Think Twice: Harnessing the Power of Counterintuition, page 17
26. David Klinger, Into the Kill Zone: A Cop’s Eye View of Deadly Force (San Francisco: Jossey-Bass, 2004).
27. Robert M. Sapolsky, Why Zebras Don’t Get Ulcers: An Updated Guide to Stress, Stress-Related Disease, and Coping (New York: W.H. Freeman and Company, 1994); and Samuel M. McClure, David I Laibson, George Loewsenstein, and Jonathan D. Cohen, “Separate Neural Systems Value Immediate and Delayed Monetary Rewards,” Science 306 (October 15, 2004), 503–507.
28. Jerome Groopman tells a similar story. See Groopman, How Doctors Think, 225–233.
29. George A. Akerlof and Robert J. Shiller, Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism (Princeton, NJ: Princeton University Press, 2009), 36–37; and Whitney Tilson and Glenn Tongue, More Mortgage Meltdown: 6 Ways to Profit in These Bad Times (New York: John Wiley & Sons, 2009), 29–47.
30. Alan Greenspan, “Testimony to the Committee of Government Oversight and Reform,” October 23, 2008.
31. Max H. Bazerman, George Loewenstein, and Don A. Moore, “Why Good Accountants Do Bad Audits,” Harvard Business Review, November 2002, 97–102; and Don A. Moore, Philip E. Tetlock, Lloyd Tanlu, and Max H. Bazerman, “Conflicts of Interest and the Case of Auditor Independence: Moral Seduction and Strategic Issue Cycling,” Academy of Management Review 31, no. 1 (2006): 10–29.
32. Malhotra and Bazerman, Negotiation Genius, 19–24. See also, Max H. Bazerman and Michael D. Watkins, Predictable Surprises: The Disasters You Should Have Seen Coming and How to Prevent Them (Boston: Harvard Business School Press, 2004).
33. J. Edward Russo and Paul J. H. Schoemaker, Winning Decisions: Getting It Right the First Time (New York: Currency, 2002), 86–89.
34. Doris Kearns Goodwin, Team of Rivals: The Political Genius of Abraham Lincoln (New York: Simon & Schuster, 2005).
35. Søren Kierkegaard, The Diary of Søren Kierkegaard (New York: Carol Publishing Group, 1993), 111; and Max H. Bazerman, Judgment in Managerial Decision Making, 6th ed. (New York: John Wiley & Sons, 2006), 37–39.
36. Antonio Damasio, The Feeling of What Happens: Body and Emotion in the Making of Consciousness (New York: Harcourt Brace & Company, 1999), 42.
Chapter 3—The Expert Squeeze: Why Netflix Knows More Than Clerks Do About Your Favorite Films
1. James Surowiecki, The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations (New York: Doubleday and Company, 2004).
2. Gary Hamel with Bill Breen, The Future of Management (Boston: Harvard Business School Press, 2007), 229–239; Renée Dye, “The Promise of Prediction Markets: A Roundtable,” The McKinsey Quarterly, no. 2 (April 2008): 83–93; and Steve Lohr, “Betting to Improve the Odds,” New York Times, April 9, 2008.
3. Prediction markets are real-money exchanges where people can bet on events with binary and temporally defined outcomes; hence the price reflects the probability of the event occurring. See Kenneth J. Arrow, Robert Forsythe, Michael Gorham, Robert Hahn, Robin Hansen, John O. Ledyard, Saul Levmore, Robert Litan, Paul Milgrom, Forrest D. Nelson, George R. Neumann, Marco Ottaviani, Thomas C. Schelling, Robert J. Shiller, Vernon L. Smith, Erik Snowberg, Cass R. Sunstein, Paul C. Tetlock, Philip E. Tetlock, Hal R. Varian, Justin Wolfers, and Eric Zitzewitz, “The Promise of Prediction Markets,” Science 320 (May 16, 2008):877–878; Bo Cowgill, Justin Wolfers, and Eric Zitzewitz, “Using Prediction Markets to Track Information Flows: Evidence from Google,” working paper, 2008.
