Chapter 1: Crunch Time on a Hot August Night
1. All quotations from Bill Flemming are from interviews with the author in September and October 2010, January 2011, and January 2013.
2. Patrick McGeehan, “It’s Official—This Is New York’s Hottest Summer,” New York Times, September 1, 2010, A16.
3. Skanska’s costs eventually exceeded $998 million, because the owner added some features, but compared to the basic project, Skanska was profitable at $998 million.
4. Itamar Simonson and Amos Tversky, “Choice in Context: Tradeoff Contrast and Extremeness Aversion,” Journal of Marketing Research 29, no. 3 (August 1992): 281–295.
5. I ran this experiment on four occasions with a total of 126 managers. The figures for the first question were S1, 42 and S2, 27; for the second the answers were S1, fourteen; S2, 40; and S3, three.
6. Dan Ariely, The Upside of Irrationality: Defying Logic at Home and at Work (New York: HarperCollins, 2010), 10.
7. When Daniel Kahneman was awarded the 2002 Nobel Prize in Economics, the Nobel Committee noted that Kahneman and his longtime research partner, the late Amos Tversky, had “inspired a new generation of researchers in economics and finance to enrich economic theory using insights from cognitive psychology into intrinsic human motivation.”
8. Dan Ariely offers many such examples in Predictably Irrational: The Hidden Forces that Shape Our Decisions (New York: HarperCollins, 2008).
9. Examples about public policy are discussed by Richard H. Thaler and Cass Sunstein in Nudge: Improving Decisions about Health, Wealth, and Happiness (New Haven, CT: Yale University Press, 2008). Thaler has been a forceful advocate on policy issues such as retirement savings: Richard H. Thaler, “Shifting Our Retirement Savings into Automatic,” New York Times, April 6, 2013.
10. Many excellent examples are provided by Jason Zweig in Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich (New York: Simon & Schuster, 2007) and by Michael J. Mauboussin in More Than You Know: Finding Financial Wisdom in Unconventional Places (Boston: Harvard Business School Press, 2007).
11. Adam Smith, The Money Game (New York: Vintage Books, 1976), 72.
12. Some kinds of investments allow for direct control. Private equity investments involve buying enough of a company to shape its performance, and activist investors like William Ackman seek to change the direction of companies in which they invest. But for most people investing means buying and selling assets the value of which cannot be directly influenced. We hunt for bargains, looking for undervalued assets that we think may rise faster than the market, or perhaps overvalued assets that we will sell short. Even investors with deep pockets rarely influence directly the performance of their holdings. Warren Buffett is occasionally an exception, able to buy enough of a stock to move the market, as he did with a $10 billion purchase of IBM in late 2011, but even Buffett is mainly a value investor.
13. Philip E. Tetlock, Expert Political Judgment (Princeton, NJ: Princeton University Press, 2005), 41.
14. Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Straus and Giroux, 2011), 417.
15. Tom Wolfe, The Right Stuff (New York: Farrar, Straus and Giroux, 1979), 186.
16. Richard P. Feynman, “What Is and What Should Be the Role of Scientific Culture in Modern Society” (address to the Galileo Symposium, Italy, 1964), in The Pleasure of Findings Things Out: The Best Short Works of Richard P. Feynman (London: Penguin 1999), 106–107.
Chapter 2: The Question of Control
1. Ian Poulter, “Opinion,” Golf World, January 2011, 25.
2. Jon Feinstein, The Majors: In Pursuit of Golf’s Holy Grail (New York: Little, Brown, 1999), 119.
3. Jaime Diaz, “Perils of Putting: Duffers, Take Heart. A New Study by the PGA Tour Reveals That When It Comes to Putting, the Pros Aren’t So Hot Either,” Sports Illustrated, April 3, 1989, http://sportsillustrated.cnn.com/vault/article/magazine/MAG1068219/3/index.htm.
4. Diaz, “Perils of Putting.” Of the putts studied, 272 were measured at six feet in length, of which 54.8 percent were made successfully. For five-footers, the success rate was 58.9 percent for 353 putts, and for seven-footers, 53.1 percent of 256.
5. Jessica K. Witt, Sally A. Linkenauger, and Dennis R. Proffitt, “Get Me Out of This Slump! Visual Illusions Improve Sports Performance,” Psychological Science 23 (2012): 397–399. Whereas previous experiments had shown that successful performance leads to changes in perception, this experiment offered evidence of the reverse: changing perceptions can lead to improved performance.
6. Mark Robert Stone, Kevin Thomas, Michael Wilkinson, Andrew M. Jones, Alan St. Clair Gibson, and Kevin G. Thompson. “Effects of Deception on Exercise Performance: Implications for Determinants of Fatigue in Humans,” Medicine & Science in Sports & Exercise 44 (2012): 534–541.
7. Xan Rice, “Finish Line: An Olympic Marathon Champion’s Tragic Weakness,” New Yorker, May 21, 2012, 54.
8. Karl Kuehl, John Kuehl, and Casey Tefertiller, Mental Toughness: Baseball’s Winning Edge (Chicago: Ivan R. Dee, 2005), 90.
9. Ron Kroichick, “Giants’ Wilson Hopes Hitters Fear the Beard,” San Francisco Chronicle, October 7, 2010, http://www.sfgate.com/sports/kroichick/article/Giants-Wilson-hopes-hitters-fear-the-beard-3171420.php.
10. Tommy Lasorda and David Fisher, The Artful Dodger (New York: Arbor House, 1985), 165.
11. Lasorda and Fisher, Artful Dodger, 166.
12. Shelley E. Taylor and Jonathan D. Brown, “Illusion and Well-Being: A Social Psychological Perspective on Mental Health,” Psychological Bulletin 103, no 2 (March 1988): 193–210.
13. Taylor and Brown, “Illusion and Well-Being,” 204.
14. See also Elizabeth King Humphrey, “Be Sad and Succeed,” Scientific American, March 3, 2010, http://www.scientificamerican.com/article.cfm?id=be-sad-and-succeed.
15. Niebuhr’s authorship, for many years questioned, appears to have been validated. See Laurie Goodstein, “Serenity Prayer Skeptic Now Credits Niebuhr,” New York Times, November 28, 2009, A11.
16. A book published in 2009 uses this exact phrase for its title; see Eileen Flanagan, The Wisdom to Know the Difference: When to Make a Change—and When to Let Go (New York: Tarcher, 2009).
17. If we think people shouldn’t care, it’s because we imagine the goal is to win the prize. But if people are driven by something else, namely the joy of taking part, it makes sense. Whether you are playing because you actually think you can control the dice, or whether what you are getting is the thrill of participation, is a different matter. If it’s all about the experience, not the outcome, then of course it makes sense that people would rather do the rolling than watch someone else.
18. Langer defined the illusion of control as “an expectancy of a personal success probability inappropriately higher than the objective probability would warrant.” Ellen J. Langer, “The Illusion of Control,” Journal of Personality and Social Psychology 32 (1975): 311–328.
19. Francesca Gino, Zachariah Sharek, and Don A. Moore, “Keeping the Illusion of Control Under Control: Ceilings, Floors, and Imperfect Calibration,” Organizational Behavior and Human Decision Processes 114, no. 2 (March 2011): 104–114.
20. Atul Gawande, Better: A Surgeon’s Notes on Performance (London: Profile, 2007), 154.
21. Groopman, Jerome. How Doctors Think. New York: Houghton Mifflin, 2007. See also Daylian M. Cain and Allan S. Detsky, “Everyone’s a Little Bit Biased (Even Physicians),” JAMA 299, no. 24 (June 25, 2008): 2893–2895.
22. Rasmussen, Heather N., Michael F. Scheier, and Joel B. Greenhouse, Optimism and Physical Health: A Meta-analytic Review,” Annals of Behavioral Medicine, 37(3) (June 2009): 239–256.
23. Jerome Groopman, The Anatomy of Hope: How People Prevail in the Face of Illness (New York: Random House, 2003).
24. Barbara Ehrenreich, Bright-Sided: How Positive Thinking Is Undermining America (New York: Holt, 2009).
25. “[M]anagerial risk taking is an endeavor where a manager can use his judgment, exert control, and utilize skills.” Zur Shapira, Risk Taking: A Managerial Perspective (New York: Russell Sage Foundation, 1995), 48.
26. Shapira, Risk Taking, 80.
27. A few more kinds of errors have been suggested, sometimes tongue-in-cheek: Type III is to make the right decision but for the wrong reasons, and Type IV is to make the right decision but at the wrong time.
Chapter 3: Performance, Absolute and Relative
1. Advice of this nature goes back to the very first book I read on the topic, A Random Walk Down Wall Street, by Burton Malkiel, in 1976. A more recent example in the same vein is The Investment Answer: Learn to Manage Your Money and Protect Your Financial Future, by Daniel C. Goldie and Gordon S. Murray (New York: Business Plus, 2011).
2. Geoff McMaster, “School of Business Wins National Stock Market Contest,” ExpressNews, December 19, 2001, http://www.expressnews.ualberta.ca/article.cfm?id=1615.
3. McMaster, “School of Business Wins National Stock Market Contest.”
4. The fact that the students were playing with fictitious money also made them willing to take outsize bets, because they wouldn’t have to bear any losses.
5. Avinash K. Dixit and Barry J. Nalebuff, The Art of Strategy: A Game Theorist’s Guide to Success in Life and Business (New York: Norton, 2008), xvi.
