with uncertainty about the outcomes. So what Nassim describes, as I understand it, is you get those huge outcomes occasionally, very rarely, and they make an enormous difference. This is defined out of existence when you deal with prospect theory, which has specific probabilities and so forth. So prospect theory is not a realistic description of how one would think in Nassim Taleb’s world. Certainly not a description of how one should think in Nassim Taleb’s world.

WALKER: I see. Does that diminish the descriptive validity of prospect theory?

KAHNEMAN: I don't think prospect theory is much descriptive. I think of it as a bunch of ideas. It's quite interesting when you look at the way formal theories like prospect theory play out. They are valuable for one or two ideas that actually travel well and get completely detached from the rest of theory. So, loss aversion is an idea, overweighting low probabilities is an idea, thinking of reference points and changes rather than final states, those are ideas. It turns out that in order to be able to state those ideas in a way that will influence thinking, you've got to pass a test of… You've got to develop a formal theory that will impress mathematicians, that you know what you're doing. Constructing a theory — so far as I'm concerned, this is very iconoclastic, what I'm saying now — constructing a theory like prospect theory is a test of competence. Once you demonstrate competence, what makes the theory important is whether there are valuable ideas that can be detached from it completely. So it's not that the theory is valid. Some ideas are more or less useful, and that's the way I think about it.