4. Phred Dvorak, “Best Buy Taps ‘Prediction Market,’” Wall Street Journal, September 16, 2008.
5. Hilke Plassmann, John O’Doherty, Baba Shiv, and Antonio Rangel, “Marketing Actions Can Modulate Neural Representations of Experienced Pleasantness,” Proceedings of the National Academy of Sciences 105, no. 3 (2008): 1050–1054.
6. Ian Ayres, Super Crunchers: Why Thinking-by-Numbers Is the New Way to Be Smart (New York: Bantam Books, 2007), 1–6. Actually, this is not the formula Ayres shows. A check of primary sources suggests Ayres made two errors in his equation (the constant should be a negative value and a decimal place is off). I believe this equation is correct.
7. Orley Ashenfelter, “Predicting the Quality and Prices of Bordeaux Wines,” Working paper no. 4, American Association of Wine Economists, April 2007.
8. Steven Pinker, How the Mind Works (New York: W.W Norton & Company, 1997), 305–306.
9. J. Scott Armstrong, Monica Adya, and Fred Collopy, “Rule-Based Forecasting: Using Judgment in Time-Series Extrapolation” in Principles of Forecasting: A Handbook for Researchers and Practitioners, ed. J. Scott Armstrong (New York: Springer, 2001), 259–282; and John D. Sterman and Linda Booth Sweeney, “Managing Complex Dynamic Systems: Challenge and Opportunity for Naturalistic Decision-Making Theory,” in How Professionals Make Decisions, ed. Henry Montgomery, Raanan Lipshitz, and Berndt Brehmer (Mahway, NJ: Lawrence Erlbaum Associates, 2005), 57–90.
10. Gary Loveman, “Diamonds in the Data Mine,” Harvard Business Review, May 2003, 109–113.
11. Michael T. Belongia, “Predicting Interest Rates: A Comparison of Professional and Market-Based Forecasts,” Federal Reserve Bank of St. Louis, March 1987, 9–15; and Deirdre N. McCloskey, If You’re So Smart: The Narrative of Economic Expertise (Chicago: University of Chicago Press, 1990), 111–122.
12. Joe Nocera, “On Oil Supply, Opinions Aren’t Scarce,” New York Times, September 10, 2005.
13. Eric Bonabeau, “Don’t Trust Your Gut,” Harvard Business Review, May 2003, 116–123.
14. Michael J. Mauboussin, “What Good Are Experts?” Harvard Business Review, February 2008, 43–44; and Bruce G. Buchanan, Randall Davis, and Edward A. Feigenbaum, “Expert Systems: A Perspective from Computer Science” in The Cambridge Handbook of Expertise and Expert Performance, ed. K. Anders Ericsson, Neil Charness, Paul J. Feltovich, and Robert R. Hoffman (Cambridge: Cambridge University Press, 2006), 87–103.
15. For more on the contest, see www.netflixprize.com. Clive Thompson, “If You Liked This, You’re Sure to Love That,” New York Times Magazine, November 23, 2008. Jordan Ellenberg, “The Netflix Challenge: This Psychologist Might Outsmart the Math Brains Competing for the Netflix Prize,” Wired Magazine, March 2008, 114–122.
16. Paul E. Meehl, Clinical versus Statistical Prediction: A Theoretical Analysis and a Review of the Evidence (Minneapolis: University of Minnesota Press, 1954); Robyn M. Dawes, David Faust, and Paul E. Meehl, “Clinical versus Actuarial Judgment,” in Heuristics and Biases: The Psychology of Intuitive Judgment, ed. Thomas Gilovich, Dale Griffin, and Daniel Kahneman (Cambridge: Cambridge University Press, 2002), 716–729; Reid Hastie and Robyn M. Dawes, Rational Choice in an Uncertain World (Thousand Oaks, CA: Sage Publications, 2001), 55–72; and William M. Grove, David H. Zald, Boyd S. Lebow, Beth E. Snitz, and Chad Nelson, “Clinical Versus Mechanical Prediction: A Meta-Analysis,” Psychological Assessment 12, no. 1 (2000): 19–30.