6. Dixit and Nalebuff, The Art of Strategy, 271.
7. For such small stakes, some of us were no doubt prepared to bet on our favorite teams even if we didn’t think they would win. I would have been willing to lose a few dollars rather than experience the cognitive dissonance of cheering against a favorite. Viewed that way, a pool has both a financial and an emotional payoff.
8. The game in question was the AFC wild card game on December 22, 1984.
9. There is also the chance, in a contest like this with no money invested and relatively small payoffs for the university, that some teams will prefer to go for broke and risk everything, seeing the contest more as an exercise in fun than one in which the objective is to win something. There are psychic payoffs as well as monetary ones, and the interests of the team may not coincide entirely with those of their university; indeed, different team members may feel differently about their objectives and aims.
10. See The Red Queen in Organizations: How Competitiveness Evolves (Princeton, NJ: Princeton University Press, 2008) by William P. Barnett, a professor at Stanford’s Graduate School of Business.
11. Robert R. Wiggins and Timothy W. Ruefli, “Schumpeter’s Ghost: Is Hypercompetition Making the Best of Times Shorter?” Strategic Management Journal 26, no. 10 (2005): 887–911.
12. James G. March and Zur Shapira, “Variable Risk Preference and the Focus of Attention,” Psychological Science 99, no 1 (1992): 172–183; Elizabeth Boyle and Zur Shapira, “The Liability of Leading: Battling Aspiration and Survival Goals in Jeopardy’s Tournament of Champions,” Organization Science 23, no.4, (2012):1110–1113.
13. Jonathan Haidt, The Happiness Hypothesis: Putting Ancient Wisdom and Philosophy to the Test of Modern Science (London: Arrow Books, 2006).
14. Demonstration effects notwithstanding, there are examples in which the recovery of one patient helps another.
15. Thomas B. Newman and Michael A. Kohn, Evidence-Based Diagnosis (New York: Cambridge University Press, 2009).
16. David Bornstein, “The Dawn of Evidence-Based Budget,” New York Times, May 30, 2012, http://opinionator.blogs.nytimes.com/2012/05/30/worthy-of-government-funding-prove-it.
17. Jeffrey Pfeffer and Robert I Sutton, “Evidence-Based Management,” Harvard Business Review (January 2006): 63–74.
18. John Gapper, “McKinsey’s Model Springs a Leak,” Financial Times, March 10, 2011, 9.
19. Behavioral game theory is concerned precisely with competitive games and often relies on laboratory studies. See, for example, Colin Camerer’s Behavioral Game Theory: Experiments in Strategic Interaction (Princeton, NJ: Princeton University Press, 2003) or research by scholars such as Amnon Rapoport. Studies of judgment and choice, however, typically do not involve competition or relative performance.
Chapter 4: What It Takes to Win
1. Tyler Hamilton and Daniel Coyle, The Secret Race: Inside the Hidden World of the Tour de France: Doping, Cover-Ups, and Winning at All Costs (New York: Bantam Books, 2012); Ian Austen, “Bicycle Thieves: World-Class Cycling’s Drug Trade,” New York Times, September 12, 2012,C7.
2. Austin Murphy, “Guide to a Broken Tour: Tyler Hamilton Shines a Revealing Light on Cycling’s Drug Era,” Sports Illustrated, September 24, 2012, 18.
3. Ian Lovett, “‘Tattooed Guy’ Pivotal in Armstrong Case,” New York Times, October 18, 2012, B11.
4. Armstrong was explicit on the eve of the 2013 Tour de France. Le Monde asked, “When you raced, was it possible to perform without doping?” Armstrong replied, “That depends on which races you wanted to win. The Tour de France? No. Impossible to win without doping. Because the Tour is a test of endurance where oxygen is decisive.” “Lance Armstrong: ‘Impossible to Win Without Doping’,” USA Today, June 28, 2013, http://www.usatoday.com/story/sports/cycling/2013/06/28/lance-armstrong-impossible-win-tour-de-france-doping/2471413/. (Le Monde: “Était-il possible de réaliser des performance sans se doper?” Armstrong: “Cela dépend des courses que tu voulais gagner. Le Tour de France? Non. Impossible de gagner sans doper. Car le Tour est une épreuve d’endurance où l’oxygène est déterminent. Pour ne prendre qu’un exemple, l’EPO ne va pas aider un sprinteur à remporter un 100m, mais elle sera déterminante pour un coureur de 10,000 m. C’est évident.” Stéphane Mandard, “Lance Armstrong: Le Tour de France? Impossible de gagner sans dopage,” Le Monde, June 29, 2013, Sport & Forme, 5.)
5. A good description of the origins of Monte Carlo simulations in physics was provided by Professor David Spiegelhalter on Tails You Win: The Science of Chance (BBC4, December 20, 2012). See also Roger Eckhardt, “Stan Ulam, John von Neumann, and the Monte Carlo Method,” Los Alamos Science Special Issue 15 (1987): 131–137.
6. Michael E. Raynor, The Strategy Paradox: Why Committing to Success Leads to Failure (and What to Do About It) (New York: Currency Doubleday, 2007), 1.
7. Thomas J. Peters and Robert H. Waterman Jr., In Search of Excellence: Lessons from America’s Best Managed Companies (New York: Warner Books, 1982).
8. Robert I. Sutton, Weird Ideas That Work: 11½ ways to Promote, Manage, and Sustain Innovation (New York: Penguin, 2001).
9. Heike Bruch and Sumantra Ghoshal, A Bias for Action: How Effective Managers Harness Their Willpower, Achieve Results, and Stop Wasting Time (Boston: Harvard Business School Press, 2004), 9.
10. Robert R. Wiggins and Timothy W. Ruefli, “Schumpeter’s Ghost: Is Hypercompetition Making the Best of Times Shorter?” Strategic Management Journal 26, no. 10 (2005), 887–911.
11. Quentin Hardy, “Intel Tries to Secure Its Footing Beyond PCs,” New York Times, April 15, 2013, B1.
12. Dan Lovallo, Carmina Clarke, and Colin Camerer, “Robust Analogizing and the Outside View: Two Empirical Tests of Case-based Decision Making,” Strategic Management Journal 33, no. 5 (May 2012): 496–512.
Chapter 5: Confidence . . . and Overconfidence
1. Walter F. DeBondt and Richard Thaler, “Financial Decision-making in Markets and Firms: A Behavioral Perspective,” Handbooks in OR & MS 9 (1995): 385–410.
2. Scott Plous, The Psychology of Judgment and Decision Making (New York: McGraw-Hill, 1993), 217.
3. Joseph T. Hallinan, Why We Make Mistakes: How We Look Without Seeing, Forget Things in Seconds, and Are All Pretty Sure We Are Way Above Average (New York: Broadway Books, 2009), 9.
4. David Brooks, The Social Animal: A Story of How Success Happens (London: Short Books, 2011), 218.
5. Kenneth L. Fisher, “The Eight Biggest Mistakes Investors Make,” UT Today, no. 1 (2007): 50–53, http://www.fimm.com.my/pdf/investment%20strategies/3_June2007_8Biggestmistakesinv.pdf.
6. Nate Silver, The Signal and the Noise: The Art and Science of Prediction (London: Allen Lane, 2012), 359.
7. George Orwell, “Politics and the English Language,” A Collection of Essays. San Diego, CA: Harvest, 1981. 156-157.
8. Callie Moran, “Overconfident Romney Was So Sure of Victory That He Spent 25 Grand on Victory Fireworks,” Capitol Hill Blue, November 9, 2012, http://www.capitolhillblue.com/node/45630.
9. Peter Baker and Jim Rutemberg, “The Long Road to a Clinton Exit,” New York Times, June 8, 2008.
10. John Heilemann and Mark Halperin, Game Change: Obama and the Clintons, McCain and Palin, and the Race of a Lifetime (New York: HarperCollins, 2010), 223–224.
11. “Former FEMA Chief Says Bush Was Engaged but Overconfident,” Associated Press, March 1, 2006, http://www.foxnews.com/story/0,2933,186546,00.html.
12. Greg Bishop, “Pacquiao Stunned in Sixth Round,” New York Times, December 9, 2012, http://www.nytimes.com/2012/12/09/sports/juan-manuel-marquez-knocks-out-manny-pacquiao-in-sixth-round.html.
13. “Manny Pacquiao Will Not Give up Boxing, Despite Pleas from Family,” BBC, December 10, 2012, http://www.bbc.co.uk/sport/0/boxing/20666106.
14. Nick Wingfield and Brian Stelter, “A Juggernaut Stumbles,” New York Times, October 25, 2011, B1.
15. Dawn Kopecki, Clea Benson, and Phil Mattingly, “Dimon Says Overconfidence Fueled Loss He Can’t Defend,” Bloomberg News, June 14, 2012, http://www.bloomberg.com/news/2012-06-14/dimon-says-overconfidence-fueled-loss-he-can-t-defend.html.
16. Peter Wonacott, “Path to India’s Market Dotted with Potholes—Savvy Cola Giants Stumble over local agendas; KFC climbs back from the abyss,” The Wall Street Journal, September 12, 2006.
17. Chad Terhune, “Home Depot, Seeking Growth, Knocks on Contractors’ Doors—CEO looks to stave off critics and gain new customers with building supply unit,” The Wall Street Journal, August 7, 2006.
18. J. Lynn Lunsford and Daniel Michaels, “Bet on Huge Plane Trips up Airbus,” Wall Street Journal, June 15, 2006, http://online.wsj.com/article/SB115027552490479926.html.
