Think Like a Freak

by Steven D. Levitt

Sometimes in life, going straight up the middle is the boldest move of all.

Incentives are the cornerstone of modern life. And understanding them—or, often, deciphering them—is the key to understanding a problem, and how it might be solved.

Knowing what to measure, and how to measure it, can make a complicated world less so.

The conventional wisdom is often wrong. And a blithe acceptance of it can lead to sloppy, wasteful, or even dangerous outcomes.

Correlation does not equal causality.

A growing body of research suggests that even the smartest people tend to seek out evidence that confirms what they already think, rather than new information that would give them a more robust view of reality.

“Few people think more than two or three times a year,” Shaw reportedly said. “I have made an international reputation for myself by thinking once or twice a week.”

“Prediction,” as Niels Bohr liked to say, “is very difficult, especially if it’s about the future.”

When asked to name the attributes of someone who is particularly bad at predicting, Tetlock needed just one word. “Dogmatism,” he says. That is, an unshakable belief they know something to be true even when they don’t. Tetlock and other scholars who have tracked prominent pundits find that they tend to be “massively overconfident,” in Tetlock’s words, even when their predictions prove stone-cold wrong. That is a lethal combination—cocky plus wrong—especially when a more prudent option exists: simply admit that the future is far less knowable than you think.

The takeaway here is simple but powerful: just because you’re great at something doesn’t mean you’re good at everything. Unfortunately, this fact is routinely ignored by those who engage in—take a deep breath—ultracrepidarianism, or “the habit of giving opinions and advice on matters outside of one’s knowledge or competence.”

Just as a warm and moist environment is conducive to the spread of deadly bacteria, the worlds of politics and business especially—with their long time frames, complex outcomes, and murky cause and effect—are conducive to the spread of half-cocked guesses posing as fact. And here’s why: the people making these wild guesses can usually get away with it! By the time things have played out and everyone has realized they didn’t know what they were talking about, the bluffers are long gone.

If the consequences of pretending to know can be so damaging, why do people keep doing it? That’s easy: in most cases, the cost of saying “I don’t know” is higher than the cost of being wrong—at least for the individual.

Every time we pretend to know something, we are doing the same: protecting our own reputation rather than promoting the collective good.

The key to learning is feedback. It is nearly impossible to learn anything without it.

Before spending all your time and resources, it’s incredibly important to properly define the problem—or, better yet, redefine the problem.

Only by redefining the problem was he able to discover a new set of solutions.

“Yes,” he says, “we call it a ‘transpoosion.’”

Preconceptions lead us to rule out a huge set of possible solutions simply because they seem unlikely or repugnant; because they don’t pass the smell test or have never been tried; because they don’t seem sophisticated enough.*

Sir Isaac Newton, for instance. “To explain all nature is too difficult a task for any one man or even for any one age,” he wrote. “Tis much better to do a little with certainty and leave the rest for others that come after than to explain all things by conjecture without making sure of any thing.”

the people involved seem to be having a good time as they learn. Freaks like to have fun. This is another good reason to think like a child. Kids aren’t afraid to like the things they like. They don’t say they want to go to the opera when they’d rather play video games. They don’t pretend they’re enjoying a meeting when they really want to get up and run around. Kids are in love with their own audacity, mesmerized by the world around them, and unstoppable in their pursuit of fun.

Let’s face it: human beings aren’t the most candid animals on the planet. We’ll often say one thing and do another—or, more precisely, we’ll say what we think other people want to hear and then, in private, do what we want. In economics, these are known as declared preferences and revealed preferences, and there is often a hefty gap between the two.

Don’t listen to what people say; watch what they do.)

So while designing the right incentive scheme certainly isn’t easy, here’s a simple set of rules that usually point us in the right direction: 1. Figure out what people really care about, not what they say they care about. 2. Incentivize them on the dimensions that are valuable to them but cheap for you to provide. 3. Pay attention to how people respond; if their response surprises or frustrates you, learn from it and try something different. 4. Whenever possible, create incentives that switch the frame from adversarial to cooperative. 5. Never, ever think that people will do something just because it is the “right” thing to do. 6. Know that some people will do everything they can to game the system, finding ways to win that you never could have imagined. If only to keep yourself sane, try to applaud their ingenuity rather than curse their greed.

As the behavioral sage Daniel Kahneman has written: “[W]e can be blind to the obvious, and we are also blind to our blindness.”

Sure, it’s important to acknowledge the flaws in your argument and keep the insults to yourself, but if you really want to persuade someone who doesn’t wish to be persuaded, you should tell him a story.

A story, meanwhile, fills out the picture. It uses data, statistical or otherwise, to portray a sense of magnitude; without data, we have no idea how a story fits into the larger scheme of things. A good story also includes the passage of time, to show the degree of constancy or change; without a time frame, we can’t judge whether we’re looking at something truly noteworthy or just an anomalous blip. And a story lays out a daisy chain of events, to show the causes that lead up to a particular situation and the consequences that result from it.

It is a testament to the power of storytelling that even stories that aren’t true can be so persuasive. That said, we encourage you to use as generous a portion of the truth as possible in your attempts to persuade. Why are stories so valuable? One reason is that a story exerts a power beyond the obvious. The whole is so much greater than the sum of the parts—the facts, the events, the context—that a story creates a deep resonance. Stories also appeal to the narcissist in all of us. As a story unspools, with its cast of characters moving through time and making decisions, we inevitably put ourselves in their shoes. Yes, I would have done that too! or No no no, I never would have made that decision! Perhaps the best reason to tell stories is simply that they capture our attention and are therefore good at teaching.

Resources are not infinite: you cannot solve tomorrow’s problem if you aren’t willing to abandon today’s dud.

By the time an invention makes it to the lab, Deane says, there are two forces at work. “One force really wants to find a winner. The other one doesn’t want you to spend a ton of money or time on an idea that won’t be successful. The key is failing fast and failing cheap. That’s a mantra that comes out of Silicon Valley. I prefer the statement ‘failing well,’ or ‘failing smart.’”

Wrosch found that people who quit their unattainable goals saw physical and psychological benefits. “They have, for example, less depressive symptoms, less negative affect over time,” he says. “They also have lower cortisol levels, and they have lower levels of systemic inflammation, which is a marker of immune functioning. And they develop fewer physical health problems over time.”