17. Philip E. Tetlock, Expert Political Judgment: How Good Is It? How Can We Know? (Princeton, NJ: Princeton University Press, 2005), 54.
18. Scott E. Page, The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies (Princeton, NJ: Princeton University Press, 2007), 205–214. Crowds solve different types of problems. See Michael J. Mauboussin, “Explaining the Wisdom of Crowds: Applying the Logic of Diversity,” Mauboussin on Strategy, March 20, 2007.
19. In his classic paper on market efficiency, Jack Treynor suggests the accuracy of the average guess “comes from the faulty opinions of a large number of investors who err independently. If their errors are wholly independent, the standard error in equilibrium price declines with roughly the square root of the number of investors.” I believe the square-root law, which says the standard error of the mean decreases with the square root of N (number of observations), is an inappropriate explanation for the jellybean (or broader wisdom of crowds) problem. The square-root law applies to sampling theory, where there are independent observations that include the answer plus a random noise term. Over a large number of observations, the errors cancel out. The underlying assumption behind the square-root law is that observations are independent and identically distributed around a mean. This is clearly not the case in many instances. While the diversity prediction theorem allows for the square-root law, it does not require it. I believe the diversity prediction theorem is a more robust way to explain the wisdom of crowds. See Jack L. Treynor, “Market Efficiency and the Bean Jar Experiment,” Financial Analysts Journal May-June 1987, 50–53.
20. J. Scott Armstrong, “Combining Forecasts,” in Principles of Forecasting: A Handbook for Researchers and Practitioners, ed. J. Scott Armstrong (New York: Springer, 2001), 417–439.
21. Malcolm Gladwell, Blink: The Power of Thinking Without Thinking (New York: Little, Brown and Company, 2005); and Gary Klein, Sources of Power: How People Make Decisions (Cambridge: MIT Press, 1998).
22. Daniel Kahneman, “Maps of Bounded Rationality: A Perspective on Intuitive Judgment and Choice,” Nobel Prize Lecture, December 8, 2002, Stockholm, Sweden.
23. Michelene T. H. Chi, Robert Glaser, and Marshall Farr, eds., The Nature of Expertise (Hillsdale, NJ: Lawrence Erlbaum Associates, 1988), xvii–xx; Robin M. Hogarth, Educating Intuition (Chicago: University of Chicago Press, 2001); David G. Myers, Intuition: Its Powers and Perils (New Haven, CT: Yale University Press, 2002); Gerd Gigerenzer, Gut Feelings: The Intelligence of the Unconscious (New York: Viking, 2007); and Charles M. Abernathy and Robert M. Hamm, Surgical Intuition: What It Is and How to Get It (Philadelphia: Hanley & Belfus, 1995).
24. Geoff Colvin, Talent is Overrated: What Really Separates World-Class Performers from Everybody Else (New York: Portfolio 2008), 65–72.
25. Malcolm Gladwell, “Reinventing Invention,” speech at The New Yorker Conference, May 8, 2008. See http://www.newyorker.com/online/video/conference/2008/gladwell; see also, Malcolm Gladwell, “Most Likely to Succeed: How Do We Hire When We Can’t Tell Who’s Right for the Job?” The New Yorker, December 15, 2008, 36–42.
26. Frank E. Kuzmits and Arthur J. Adams, “The NFL Combine: Does It Predict Performance in the National Football League?” The Journal of Strength and Conditioning Research 22, no. 6 (2008): 1721–1727.