19. Chip Heath and Dan Heath. Decisive: How to Make Better Choices in Life and Work (New York: Crown Business, 2013).
20. Ola Svenson, “Are We all Less Risky and More Skillful Than Our Fellow Drivers?” Acta Psychologica 47 (1981): 143–148. It is possible (although very unlikely) that more than 50 percent of drivers can be above the mean, although not above the median.
21. College Board, Student Descriptive Questionnaire (Princeton, NJ: Educational Testing Service, 1976–1977).
22. Todd R. Zenger, “Why Do Employers Only Reward Extreme Performance? Examining the Relationship Among Pay, Performance, and Turnover,” Administrative Science Quarterly 37, no. 2 (1992): 198–219.
23. Neil D. Weinstein, “Unrealistic Optimism about Future Life Events,” Journal of Personality and Social Psychology 39, no. 5 (1980): 806–820; Shelley E. Taylor and Jonathan D. Brown, “Illusion and Well-Being: A Social Psychological Perspective on Mental Health,” Psychological Bulletin 103, no 2 (March 1988): 193–210.
24. Marc Alpert, and Howard Raiffa, “A Progress Report on the Training of Probability Assessors” (unpublished manuscript, 1969), in Judgment Under Uncertainty: Heuristics and Biases, ed. Daniel Kahneman, Paul Slovic, and Amos Tversky (Cambridge, UK: Cambridge University Press, 1982).
25. Don Moore and Paul J. Healy, “The Trouble with Overconfidence,” Psychological Review 115, no. 2 (April 2008): 502–517.
26. Silver, Signal and the Noise, 183.
27. Tali Sharot, The Optimism Bias: A Tour of the Irrationally Positive Brain (New York: Pantheon Books, 2011), 15.
28. “NTSB Suggests Alcohol Detection Systems on All New Cars,” CBS Local, December 17, 2012, http://dfw.cbslocal.com/2012/12/17/ntsb-suggests-alcohol-detection-systems-on-all-new-cars/.
29. In an essay for the New Yorker, in which he described his effort as an adult learning to draw, Adam Gopnik began with an admission: “I hadn’t learned to draw because I had never been any good at drawing.” But then he offered an intriguing perspective on why people tend to overestimate and overplace, noting that as we grow up and choose our paths in life, we gravitate toward those things that we do well and no longer have to do those things at which we’re less competent. We can avoid the small humiliations of our school days, when the less gifted of us were called on to do long division, or act in a school play, or perform gymnastics, or do some other task we came to dread. As adults many of us go about our lives without the worry of being asked to do what we do poorly. The result is an illusion of competence. Gopnik observed: “Whatever sense of accomplishment we feel in adult life is less the sum of accomplishment than the absence of impossibility: it’s really our relief at no longer having to do things we were never good at doing in the first place—relief at never again having to dissect a frog or memorize the periodic table. Or having to make a drawing that looks like the thing we’re drawing.” Adam Gopnik, “Life Studies: What I Learned When I Learned to Draw,” New Yorker, June 27, 2011, 58.
30. J. Kruger, “Lake Wobegon Be Gone! The ‘Below-Average’ Effect and the Egocentric Nature of Comparative Ability Judgments,” Journal of Personality and Social Psychology 77 (1999): 221–232.
31. P. D. Windschitl, J. Kruger, and E. Simms, “The Influence of Egocentrism and Focalism on People’s Optimism in Competitions: When What Affects Us Equally Affects Me More,” Journal of Personality and Social Psychology 85 (2003): 389–408.
32. These findings are related to the Dunning-Kruger effect, in which unskilled people are unaware of their deficiencies and believe they are better than they really are, leading to illusory superiority, whereas highly skilled people are aware of their deficiencies and underestimate their (relative) abilities. Kruger and Dunning authors note that “the miscalibration of the incompetent stems from an error about the self, whereas the miscalibration of the highly competent stems from an error about others.” The questions about driving and drawing say nothing about the accuracy of ratings of absolute abilities (overestimation or underestimation), but only relative abilities (overplacement or underplacement). In both directions, people imagine that others are less extreme than they believe themselves to be. Kruger, Justin and David Dunning. “Unskilled and Unaware of It: How Difficulties in Recognizing One’s Own Incompetence Lead to Inflated Self-Assessments,” Journal of Personality and Social Psychology 77 (6), 1999, 1121–34.
33. Now and then a respondent seems to be immune to myopia. In one of my classes I had a respondent who rated himself as an excellent driver, but placed himself in the middle quintile, no better or worse than average, and also rated himself poor at drawing, yet again he placed himself in the middle of the pack, no better or worse than average. This response suggested that he understood that an extreme level of absolute skill was entirely ordinary in a relative sense. Of course, in a large sample we can probably find one respondent who says just about anything, so we should never make too much of a single answer. Yet the ability to see that a very high or low absolute ranking doesn’t mean much about relative placement seems to be very perceptive, as well as unusual.
34. David Brooks, “The Fatal Conceit,” New York Times, October 27, 2009, A31.
35. Samuel Clemens may have been thinking about his own life, growing up in Missouri, working at various jobs but never amounting to much until he joined his brother in Nevada, where he invented himself as a writer and chronicler of the American West. He became an American original, a writer, storyteller, humorist, and mordant observer of the human experience. He showed a willingness to try what had never been done before and was both confident in his abilities and ignorant enough to believe he could succeed. To set aside those limits and believe we can go beyond them may seem foolish, but if that’s what it takes to succeed, it may not be ignorance after all.
36. Paul McGee, Self-Confidence: The Remarkable Truth of Why a Small Change Can Make a Big Difference, 2nd ed. (Chichester, UK: Capstone, 2012); Mike McClement, Brilliant Confidence: What Confident People Know, Say and Do (Harlow, UK: Prentice Hall, 2010); Dr. Rob Yeung, Confidence: The Power to Take Control and Live the Life You Want (Harlow, UK: Pearson Life, 2011); and Paul McKenna, Instant Confidence: The Power to Go for Anything You Want (London: Transworld Publishers, 2006). The last of these, said to be a number one best seller, is by an author whose other titles include I Can Make You Happy, I Can Make You Smarter, I Can Make You Rich, and I Can Make You Thin.
37. Jeremy Eichler, “String Theorist: Christian Tetzlaff Rethinks How a Violin Should Sound,” New Yorker, August 27, 2012, 34.
Chapter 6: Base Rates and Breaking Barriers
1. Amos Tversky and Daniel Kahneman, “Judgment under Uncertainty: Heuristics and Biases,” Science 185, no. 4157 (1974): 1124–1131. See also Daniel Kahneman and Amos Tversky, “On the Psychology of Prediction,” Psychological Review 80 (1973): 237–257.
2. “An Essay Toward Solving a Problem in the Doctrine of Chances” first laid out the idea in Philosophical Transactions of the Royal Society of London 53 (1763): 370–418, http://www.socsci.uci.edu/~bskyrms/bio/readings/bayes_essay.pdf. Stephen E. Fienberg, “When Did Bayesian Inference Become Bayesian?” Bayesian Analysis 1, no. 1 (2006): 1–40.
3. In the extreme case that the population was said to be 100 percent lawyers, it should be obvious that anyone drawn from the sample has to be a lawyer, no matter what his or her hobbies or personal inclinations are. But when the ratios are .3/.7, or .7/.3, the likelihoods are scarcely affected.
4. Amos Tversky and Daniel Kahneman, “Evidential Impact of Base Rates,” in Judgment Under Uncertainty: Heuristics and Biases, ed. Daniel Kahneman, Paul Slovic, and Amos Tversky (Cambridge, UK: Cambridge University Press, 1982).
5. Ward Casscells, Arno Schoenberger, and Thomas Graboys “Interpretation by physicians of clinical laboratory results.” New England Journal of Medicine, 299: 18 (1978) 999–1001. Of the 999 healthy people, 95 percent accuracy means we will have 49.95 false positive results. Of the 1 afflicted, 95 percent accuracy means we will have 0.95 positive result. Out of 50.90 positive results (49.95 + 0.95), only 0.95/50.90, or 1.9 percent, have the disease. The other 49.95 out of 50.90, or 98.1 percent, are false positives.
6. Even so, articles continue to appear that describe the base rate bias as if it were something new. Although it was identified many years ago, much of the general public remains unaware of it, and in any event pointing out errors makes for a good story. See, for example, Tim Harford, “Screening: It’s All in the Numbers,” Financial Times, FT.com Magazine, December 10/11, 2011.
7. The Black Swan: The Impact of the Highly Improbable (New York: Random House, 2007).
8. If all the Blue Cabs but only three-fifths of the Green Cabs were on the road, we would have 15 Blue Cabs and (.6 × 85) = 51 Green Cabs. The true positive would still be 12 but the false positive only 10.2, and the chance that a car identified as a Blue Cab was in fact blue would be [12/(12+10.2)] = 54.1 percent, up from 41.4 percent.
9. Zhen-Xin Zhang, Gustavo C. Roman, Zhen Hong, Cheng-Bing Wu, Qui-Ming Qu, Jue-Bing Huang, Bing Zhou, Zhi-Ping Geng, Ji-Zing Wu, Hong-Bo Wen, Heng Zhao, and Gwendolyn E. P. Zahner, “Parkinson’s Disease in China: Prevalence in Beijing, Xian, and Shanghai,” Lancet 365 (February 12, 2005): 595–597. I am grateful to Mads Dalsgaard for this example and the reference.
