Narrator: Why do experts so often get it wrong? In the high-stakes world of professional basketball, Houston Rockets General Manager Daryl Morey built one of the most sophisticated statistical models in the league to predict player success. His system analyzed thousands of data points, searching for hidden value that traditional scouts missed. Yet, he found himself in a constant battle, not against other teams, but against the flawed intuition of his own staff. Scouts would fall for a player's charm in an interview, overvalue physical appearance, or let racial stereotypes cloud their judgment, ignoring what the data clearly showed. Morey discovered that even the most experienced experts were prone to making systematic, irrational errors. The problem wasn't a lack of information; the problem was the human mind itself.

This deep and fascinating puzzle is at the heart of Michael Lewis's The Undoing Project. The book tells the story of the extraordinary intellectual partnership between two Israeli psychologists, Daniel Kahneman and Amos Tversky. Together, they embarked on a journey into the inner workings of the mind, uncovering the hidden biases and mental shortcuts that govern human decision-making. Their work didn't just explain the errors of basketball scouts; it undid the long-held assumption of human rationality and created the revolutionary field of behavioral economics.

Narrator: The story of Moneyball revealed how data could exploit inefficiencies in markets, but The Undoing Project explores the psychological reasons those inefficiencies exist in the first place. The central problem is that human judgment, even among seasoned experts, is unreliable and systematically biased. Daryl Morey’s experience with the Houston Rockets provides a perfect case study. He knew that face-to-face interviews were often misleading and that scouts were susceptible to what he called the "endowment effect"—overvaluing players they already knew or liked.

One of the most telling examples was the case of Jeremy Lin. In 2010, Morey's statistical model flagged Lin, a Harvard graduate, as a highly promising prospect. The data showed he possessed an incredibly quick first step, one of the fastest ever measured. But the team's experts saw something else: a "not terribly athletic Asian kid." Their intuitive, stereotype-driven assessment overrode the objective data, and the Rockets passed on drafting him. A year later, "Linsanity" swept the NBA, and Morey was left to wonder how his team could have missed such an obvious talent. He concluded, "I can’t think of any reason for it other than he was Asian." This incident, and others like it, demonstrated that human experts are not objective processors of information. Their minds are wired with biases that cause them to see what they expect to see, not what is actually there.

Narrator: The minds that would diagnose this universal human flaw belonged to two men who were, in many ways, complete opposites. Daniel "Danny" Kahneman was a Holocaust survivor, a man defined by doubt, introspection, and a constant search for error in his own thinking. He was an outsider who felt his life was shaped by chance and uncertainty. Amos Tversky was his perfect foil. A charismatic Israeli war hero and paratrooper, Tversky was supremely confident, the ultimate insider who believed people made their own luck. He was described as the most intelligent person most people had ever met.

Their legendary collaboration began not with agreement, but with a collision. In 1969, Tversky gave a guest lecture to Kahneman's seminar, presenting the prevailing view that people are "conservative Bayesians"—meaning they are fundamentally good, if cautious, intuitive statisticians. Kahneman disagreed, vehemently. He argued from his own experience that people, including trained psychologists like himself, were terrible intuitive statisticians. They didn't cautiously update their beliefs; they jumped to wild conclusions based on flimsy evidence. Tversky, who was not used to being challenged, was intrigued. This fundamental disagreement about the nature of human judgment sparked a conversation that would last for years. They began working together in a small room, sharing a single typewriter and, as Kahneman would later say, "sharing a mind." This unique fusion of doubt and confidence allowed them to see what no one else had seen before.

Narrator: Kahneman and Tversky’s first major breakthrough was realizing that when faced with complex, uncertain questions, the human mind doesn't perform complex statistical calculations. Instead, it substitutes an easier question using a mental shortcut, or heuristic. One of the most powerful of these is the representativeness heuristic, where we judge the probability of something based on how much it resembles a stereotype or mental model.

They illustrated this with a simple question about randomness. Consider two possible sequences for the births of six children in a family: BGBBBB and GBGBBG. Which is more likely? Most people instinctively choose GBGBBG. It simply looks more random. But statistically, any specific sequence of six births is equally likely. The sequence BBBGGG feels less probable because it doesn't match our mental stereotype of what randomness is supposed to look like—a jumbled, non-patterned mix. This reliance on representativeness blinds us to the actual laws of probability. We favor the story that fits our expectations, even when it’s statistically no more likely than any other.

Narrator: Another key mental shortcut they identified is the availability heuristic. The mind judges the frequency or likelihood of an event based on how easily examples come to mind. Things that are recent, vivid, or emotionally charged are more "available" to our memory and are therefore perceived as being more common than they actually are.

To demonstrate this, they asked subjects a simple question: In the English language, are there more words that start with the letter 'K' or more words that have 'K' as their third letter? The overwhelming majority of people say words that start with 'K'. This is because our brains are organized like a dictionary; it’s effortless to recall words that start with a letter (king, kitchen, kite) but much harder to retrieve words where that letter is in the third position (ask, bake, acknowledge). In reality, there are more than twice as many English words with 'K' in the third position. The ease of retrieval creates an illusion of frequency. This bias explains why people worry more about shark attacks (vivid and memorable) than drowning (statistically far more common but less dramatic).

Narrator: Perhaps one of the most unsettling biases Kahneman and Tversky discovered is anchoring and adjustment. This heuristic describes our tendency to rely heavily on the first piece of information offered (the "anchor") when making decisions. Even when the anchor is completely arbitrary and irrelevant, it has a powerful pull on our subsequent judgments.

Their most famous experiment on this involved a rigged wheel of fortune. They had subjects spin a wheel that would land on either 10 or 65. After seeing the number, the subjects were asked to estimate the percentage of African nations in the United Nations. The results were astounding. The subjects who saw the number 10 on the wheel gave a median estimate of 25%. Those who saw the number 65 gave a median estimate of 45%. The random number from the wheel, which had no connection whatsoever to the question, served as a powerful anchor that dragged their estimates in its direction. This shows how susceptible our judgment is to manipulation and how easily our decisions can be shaped by information that should have no bearing on the outcome.

Narrator: The single most important takeaway from The Undoing Project is that the long-held model of humans as rational actors is a fiction. Our minds are not built like flawless computers. Instead, they are governed by a set of predictable, and often flawed, heuristics that lead us to make systematic errors in judgment. Daniel Kahneman and Amos Tversky’s work provided a map of these cognitive illusions, giving us a language to understand the hidden architecture of our own decision-making processes.

Their collaboration didn't just revolutionize psychology; it created the field of behavioral economics and forever changed our understanding of the human element in everything from medicine and finance to public policy. The book leaves us with a profound and challenging question: Now that we have been shown the flaws in our own thinking, do we have the wisdom and discipline to design systems, and to live our lives, in a way that accounts for them?