27. Duncan J. Watts, “A Simple Model of Global Cascades on Random Networks,” Proceedings of the National Academy of Sciences 99, no. 9, April 30, 2002: 5766–5771; Duncan J. Watts, Six Degrees: The Science of a Connect Age (New York: W.W. Norton & Company, 2003); and Victor M. Eguiluz and Martin G. Zimmerman, “Transmission of Information and Herd Behavior: An Application to Financial Markets,” Physical Review Letters 85, no. 26 (2000): 5659–5662.
28. Irving Janis, Groupthink: Psychological Studies of Policy Decisions and Fiascoes, 2nd ed. (Boston: Houghton Mifflin, 1982); and Cass R. Sunstein, Infotopia: How Many Minds Produce Knowledge (Oxford: Oxford University Press, 2006), 45–46.
29. Tetlock, Expert Political Judgment, 73–75.
30. Saul Hansell, “Google Answer to Filling Jobs Is an Algorithm,” New York Times, January 3, 2007.
Chapter 4—Situational Awareness: How Accordion Music Boosts Sales of Burgundy
1. S. E. Asch, “Effects of Group Pressure Upon the Modification and Distortion of Judgments,” in Groups, Leadership and Men, ed. Harold Guetzkow (Pittsburgh: Carnegie Press, 1951), 177–190.
2. Gregory S. Berns, Jonathan Chappelow, Caroline F. Zink, Giuseppe Pagnoni, Megan Martin-Skurski, and Jim Richards, “Neurobiological Correlates of Social Conformity and Independence During Mental Rotation,” Biological Psychiatry 58 (22 June 2005): 245–253.
3. Sandra Blakeslee, “What Other People Say May Change What You See,” New York Times, June 28, 2005.
4. Gregory Berns, Iconoclast: A Neuroscientist Reveals How to Think Differently (Boston: Harvard Business Press, 2008), 92–97.
5. “Conformity,” ABC Primetime Lab, January 12, 2006. See http://abcnews.go.com/Primetime/Health/story?id=1495038.
6. Paul Slovic, Melissa Finucane, Ellen Peters, and Donald G. MacGregor, “The Affect Heuristic,” in Heuristics and Biases: The Psychology of Intuitive Judgment, ed. Thomas Gilovich, Dale Griffin, and Daniel Kahneman (Cambridge: Cambridge University Press, 2002), 397–420.
7. David Berreby, Us and Them: Understanding Your Tribal Mind (New York: Little, Brown and Company, 2005).
8. Lee Ross, “The Intuitive Psychologist and His Shortcomings,” in Advances in Experimental Social Psychology, ed. Leonard Berkowitz (New York: Academic Press, 1977), 173–220; and Thomas Gilovich, Dacher Keltner, and Richard E. Nisbett, Social Psychology (New York: W.W. Norton & Company, 2006), 360–369.
9. Richard E. Nisbett, The Geography of Thought: How Asians and Westerners Think Differently… and Why (New York: Free Press, 2003).
10. Michael W. Morris and Kaiping Peng, “Culture and Cause: American and Chinese Attributions for Social and Physical Events,” Journal of Personality and Social Psychology 67, no. 6 (1994): 949–971.
11. Adrian C. North, David J. Hargreaves, and Jennifer McKendrick, “In-store Music Affects Product Choice,” Nature 390 (November 13, 2007): 13.
12. John A. Bargh, Mark Chen, and Laura Burrows, “Automaticity of Social Behavior: Direct Effects of Trait Construction and Stereotype Activation on Action,” Journal of Personality and Social Psychology 71, no. 2, (1996): 230–244.
13. Ibid.
14. Rob W. Holland, Merel Hendriks, and Henk Aarts, “Smells Like Clean Spirit: Nonconscious Effects of Scent on Cognition and Behavior,” Psychological Science 16, no. 9 (2005): 689–693.
15. Naomi Mandel and Eric J. Johnson, “When Web Pages Influence Choice: Effects of Visual Primes on Experts and Novices,” Journal of Consumer Research 29, no. 2 (2002): 235–245.