10. National Center for Health Statistics, http://www.cdc.gov/nchs/pressroom/05facts/moreboys.htm. There are some variations by year, by age of the mother, and by ethnic group: “The highest sex birth ratio occurred in 1946 (1,059 male births per 1,000 females) while the lowest occurred in 1991 and again in 2001 (1,046 male births per 1,000 females). Combining all the years studied, older mothers (40 to 44 years of age and 45 years and over) have the lowest total sex birth ratios (1,038 and 1,039, respectively) and mothers 15 to 19 years of age had the highest sex birth ratio (1,054). For all available years combined, Chinese mothers (1,074) and Filipino mothers (1,072) had the highest differences between the number of boys born compared with girls, whereas non-Hispanic black mothers (1,031) and American Indian mothers (1,031) had the lowest.” “Trend Analysis of the Sex Ratio at Birth in the United States.” National Vital Statistics Reports 53, no. 20 (June 14, 2005).
11. Sharon Bertsch McGrayne, The Theory That Would Not Die: How Bayes’ Rule Cracked the Enigma Code, Hunted Down Russian Submarines, and Emerged Triumphant from Two Centuries of Controversy (New Haven, CT: Yale University Press, 2011), 26–28.
12. Atul Gawande, “The Bell Curve: What Happens When Patients Find Out How Good Their Doctors Really Are?” New Yorker, December 6, 2004, 82–91.
13. Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Straus and Giroux, 2011), 241–247.
14. Project planning expert Bent Flyvbjerg has conducted extensive research about project planning and offers a three-step approach to warding off the planning fallacy: identify the relevant reference class, establish a base line for that class, and make adjustments to that baseline to the extent warranted. Bent Flyvbjerg, Mette K. Skamris Holm, and Søren L. Buhl, “How (In)Accurate Are Demand Forecasts in Public Works Projects?” Journal of the American Planning Association 71 (2005):131–146.
15. Dan Lovallo and Daniel Kahneman, “Delusions of Success: How Optimism Undermines Executives’ Decisions,” Harvard Business Review (July 2003): 63.
16. Thomas L. Friedman, “Obama’s Best-Kept Secrets,” New York Times, October 21, 2012, SR1.
17. George Bernard Shaw, Maxim 124, “Maxims for Revolutionists,” in Man and Superman: A Comedy and Philosophy (London: Penguin Books, 2000).
18. H. Guyford Stever and James J Haggerty, Flight (New York: Time Inc., 1965), 23.
19. Chuck Yeager and Leo Janos, Yeager: An Autobiography (New York: Bantam Books, 1985), 103.
20. Yeager and Janos, Yeager, 117–118.
21. Yeager and Janos, Yeager, 118.
22. Yeager and Janos, Yeager, 137.
23. Yeager and Janos, Yeager, 121.
24. Yeager and Janos, Yeager, 132.
25. Yeager and Janos, Yeager, 150.
26. Chuck Yeager, Bob Cardenas, Bob Hoover, Jack Russell, and James Young, The Quest for Mach One: A First-Person Account of Breaking the Sound Barrier (New York: Penguin, 1997), 99.
27. Michael Walsh, “Solar-Paneled Plane Completes First Leg of Historic Cross-Country Flight from San Francisco to New York,” New York Daily News, May 4, 2013, http://www.nydailynews.com/news/national/all-solar-airplane-making-jfk-article-1.1335172.
28. “No Sun, No Problem for Plane,” Associated Press in Shanghai Daily, May 4, 2013, A3.
29. Valérie Lion, “L’Entretien: Bertrand Piccard ‘Explorer, c’est aller au-delà des évidences,’” L’Express 3187 (August 1, 2012): 8–11 (author’s translation). “Mon but n’est pas de dépasser les limites extérieurs, physiques. C’est de dépasser les limites qu’on s’inflige à soi-même. L’être humain s’empêche de sortir de ce qu’il connaît, de se mettre dans des situations où il risquerait de perdre le contrôle. Ce sont justement ces situations-là qui m’intéressent, quand on entre dans l’inconnu.”
Chapter 7: Better Decisions over Time
1. http://www.basketball-reference.com/leagues/NBA_2012_leaders.html.
2. Michael Austin, “Building the Perfect Arc: Research Shows Players Need to Keep Shot Arc around 45 Degrees,” Winning Hoops, May/June 2010, 20–27. See also www.noahbasketball.com.
3. Benjamin S. Bloom, ed., Developing Talent in Young People (New York: Ballantine Books, 1985).
4. Stephen J. Dubner and Steven D. Levitt, “A Star Is Made,” New York Times, May 7, 2006, http://www.nytimes.com/2006/05/07/magazine/07wwln_freak.html?pagewanted=all.
5. See K. Anders Ericsson, Ralf Th. Krampe, and Clemens Tesch-Römer, “The Role of Deliberate Practice in the Acquisition of Expert Performance,” Psychological Review 100, no. 3 (1993): 363–406.
6. Ericsson, K. Anders, Michael J. Prietula, and Edward T. Cokely, “The Making of an Expert,” Harvard Business Review, July–August 2007, 114–121.
7. “We observed that the deliberative mindset leads to an accurate and impartial analysis of information that speaks to the feasibility and desirability of possible goals, whereas the implemental mindset promotes an optimistic and partial analysis of such information. Moreover, the deliberative mindset is associated with open-mindedness, whereas the implemental mindset is characterized by closed-mindedness.” Quotation from Professor Gollwitzer’s Web site, http://www.psych.nyu.edu/gollwitzer/.
8. Peter M. Gollwitzer and Ronald F. Kinney, “Effects of Deliberative and Implemental Mind-sets on Illusion of Control,” Journal of Personality and Social Psychology 56, no. 4 (1989): 531–542.
9. One of many examples comes from Carl Richard, in a blog in the New York Times: “Viewing the Glass as Half Full, but Not Too Full,” March 18, 2013. Richard discussed the pros and cons of positive thinking, but like most people did not add the temporal dimension and ask when it is best to take an optimistic view and when it is best to insist on a detached and realistic view. http://bucks.blogs.nytimes.com/2013/03/18/viewing-the-glass-as-half-full-but-not-too-full/?src=recg.
10. This dramatic incident has already become the stuff of legend. It has been cited by Gary Klein as an example of “recognition primed decision making.” As Klein tells it, Captain Chesley Sullenberger went with the first option that could work, rather than following a classical decision model approach of evaluating all options at once. It has also been mentioned by Dr. Atul Gawande as an example of the power of checklists, with Sullenberger proceeding in a logical sequence to determine the cause of the problem and identify the best action.
11. If you’re wondering why golfers overestimate their ability to sink a six-foot putt, described in Chapter Two, it may be because a short putt involves little deliberation. Unlike shots that call for assessment and choices of club, a six-foot putt is often just a straight shot.
12. Dr. Bob Rotella, Golf Is a Game of Confidence (New York: Simon & Schuster, 1996), 18.
13. “Harrington using electrodes in battle with the left side of his brain,” The Independent, March 6, 2013, http://www.independent.ie/sport/golf/harrington-using-electrodes-in-battle-with-the-left-side-of-his-brain-29113728.html.
14. Brian Keogh, “Harrington and the Man with Two Brains,” Irish Golf News, March 6, 2013, http://www.irishgolfdesk.com/news-files/2013/3/6/harrington-and-the-man-with-two-brains.html.
15. http://sports.espn.go.com/golf/masters10/news/story?id=5075606. The Associated Press reported: “The signature moment came on the 13th, a hole Mickelson has dominated like no other at Augusta. With a 2-shot lead, he was stuck between two Georgia pines and had just over 200 yards to the hole. He never considered anything but a shot at the green. ‘I was going to have to go through that gap if I laid up or went for the green,’ Mickelson said. ‘I was going to have to hit a decent shot. The gap . . . it wasn’t huge, but it was big enough, you know, for a ball to fit through. I just felt like at that time, I needed to trust my swing and hit a shot,’ he said. ‘And it came off perfect.’”
16. Mickelson’s historic shot can be seen on YouTube at http://www.youtube.com/watch?v=Gh1ZVLuZdvE.
17. http://sports.espn.go.com/golf/masters10/news/story?id=5075606.
18. http://www.golf.com/tour-and-news/mickelsons-guts-talent-came-together-shot-defined-masters#ixzz2LSUceD00.
19. Ericsson, Prietula, and Cokely, “Making of an Expert,” 115.
20. Daniel Coyle, The Talent Code: Greatness Isn’t Born. It’s Grown. Here’s How (New York: Bantam, 2009); David Shenk, The Genius in All of Us: Why Everything You’ve Been Told About Genetics, Talent, and IQ Is Wrong (New York: Anchor, 2011); Matthew Syed, Bounce: The Myth of Talent and the Power of Practice: Beckham, Serena, Mozart, and the Science of Success (New York: Harper, 2011).
21. Joshua Foer, Moonwalking with Einstein: The Art and Science of Remembering Everything (New York: Penguin, 2012).
22. In fact, not even Anders Ericsson makes the claim that ten thousand hours of practice leads predictably to success. A twenty-nine-year-old named Dan McLaughlin, who had never played golf before, decided in 2010 to devote himself to playing golf for ten thousand hours, essentially full time for six and a half years, with the goal of qualifying for the PGA Tour, which would make him one of the top 250 or so golfers in the world. Can he do it? Ericsson isn’t sure: “Nobody has done it, which means nobody knows how it’s going to wind up. He’s like Columbus.” Businessweek comments that McLaughlin may never become an excellent golfer, but he’s talented at self-promotion. Joel Stein, “From Doofus to Genius?” Bloomberg Businessweek, November 29–December 4, 2011, 101.
