Jul 132014
 

It has been a long time since I’ve written a book review, but I have been Thinking, Fast and Slow on and off this whole time. My reading has slowed down but has picked back up. Finished this excellent book and will be moving right along with a new one soon.

Thinking, Fast and Slow is another one of those books that alter your reality. It is a thorough overview of how our brains work when it comes to decision making. In many cases, humans actually make absurd or illogical choices simply because of the way our brains are wired. The author even admits that while educating yourself about how you can easily be swayed on a decision based on the way a question was framed, you may still make the same mistakes anyway. Your brain is split into the “intuition mode” which he describes as System 1 and “thinking mode” which is described as System 2. System 1 is susceptible to errors in intuition.

Of many passages I found interesting, here he describes “Loss Aversion” and how it applies to both economics and putting in golf. Loss Aversion is the idea that humans are more fearful of losing something than they are of gaining something of equal value. Another way of describing it is that you would be more upset if you lost $1000 than you would be happy if you gained $1000. Loss aversion might seem obvious to us, but this passage demonstrates how it can have rippling effects far beyond what we may imagine:

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The economists Devin Pope and Maurice Schweitzer, at the University of Pennsylvania, reasoned that golf provides a perfect example of a reference point: par. Every hole on the golf course has a number of strokes associated with it; the par number provides a baseline for good–but not outstanding–performance. For a professional golfer, a birdie (one stroke under par) is a gain, and a bogey (one stroke over par) is a loss. The economists compared two situations a player might face when near the hole:
– Putt to avoid a bogey
– Putt to achieve a birdie
Every stroke counts in golf, and in professional golf every stroke counts a lot. According to prospect theory, however, some strokes count more than others. Failing to make par is a loss, but missing a birdie putt is a foregone gain, not a loss. Pope and Schweitzer reasoned from loss aversion that players would try a little harder when putting for par (to avoid a bogey) than when putting for a birdie. They analyzed more than 2.5 million putts in exquisite detail to test that prediction.
They were right. Whether the putt was easy or hard, at every distance from the hole, the players were more successful when putting for par than for birdie. The difference in their rate of success when going for par (to avoid a bogey) or for a birdie was 3.6%. This difference is not trivial. Tiger Woods was one of the “participants” in their study. If in his best years Tiger Woods had managed to putt as well for birdies as he did for par, his average tournament score would have improved by one stroke and his earnings by almost $1 million per season. These fierce competitors certainly do not make conscious decision to slack off on birdie putts, but their intense aversion to a bogey apparently contributes to extra concentration on the task at hand.
The study of putts illustrates the power of a theoretical concept as an aid to thinking. Who would have thought it worthwhile to spend months analyzing putts for par and birdie? The idea of loss aversion, which surprises no one except perhaps some economists, generated a precise and non-intuitive hypothesis and led researchers to a finding that surprised everyone–including professional golfers.

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Definitely a recommended reading. Check it out here!

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