16. Eric J. Johnson and Daniel Goldstein, “Do Defaults Save Lives?” Science 302 (November 21, 2003): 1338–1339.
17. Richard H. Thaler and Cass R. Sunstein, Nudge: Improving Decisions About Health, Wealth, and Happiness (New Haven, CT: Yale University Press, 2008); Daniel G. Goldstein, Eric J. Johnson, Andreas Herrmann, and Mark Heitmann, “Nudge Your Customers Toward Better Choices,” Harvard Business Review, December 2008, 99–105; and Dan Ariely, Predictably Irrational: The Hidden Forces That Shape Our Decisions (New York: Harper, 2008), 1–6.
18. George F. Loewenstein, Elke U. Weber, Christopher K. Hsee, and Ned Welch, “Risk as Feelings,” Psychological Bulletin 127, no. 2 (2001): 267–286.
19. R. B. Zajonc, ed., The Selected Works of R. B. Zajonc (New York: John Wiley & Sons, 2004), 256.
20. For example, after good returns in the stock market, investors expect continued outsized returns. See Donald G. MacGregor, “Imagery and Financial Judgment,” The Journal of Psychology and Financial Markets 3, no. 1 (2002): 15–22.
21. Slovic et al., “The Affect Heuristic,” 408.
22. Stanley Milgram, Obedience to Authority (New York: Harper & Row, 1974), 6.
23. Jerry M. Burger, “Replicating Milgram: Would People Still Obey Today?” American Psychologist 64, no. 1 (2009): 1–11.
24. Philip Zimbardo, The Lucifer Effect: Understanding How Good People Turn Evil (New York: Random House, 2007).
25. Ibid., 210–221.
26. Peter F. Drucker, Management Challenges for the 21st Century (New York: HarperBusiness, 1999), 74.
27. David Leonhardt, “Why Doctors So Often Get It Wrong,” New York Times, February 22, 2006.
28. Atul Gawande, “The Checklist,” The New Yorker, December 10, 2007, 86–95; Atul Gawande, “A Lifesaving Checklist,” New York Times, December 30, 2007; and Peter Pronovost, “Testimony before Government Oversight Committee,” April 16, 2008.
29. Bargh, Chen, and Burrows, “Automaticity of Social Behavior,” 241.
30. Zimbardo, The Lucifer Effect, 451–456.
31. Warren E. Buffett, “Chairman’s Letter,” Berkshire Hathaway Annual Report to Shareholders, 1989.
32. Michiyo Nakamoto and David Wighton, “Citigroup Chief Stays Bullish on Buy-Outs,” Financial Times, July 9, 2007.
Chapter 5—More Is Different: How Bees Find the Best Hive Without a Real Estate Agent
1. Quote from biologist Deborah Gordon in Peter Miller, “The Genius of Swarms,” National Geographic, July 2007, 126–147. See also Herbert A. Simon, The Sciences of the Artificial, 3rd ed. (Cambridge: MIT Press, 1996), 51–54.
2. Thomas D. Seeley, P. Kirk Visscher, and Kevin M. Passino, “Group Decision Making in Honey Bee Swarms,” American Scientist 94, no. 3 (2006): 220–229.
3. For a popular treatment, see Eric Bonabeau and Guy Théraulaz, “Swarm Smarts,” Scientific American, March 2000, 82–90. See also Eric Bonabeau, Marco Dorigo, and Guy Théraulaz, Swarm Intelligence: From Natural to Artificial Systems (New York: Oxford University Press, 1999); Thomas D. Seeley, The Wisdom of the Hive (Cambridge: Harvard University Press, 1995); and Steven Johnson, Emergence: The Connected Lives of Ants, Brains, Cities, and Software (New York: Scribner, 2001).
4. Thomas D. Seeley and P. Kirk Visscher, “Sensory Coding of Nest-site Value in Honeybee Swarms,” The Journal of Experimental Biology 211, no. 23 (2008): 3691–3697.