23. Vanderbilt University researchers David Lubinski and Camilla Benbow tracked more than two thousand people who had scored in the top 1 percent of an intelligence test at age thirteen. They found that of those who were at the very top—the 99.9th percentile, or the “profoundly gifted”—were three to five times as likely to eventually earn a doctorate, register a patent, or publish a scientific article, as those who were only in the top 99.1th percentile. Among the top students, outstanding talent at an early age proved to be an important predictor of the very highest levels of success. Very high intellectual ability confers an enormous real-world advantage for the most demanding accomplishments. In further research, this time with pianists, Lubinski and Benbow confirmed a strong positive correlation between practice habits and sight-reading performance, but also determined that an innate mental talent, known as working memory capacity, was important as well. David Z. Hambrick and Elizabeth J. Meinz, “Sorry, Strivers: Talent Matters,” New York Times, November 20, 2011, SR12.
24. Steven Pinker, “Malcolm Gladwell, Eclectic Detective,” New York Times, November 15, 2009, BR1.
25. Geoff Colvin. Talent Is Overrated: What Really Separates World-Class Performers from Everybody Else, New York: Portfolio Trade, 2010, 1–2 and 199.
26. Ericsson, Prietula, and Cokely, “Making of an Expert,” 118.
27. Ericsson, Prietula, and Cokely, “Making of an Expert,” 119.
Chapter 8: Decisions of a Leader
1. Joseph S. Nye Jr., The Powers to Lead (Oxford: Oxford University Press, 2008), 18.
2. Jack Welch and Suzy Welch, “How Not to Succeed in Business,” Business Week, March 2, 2009, 74.
3. In A Force for Change: How Leadership Differs from Management (New York: Free Press, 1990), John Kotter argues that leadership is a force for change, but management emphasizes the status quo. In my view the distinction between leaders and managers is not only a false dichotomy, but one that does a disservice to managers; because leadership is often an aspirational term, management suffers by comparison. Henry Mintzberg takes an opposing and wise view in “We’re Overled and Undermanaged,” Business Week, August 17, 2009, 68.
4. Nye, Powers to Lead, 70. “If emotional intelligence is not authentic, others will likely find out in the long run, but successful management of personal impressions requires some of the same emotional discipline and skills possessed by good actors.” A similar mention of acting is made by Warren Bennis: “Like great actors, great leaders create and sell an alternative vision of the world, a better one in which we are are an essential part.” “Acting the Part of a Leader,” Business Week, September 14, 2009, 80.
5. Speech presented at Rice University, September 12, 1962. The exact quote was: “We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard.”
6. Chris Kraft, Flight: My Life in Mission Control (New York: Dutton, 2001), 82.
7. Kraft, Flight, 229.
8. Stephen B. Johnson, The Secret of Apollo: Systems Management in American and European Space Programs (Baltimore, MD: Johns Hopkins University Press, 2002), 146.
9. Sy Liebergot, Apollo EECOM: Journey of a Lifetime (Burlington, ON: Apogee Books, 2003), 138.
10. According to Liebergot, it was Swigert who radioed: “Okay, Houston, we’ve had a problem here.”
11. Liebergot, Apollo EECOM, 140.
12. Gene Kranz, Failure Is Not an Option: Mission Control from Mercury to Apollo 13 and Beyond (New York: Berkley Books, 2000), 314.
13. Miles O’Brien, CNN Anchor interview, “Veteran NASA Flight Director Discusses Book About Race to the Moon,” CNN Sunday Morning News, May 7, 2000.
14. Kranz, Failure Is Not an Option, 321.
15. It is not clear whether Kranz said the memorable line, “Failure is not an option.” Some claim it was written by the screenwriters. But it summed up Kranz’s attitude, and he used the phrase for the title of his 2000 autobiography.
16. Gary Klein has used the crisis aboard Apollo 13 as an example of organizational problem solving, with examples of six distinct purposes: generating new actions, providing forecasts, formulating plans, deriving diagnoses, making decisions, and revising goals. I have looked at the same story from the perspective of confidence and leadership. Gary Klein, Sources of Power: How People Make Decisions (Cambridge, MA: MIT Press, 1998).
17. Kranz, Failure Is Not an Option, 12. When the mission was over, NASA’s deliberative mind-set returned to the fore. Expressions of certainty—“Failure is not an option” and “This crew is coming home”—were set aside as NASA reverted to rational analysis. A special panel, the Cortright Commission, examined every major component, from cryogenic tanks to computers, at every moment in its history, from design to manufacture to safety testing to deployment. The Cortright Commission found that the explosion was caused by the confluence of two earlier faults. Thermostat switches on the Apollo fuel tanks had originally been designed for the spacecraft’s 28-volt power grid, but were not modified when new 65-volt heaters were installed, leaving 28-volt switches on a 65-volt tank. That was serious, but not sufficient to cause the explosion until combined with a second error. A fuel tank had been dropped after its use on Apollo 7 in October 1968, then installed in slightly damaged condition on Apollo 13. That damage, although small and undetected, meant that a thermostat was fused shut while 65 volts surged through the tanks, creating an enormous buildup of pressure and eventually an explosion. The report concluded: “While the exact point of initiation of combustion and the specific propagation path involved may never be known with certainty, the nature of the occurrence is sufficiently well understood to permit taking corrective steps to prevent its recurrence.” The tone of the report, consistent with NASA culture, was fact based and unemotional. NASA was once again in a supremely analytical mode, sparing no cost to identify the root cause of failure and to eliminate problems from future missions. Yet in three days when it had mattered most, from the first frantic moments when the extent of the explosion was clear until the final splashdown, an implemental mind-set had prevailed.
18. Gene Kranz, correspondence with author, March 2010.
19. Chris Kraft, Flight: My Life in Mission Control (New York: Dutton, 2001), 337.
20. Kranz, correspondence.
21. We tell the story of Apollo 13 because everything turned out well, which is an example of the survivor bias. We’ll never know if Mission Control would have performed as brilliantly for the Challenger space shuttle mission in January 1986, because the explosion seventy seconds after launch destroyed the vehicle. Lost amid the cheering about Apollo 13 is an uncomfortable fact: if the explosion had taken place at a slightly different time, even the best leadership, teamwork, and tenacity would not have gotten Lovell, Haise, and Swigert home safely. The explosion in Apollo 13’s service module took place fifty-five hours into the mission. Had it taken place a few hours earlier, there wouldn’t have been enough oxygen left to support three men for the time needed to get back to Earth. Had the explosion taken place a day later, after the lunar module had descended to the moon’s surface and the command module was orbiting the moon, all would have been lost. And had the explosion been slightly more powerful, tearing away additional life-support systems, there would have been no chance for a safe return. Under only slightly different conditions, we would never have had a chance to marvel at the brilliant dedication and grace under pressure of Mission Control and the crew. Apollo 13: The NASA Mission Reports (Burlington, ON: Apogee Books, 2000), 4.
22. Welch and Welch, “How Not to Succeed in Business,” 74.
23. Walter Isaacson, Steve Jobs (New York: Little, Brown, 2011); Murad Ahmed, “Jobs: The Special One,” The Times, Saturday Review, October 29, 2011, 16.
24. Typical of recent treatments of authenticity is the mention by Rob Goffee and Gareth Jones in “Managing Authenticity: The Great Paradox of Leadership,” Harvard Business Review (December 2005): 87–94: “Leaders and followers both associate authenticity with sincerity, honesty, and integrity. It’s the real thing—the attribute that uniquely defines great leaders.” One must ask, however, if authenticity, objectively defined, leads to great leadership, or if those considered to be great leaders are perceived to be authentic. The latter, in common speech, seems more likely than the former.
25. Apollo 13 called for a very high level of performance, but an absolute level, not one with relative performance as in competition.
26. “Sincerity, he said, requires us to act and really be the way that we present ourselves to others. Authenticity involves finding and expressing the true inner self and judging all relationships in terms of it.” Orlando Patterson, “Our Overrated Inner Self,” New York Times, December 26, 2006, A35. Patterson refers to Lionel Trilling, Sincerity and Authenticity (Cambridge, MA: Harvard University Press, 1971).
27. “‘Duty, Honor, Country’—those three hallowed words reverently dictate what you ought to be, what you can be, what you will be. They are your rallying point to build courage when courage seems to fail, to regain faith when there seems to be little cause for faith, to create hope when hope becomes forlorn.” Gen. Douglas MacArthur, speech to the Corps of Cadets at the U.S. Military Academy at West Point, New York, May 12, 1962.
28. Patterson, “Our Overrated Inner Self.”
29. Others are even more scathing about the current emphasis on authenticity. Simon Critchley, a professor of philosophy, and Jamieson Webster, a psychoanalyst, write: “In the gospel of authenticity, well-being has become the primary goal of human life. Rather than being the by-product of some collective project, some upbuilding of the New Jerusalem, well-being is an end in itself. . . . Authenticity, needing no reference to anything outside itself, is an evacuation of history. The power of now. At the heart of the ethic of authenticity is a profound selfishness and callous disregard of others. This ideology functions prominently in the contemporary workplace, where the classical distinction between work and nonwork has broken down.” Simon Critchley and Jamieson Webster, “The Gospel According to ‘Me,’” New York Times, June 30, 2013, SR8.
30. Patterson, “Our Overrated Inner Self.”
31. “Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.” Thomas Boswell, Life of Johnson (Oxford: Oxford University Press, 2008), 849.
32. Carol J. Loomis, “Why Carly’s Bet Is Failing,” Fortune, February 7, 2005, 50–64.
33. Rakesh Khurana, Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs (Princeton, NJ: Princeton University Press, 2002).
34. James G. March and Zur Shapira, “Managerial Perceptions on Risk and Risk-Taking,” Management Science 33 (1987): 1404–1418.
35. Barry M. Staw, “Leadership and Persistence,” in Leadership and Organizational Culture: New Perspectives on Administrative Theory and Practice, ed. Thomas J. Sergiovanni and John E. Corbally (Champaign: University of Illinois Press, 1986), 72–84.
36. Staw, “Leadership and Persistence,” 82.
37. For a review, see Barry M. Staw, “The Escalation of Commitment to a Course of Action,” Academy of Management Review 6, no. 4 (1981): 577–587.
38. Staw, “Leadership and Persistence,” 80.
39. Nye, The Powers to Lead, 124.
Chapter 9: Where Models Fear to Tread
1. Ashlee Vance, “Algorithms on the Prairie,” Bloomberg Businessweek, March 26, 2012, 37–39.
2. John Tierney, “From Tinseltown to Splitsville: Just Do the Math,” New York Times, September 19, 2006, A25.
3. They included the circuit court of origin, the issue area, the type of petitioner, and the ideological direction of the lower court ruling.
4. Ian Ayres, Super Crunchers: Why Thinking-By-Numbers Is the New Way to Be Smart (New York: Bantam Dell Books, 2007). The original citation is Andrew D. Martin et al., “Competing Approaches to Predicting Supreme Court Decision Making,” Perspectives on Policy 2 (2004): 763; Theodore W. Ruger et al., “The Supreme Court Forecasting Project: Legal and Political Science Approaches to Predicting Supreme Court Decisionmaking,” Columbia Law Review 104 (2004): 1150.
5. Orley Ashenfelter, “Predicting the Quality and Prices of Bordeaux Wine,” Economic Journal 118, no. 529 (June 2008): F174–F184; Ayres, Super Crunchers, 1–6.
6. Orley Ashenfelter’s model for predicting the quality of wine has by now been reported many times, not only by Ian Ayres but also by Michael Mauboussin in Think Twice (Boston: Harvard Business Press, 2009) and by Daniel Kahneman in Thinking, Fast and Slow (New York: Farrar, Straus and Giroux, 2011).
7. Ayres, Super Crunchers, 114.
8. Bill James. Solid Fool’s Gold: Detours on the Way to Conventional Wisdom (Chicago: ACTA Sports, 2011), 185.
9. Adapted from Joseph Adler, Baseball Hacks: Tips & Tools for Analyzing and Winning with Statistics (Sebastapol, CA: O’Reilly, 2006), 313. I have left this example at a fairly broad level, considering only whether runs are scored in the inning. The analysis could be more sophisticated, examining particular pitchers and batters, the innings, the number of runs ahead or behind, whether home or visitor, and more. Nor have I considered attempted bunts that either led to the batter reaching base safely—beating it out for a hit, or the fielders making an error—or bunts that led to the runner being forced out at second. But as a first cut, as a way to show how analysis of a large data set can show overall effectiveness, the insights are compelling.
10. James, Solid Fool’s Gold, 186.
11. Tim Adams, “How a Book about Baseball Statistics Changed the Way We Think about Football—Forever,” Esquire, September 2011, 201.
12. Jonah Keri, The Extra 2%: How Wall Street Strategies Took a Major League Team from Worst to First (New York: Ballantine Books, 2011), 188.
13. Keri, Extra 2%, 192.
14. Jon Swartz, “San Francisco Giants Ride Techball to the Top,” USAToday, March 31, 2013, http://www.usatoday.com/story/tech/2013/03/31/giants-social-media-world-series-technologh/2013497/.
15. Susan Slusser, “Can’t Keep Beane Down: No More Talk of Moneyball, Please,” San Francisco Chronicle, July 12, 2009, B1–B7.
16. Michael Lewis, “Out of Their Tree,” Sports Illustrated, March 1, 2004, http://sportsillustrated.cnn.com/vault/article/magazine/MAG1031308/index.htm.
17. Paul White, “‘Moneyball’ Principles Have Become Old Hat,” USA Today, September 21, 2011, 6C.
18. Bill James rates Morgan the best second baseman of all time, ahead of Eddie Collins and Rogers Hornsby. Bill James Historical Baseball Abstract (New York: The Free Press, 2001), 479.
19. Tommy Craggs, “Say-It-Ain’t-So Joe,” SF Weekly, July 6, 2005, http://www.sfweekly.com/2005-07-06/news/say-it-ain-t-so-joe.
20. The phrase comes from Theodore Roosevelt’s speech, “Citizenship in a Republic,” on April 23, 1910. “It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming.” http://www.theodore-roosevelt.com/trsorbonnespeech.html.
21. Joe Morgan and David Falkner, Joe Morgan: A Life in Baseball (New York: W.W. Norton & Co., 1993), 39.
22. Pete Rose could serve equally well as an example, achieving outstanding results through hard work and a strong mental attitude, but Rose is neither in the Hall of Fame nor a member of baseball’s “club.” A teammate, Merv Rettenmund, observed: “Peter’s confidence was at such a high level that if he had a bad week, he figured that was more hits he had coming to him the next week. He turned it into a positive. Good hitters learn from their failures, but they don’t dwell on them. Pete was the ultimate example of that.” Quoted in Michael Sokolove, Hustle: The Myth, Life, and Lies of Pete Rose (New York: Simon & Schuster, 1990), 90.
23. David Leonhardt, “Science and Art at Odds on the Field of Dreams,” New York Times, August 28, 2005, http://www.nytimes.com/2005/08/28/sports/28iht-THEORIES.html.
24. Philip E. Tetlock, Expert Political Judgment: How Good Is It? How Can We Know? Princeton, NJ: Princeton University Press, 2005. Daniel Kahneman remarked that “Tetlock has set the terms for any future discussion of this topic.” Thinking, Fast and Slow, 218.
25. Joan Hoff, Nixon Reconsidered (New York: Basic Books, 1995), 6, quoted in Margaret MacMillan, Nixon and Mao: The Week That Changed the World (New York: Random House, 2007).
26. Felicia Sonmez, “Vice President Biden Predicts Supreme Court Won’t Rule Health Care Law Unconstitutional,” Washington Post, April 1, 2012, http://www.washingtonpost.com/blogs/post-politics/post/vice-president-biden-predicts-supreme-court-wont-rule-health-care-law-unconstitutional/2012/04/01/gIQADBE8oS_blog.html.
27. Jennifer Bendery, “Nancy Pelosi Predicts 6–3 Supreme Court Vote in Favor of Health Care Law,” Huffington Post, April 4, 2012, http://www.huffingtonpost.com/2012/04/04/nancy-pelosi-health-care-law_n_1402908.html.
28. Dylan Byers, “Dick Morris Fesses Up,” Politico.com, November 13, 2012, http://www.politico.com/blogs/media/2012/11/dick-morris-fesses-up-149453.html.
29. In July 2013, Nate Silver announced he was leaving the New York Times for a new role at ESPN that would let him combine sports and also report on politics for ABC News. ESPN and ABC are both owned by Disney, leading the Drudge Report to offer a parting shot: “Nate Silver joins Mickey Mouse media empire.” Stelter, Brian. “Blogger for Times Is to Join ESPN Staff,” New York Times, July 20, 2013, B6.
30. Nate Silver, The Signal and the Noise: Why So Many Predictions Fail—but Some Don’t (New York: Penguin, 2012), 126.
31. Silver, The Signal and the Noise, 243–245. In Thinking Statistically, Uri Bram uses a similar example, this time asking whether your girlfriend who told you she was going home because she wasn’t feeling well but snuck off to have dinner with a former boyfriend is cheating on you. Perhaps these are just meant as ways to make statistics compelling to a wide audience, or maybe these are the questions that statisticians tend to think about?
32. The taxicab and medical test examples were slightly simpler, in that the false positive and false negative rates were the same. We were simply told the witness was accurate 80 percent of the time, with no difference between false negatives and false positives—she was equally likely to call a Green Cab blue as she was to call a Blue Cab green. The same applied to the medical test, which was said to have a false positive of 5 percent, but no mention was made of false negatives.
33. Nate Silver explained this probability of .5 as follows: “If he’s cheating on you, it’s certainly easy enough to imagine how the panties got there. Then again, even (and perhaps especially) if he is cheating on you, you might expect him to be more careful.” Silver seems to be saying: maybe he’s cheating on you and maybe he isn’t, so let’s call it 50/50. But that’s not what 50 percent means here. This base rate means that if he is having an affair, 50 percent of the time mysterious underwear will wind up in the dresser, and 50 percent it won’t. This figure seems much too high (although I don’t claim to be an expert). I suspect Silver really meant that 50 percent was the chance of an affair given that you found the underwear, which is the question we’re trying to solve.
34. Jeremy Fox: “One unfortunate side effect of the increasing popularity of technically-sophisticated, computationally-intensive statistical approaches in ecology has been to make ecologists even more reluctant to engage with philosophical issues—i.e. less fluent, or else less likely to care about fluency. It seems like there’s a ‘shut up and calculate the numbers’ ethos developing, as if technical proficiency with programming could substitute for thinking about what the numbers mean.” http://oikosjournal.wordpress.com/2011/10/11/frequentist-vs-bayesian-statistics-resources-to-help-you-choose/.
Chapter 10: When Are Winners Cursed?
1. Edward C. Capen, Robert V. Clapp, and William M. Campbell, “Competitive Bidding in High-Risk Situations,” Journal of Petroleum Technology 23 (1971): 641.
2. Capen, Clapp, and Campbell, “Competitive Bidding in High-Risk Situations,” 644.
3. “The Tale of the ‘Winner’s Curse,’ Bidding Science Saved $$,” http://www.aapg.org/explorer/2004/12dec/capen.cfm.
4. Capen, Clapp, and Campbell, “Competitive Bidding in High-Risk Situations,” 647.
5. Capen, Clapp, and Campbell, “Competitive Bidding in High-Risk Situations,” 641–653.
6. Max H. Bazerman and William F. Samuelson, “I Won the Auction but I Don’t Want the Prize,” Journal of Conflict Resolution 27 (1983): 618–634.
7. Richard H. Thaler, “The Winner’s Curse,” Journal of Economic Perspectives 2, no. 1 (1988): 191–202.
8. Nate Silver, The Signal and the Noise: Why So Many Predictions Fail—but Some Don’t (New York: Penguin, 2012), 359.
9. In Think Twice: Harnessing the Power of Counterintuition (Boston: Harvard Business Press, 2009), Michael Mauboussin explains that he runs similar experiments with his class on financial investments, and financial markets, to teach the dangers of competitive auctions.
10. It’s also an example of a sealed first-price auction, as each party places a bid without knowing the bids of others, and the winner pays the full amount bid. Sealed first-price auctions often result in very high winning bids, because bidders can’t see what others are willing to pay. Other auction formats lessen the tendency to overpay. In sealed second-price auctions, also known as Vickrey auctions after Nobel Prize–winning economist William Vickrey, the top bidder pays the amount bid by the runner-up, or second-price. That way the winner is protected from his excesses, although not from those of the second-place bidder. In open ascending price auctions, also called English auctions, participants bid openly with full knowledge of one another’s bids. Finally, in open descending price auctions, also known as Dutch auctions, the auctioneer begins with a high asking price and then lowers the price until a bidder is willing to buy. Each kind of auction has somewhat different bidding dynamics and lends itself to different tactics, but the winner’s curse can occur in all of them.
11. Daniel Kreps, “Lennon’s ‘A Day in the Life’ Lyrics Sell for $1.2 Million,” Rolling Stone, June 18, 2010, http://www.rollingstone.com/music/news/lennons-a-day-in-the-life-lyrics-sell-for-1-2-million-20100618.
12. J. J. Taber, F. D. Martin, and R. S. Seright, “EOR Screening Criteria Revisited-Part 1: Introduction to Screening Criteria and Enhanced Recovery Field Projects,” SPE Reservoir Engineering, 12, no. 3 (August 1997): 189–198.
13. Keith Schaefer, “Natural Gas: Costs Go Down as Learning Curve Goes Up,” www.oilandgas-investments.com, June 6, 2009. “That learning curve is still happening. Production out of these long horizontal wells is getting better in all the unconventional gas (and oil) plays in North America.. . . . And as I wrote in an earlier article, the energy producers are learning how to frac these plays much better, using special mixes of chemicals and water to get the most oil or gas out of these new, very tight reservoirs. It can sometimes take some expensive trial and error on how to get that frac formula right. Tristone estimates the average break even level of these new shale plays is now hovering around $5/mcf, with the best plays already at $4, and as the learning curve goes up, the cost curve will continue to go down, taking the break-even price for natural gas production down with it.”
14. “Greater Prudhoe Bay,” BP Fact Sheet, http://www.bp.com/liveassets/bp_internet/globalbp/STAGING/global_assets/downloads/A/abp_wwd_alaska_prudhoe_bay_fact_sheet.pdf.
15. I assumed that companies get better at exploration, drilling, and extraction at between 0 and 2 percent each year, with an average of 1 percent. That means a company would improve its productivity between 0 and 6 percent per year, but 3 percent on average. To keep things simple, I assumed that improvements in exploration, drilling, and extraction are independent not only of one another in any given year but also across years, such that there’s no carryover from one year to the next.
16. Max H. Bazerman, Judgment in Managerial Decision Making, 2nd ed. (New York: Wiley, 1990), 143. Despite the book’s title, many examples have little to do with the decisions that real managers face; indeed, there is no consideration of what makes a managerial decision different from other kinds.
17. One of the first explanations in terms of chief executive hubris came from Richard Roll, “The Hubris Theory of Corporate Takeovers,” Journal of Business 59, no. 2 (1986): 197–216.
18. The evidence is based on financial markets’ immediate responses to the announcement of an acquisition. If financial markets are efficient, or at least efficient most of the time, then all that’s publicly known is factored in at the time of acquisition. When the announcement is made that Company A will pay a given sum to acquire Company B, the change in their share prices reflects the market’s expectation of changes in financial performance. We expect the share price of the acquired firm to go up, for otherwise there would be no sale, but what about the price of the acquiring firm? If the deal is expected to be a good move for the acquiring firm, we would expect its share price to go up as well. But that’s not what usually happens. The market usually sends the shares of the acquiring company lower, reflecting a sense that benefits will not be as great as the amount paid.
19. Mark L. Sirower and Sumit Sahni, “Avoiding the ‘Synergy Trap’: Practical Guidance on M&A Decisions for CEOs and Boards,” Journal of Applied Corporate Finance 18, no. 3 (Summer 2006): 83–95. Recently there has been evidence of a change. JP Morgan reported in 2012 that investor responses to acquisitions have moved from slightly negative on average to somewhat positive. One explanation, however, is that as markets learned to be skeptical of most deals, fewer were attempted, leaving only the most credible and likely to succeed to go through. Thus, the average improves because the mix of deals changes. See Corporate Finance Advisory and Mergers & Acquisitions, Uncorking M&A: The 2013 Vintage (J.P. Morgan, December 2012), https://www.jpmorgan.com/cm/BlobServer/JPMorgan_CorporateFinanceAdvisory_MA.pdf.
20. Edward E. Whitacre Jr., Corporate Acquisitions Can Create Winners: A Case in Point, The CEO Series, Business Leaders, Thought and Action, (St. Louis, MO: Washington University, Center for the Study of American Business, 1998).
21. Almar Latour and Shawn Young, “Two Who May Pop the Question to AT&T Wireless—Intent on Wireless Expansion, SBC Communications’ Whitacre Takes Risks Seeking Acquisitions,” Wall Street Journal, February 10, 2004, B1.
22. Wachtell Lipton was again in the news, on September 12, 2008, when the sale of Merrill Lynch to Bank of America was hammered out at its offices. James B. Stewart, “Eight Days: The Battle to Save the American Financial System,” New Yorker, September 21, 2009, 69.
23. Matt Richtel, “List of Suitors Said to Narrow for Mobile Giant,” New York Times, February 11, 2004, http://www.nytimes.com/2004/02/11/business/list-of-suitors-said-to-narrow-for-mobile-giant.html.
24. Ed Whitacre, American Turnaround: Reinventing AT&T and GM and the Way We Do Business in the USA (New York: Business Plus, 2013), 129.
25. Latour and Young, “Two Who May Pop the Question to AT&T Wireless.”
26. AT&T Wireless Services, Inc., Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934, March 22, 2004.
27. “Vodafone Bids for AT&T Wireless: Vodafone and Cingular Square off in Bids for No. 3 U.S. Wireless Firm at about $35 Billion,” New York (CNN/Money), February 15, 2004, http://money.cnn.com/2004/02/15/technology/att_bids/.
28. Dan Sabbagh, “Vodafone in $35bn Fight for AT&T Wireless,” The Times, February 16, 2004, http://www.thetimes.co.uk/tto/business/article2103013.ece.
29. Vodafone was engaged in two sets of calculations, determining what to bid for AT&T Wireless while also negotiating a sale price for its 45 percent stake in Verizon Wireless. The more it could get for Verizon Wireless, the more it would be able to pay for AT&T Wireless. Rumors suggested that Verizon Communications had agreed to buy Vodafone’s share for $23 billion, which would have given it plenty of ready cash for an aggressive bid.
30. Anita Raghavan, Almar Latour, and Jesse Drucker, “Battle Intensifies for AT&T Wireless—Vodafone and Cingular Submit Revised Offers as Others Decline to Bid,” Wall Street Journal Europe, February 16, 2004, A1.
31. Maija Pesola, James Politi, Dan Roberts, and Peter Thal Larsen, “Vodafone Edges Ahead in AT&TW Bidding,” Financial Times, February 17, 2004, 24.
32. Andrew Ross Sorkin and Matt Richtel, “Cingular Wins AT&T Wireless in an Early-Morning Drama,” New York Times, February 19, 2004, http://www.nytimes.com/learning/teachers/featured_articles/20040219thursday.html.
33. Whitacre, American Turnaround, 131.
34. Whitacre, American Turnaround, 131.
35. Sorkin and Richtel, “Cingular Wins AT&T Wireless.”
36. Maija Pesola, James Politi, Dan Roberts, and Peter Thal Larsen, “Cingular Grabs AT&TW from Sleeping Vodafone,” Financial Times, February 18, 2004, 44.
37. Pesola, Politi, Roberts, and Larsen, “Cingular Grabs AT&TW,” 44.
38. Richard Wray, “Cingular’s $41bn Forces Vodafone out of AT&T Race,” The Guardian, February 18, 2004, 19.
39. When trading opened on Tuesday, news of the record bid helped push the Standard & Poor’s 500 stock index up by 11 points, or about 1 percent, while the Dow Jones industrial average was up 87 points, or 0.8 percent. As for the two principals, shares of Vodafone rose 7 percent on the London FTSE. Investors seemed relieved it had missed out. Meanwhile, shares in Cingular’s parent, Ed Whitacre’s SBC, fell 18 cents to $24.87, a loss of 0.7 percent, and BellSouth dropped 49 cents to $29.06, a loss of 1.7 percent. Financial markets often punish the stock of an acquirer, assuming that if it bid enough to win the auction, it may have paid too much.
40. Dominic White, “Vodafone Looks to Next Target,” Daily Telegraph, February 25, 2004, http://www.telegraph.co.uk/finance/2878078/Vodafone-looks-to-next-target.html. Vodafone released this statement: “On 17 February 2004, Vodafone withdrew from the auction when it concluded that it was no longer in its shareholders’ best interests to continue discussions. Vodafone remains committed to its existing position in the U.S. market with its successful partnership in Verizon Wireless.”
41. When Dow Chemical bought Rohm & Haas in July 2008, the company’s CEO justified the high price by describing the target as “a high quality beachfront property.” That disastrous deal is one of many in a very good general treatment of optimism in mergers and acquisitions. Mauboussin, Think Twice.
42. Whitacre, American Turnaround, 133.
43. Whitacre, American Turnaround, 131.
44. Whitacre, American Turnaround, 129.
45. Chairman’s Letter, 2005 AT&T Annual Report [at that time SBC], http://www.att.com/Investor/ATT_Annual/2005/chairletter.html.
46. Leslie Cauley, “BellSouth Likes to Go It Alone,” USA Today, October 31, 2005, http://www.usatoday.com/tech/news/techpolicy/business/2005-10-31-bellsouth-mergers_x.htm.
47. A year later Whitacre retired from AT&T Wireless and subsequently was called into government service as chairman of General Motors, which he led from 2009 until 2011. Yet the powerhouse he built continued to grow. In March 2011 AT&T Wireless agreed to pay $39 billion to acquire T-Mobile, which would have made it the largest wireless carrier, with 42 percent of US subscribers, vaulting it past Verizon. “From AT&T’s perspective, this is a huge win,” said one market analyst. “It’s about being No. 1 and having economy of scale.” Andrew Ross Sorkin, Michael J. De La Merced, and Jenna Wortham, “AT&T to Buy T-Mobile USA for $39 Billion,” New York Times, March 20, 2011, http://dealbook.nytimes.com/2011/03/20/att-to-buy-t-mobile-usa-for-39-billion/. Eventually, however, that proposed acquisition fell through.
48. Whitacre, American Turnaround, 129.
49. Aditya Chakrabortty, “Haven’t the Politicians Desperately Scrambling to Form a Government Heard of the Winner’s Curse?” The Guardian, November 5, 2010, 5.
Chapter 11: Starting Up, Stepping Out
1. US Dept. of Commerce, Bureau of the Census, Business Dynamics Statistics, http://weblog.sba.gov/blog-advo/?p=1037.
2. Timothy Dunne, Mark J. Roberts, and Larry Samuelson, “Patterns of Firm Entry and Exit in U.S. Manufacturing Industries,” Rand Journal of Economics 19, no 4 (Winter 1988): 233–271; Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Straus, and Giroux, 2011), 256.
3. This view is captured as follows: “An individual’s decision whether to become an entrepreneur will be based upon a comparison of the expected reward to entrepreneurship and the reward to the best alternative use of his time.” C. A. Campbell, “A Decision Theory Model of Entrepreneurial Acts,” Entrepreneurship Theory and Practice 17, no. 1 (1992): 21–27.
4. If we’re not careful, subjective expected utility can be used to justify anything, even the most pernicious addictions. It can become a tautology and therefore offer little explanatory power.
5. Mathew L. A. Hayward, Dean A. Shepherd, and Dale Griffin, “A Hubris Theory of Entrepreneurship,” Management Science 52, no. 2 (2006): 160–172.
6. Colin Camerer and Dan Lovallo “Overconfidence and Excess Entry: An Experimental Approach,” American Economic Review 89, no 1 (1999): 313.
7. Camerer and Lovallo, “Overconfidence and Excess Entry,” 306–318.
8. “Cognitive and decision biases are likely to be intrinsic ingredients of technological development and corporate strategies, including those concerning new start-up firms.” Giovanni Dosi and Dan Lovallo, “Rational Entrepreneurs or Optimistic Martyrs? Some Considerations on Technological Regimes, Corporate Entries, and the Evolutional Role of Decision Biases,” in Technological Innovation: Oversights and Foresights, ed. Raghu Garud, Praveen Nattar Nayyar, and Zur Baruch Shapira (New York: Cambridge University Press, 1997), 41–68.
9. Kahneman, Thinking, Fast and Slow, 255–257.
10. Barry J. Moltz, You Need to Be a Little Crazy: The Truth About Starting and Growing Your Business (Chicago: Dearborn Trade Publishing, 2003).
11. Michael Lewis, “In Defense of the Boom,” New York Times Magazine, October 27, 2002, http://www.nytimes.com/2002/10/27/magazine/27DEFENSE.html.
12. Martha Lane Fox, interview on HARDtalk, BBC, December 11, 2003.
13. We need not even conclude that entrepreneurs suffer from overestimation to observe excess entry. As long as people have fallible judgment and will vary around the mean, those who are most confident will go on to found a new company. This phenomenon is analogous to the winner’s curse: even if on average people are risk averse, with some variation around the mean, it is those who stand at an extreme point on the distribution who will pay the most. Robin M. Hogarth and Natalia Karelaia, “Entrepreneurial Success and Failure: Confidence and Fallible Judgment,” Organization Science 23 (2012): 1733–1747.
14. See, for example: Brian Headd, “Redefining Business Success: Distinguishing Between Closure and Failure.” Journal Small Business Economics. 1(1) (2004): 51–61; Knaup, Amy E. “Survival and Longevity in the Business Employment Dynamics data.” Monthly Labor Review. Vol. 128, Iss. 5, (May 2005): 50-56; US Small Business Administration, “Frequently Asked Questions About Small Business,” (2009) http://www.sba.gov/ADVO/stats/sbfaq.txt.
15. David B. Yoffie, Ward Bullard, Nikhil Raj, and Suja Vaidyanathan, “VMware Inc. (A),” Harvard Business School Case 9-707-013 (2007).
16. Mendel Rosenblum, interview with author, September 2012.
17. Ed Bugnion, interview with author, September 2011.
18. Bugnion interview.
19. Rosenblum interview.
20. Rosenblum interview.
21. Brad Mattson, interview with author, September 2012.
22. Jessica Livingston, Founders at Work: Stories of Startups’ Early Days (Berkeley, CA: Apress, 2008), xviii.
23. Livingston, Founders at Work, xviii.
24. Don A. Moore, John M. Oesch, and Charlene Zietsma, “What Competition? Myopic Self-Focus in Market-Entry Decisions,” Organization Science 18, no. 3 (May–June 2007): 440–454.
25. Nicholas Dew, Saras Sarasvathy, Stuart Read, and Robert Wiltbank, “Affordable Loss: Behavioral Aspects of the Plunge Decision,” Strategic Entrepreneurship Journal 3 (2009): 105–126.
26. Saras D. Sarasvathy, “The Affordable Loss Principle” (technical note, University of Virginia Darden School Foundation, Charlottesville, VA, 2006).
Chapter 12: The Stuff of Winning Decisions
1. The NSA identified several factors for success: schedule, drawings, past performance, technical approach, subcontractor experience, and price. If bidders were similar on the rest, price would be definitive. In its final report, Skanska was rated equal to DPR and Balfour Beatty in three, superior in two, and behind in one. Ultimately the contract appeared to have been awarded on price.
2. http://finance.yahoo.com/news/DPR-Construction-Build-iw-1500962679.html?x=0DPR. “Construction to Build Facebook’s Sweden Data Center: Construction to Commence This Month on Social Networking Giant’s First Data Center Outside the U.S” (press release, DPR Construction, October 27, 2011).
3. Interviews with David Ibarra, September 2012, and with Gavin Keith, January 2013.
4. Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Straus, and Giroux, 2011), 419.
5. Bruce Bueno de Mesquita comments that aside from two-year-olds and schizophrenics, most people are able to state their preferences and act in reasonably consistent ways to achieve them. The Predictioneer’s Game: Using the Logic of Brazen Self-Interest to See and Shape the Future (New York: Random House, 2009), 19.
6. Dan Lovallo and Olivier Sibony. “The Case for Behavioral Strategy,” McKinsey Quarterly 2 (Spring 2010): 30-43.
7. The need for strategic decision makers to avoid cognitive biases was explained by Dan P. Lovallo and Olivier Sibony in “Distortions and Deceptions in Strategic Decisions,” McKinsey Quarterly (February 2006): 19–29, and also by Daniel Kahneman, Dan Lovallo, and Olivier Sibony in “Before You Make that Big Decision . . .” Harvard Business Review (June 2011): 51–60.
8. Chip Heath and Dan Heath. Decisive: How to Make Better Choices in Life and Work (New York: Crown Business, 2013).
9. Zur Shapira, Risk Taking: A Managerial Perspective (New York: Russell Sage Foundation, 1995), 132.
10. Buzz Bissinger, Three Nights in August: Strategy, Heartbreak, and Joy Inside the Mind of a Manager (Boston and New York: Mariner, Houghton Mifflin and Company, 2005), 17.