Ep. 20 Stephen Dubner: How to Think Like a Freak

 

James Altucher:          This is James Altucher with the James Altucher show.  I am really happy today because one of my favorite guests is on the show.  Stephen Dubner, author of Freakonomics, Super Freakonomics, and now the brand new Think like a Freak – Stephen, welcome to the show.

 

Stephen Dubner:         Thank you.  You’re one of my favorite people, too, just so you know.

 

James Altucher:          We’ve known each other for a really long time.  How long have we known each other? It’s been about 12-years now almost to the day.

 

Stephen Dubner:         I think so.  I met you because I wanted to write about you as a subject in this book that was about the psychology of money.  So, you were this fascinating guy that had a contorted, interesting relationship with money generally.

 

James Altucher:          It’s still contorted.

 

Stephen Dubner:         We started to hangout and I would interview you for hours and we started to play backgammon, etc.  Then, eventually I put that book in a drawer even though I wrote a couple chapters including one that included you.  I put that book in a drawer because Freakonomics kind of happened instead.  That thing is still in a drawer.

 

James Altucher:          Well, it’s a really good thing that Freakonomics probably happened instead for both of us.

 

Stephen Dubner:         I don’t know about for you, but for me for sure.  I would have liked to write that other book and I still fantasize about it sometimes.  A lot of the ideas that were behind that book have gone into a lot of the Freakonomics radio and writing that I’ve done since then, but I’m still fascinated by how much emotion and lack of rationality and religious and sexual fervor is attached to money and misunderstood.  So, like I said, I still like that idea.

 

James Altucher:          Maybe one day in the future.  Today is all about Think Like a Freak.  I want to bring up this one memory I have, and this was like a decade ago.  It was the day or two before Freakonomics was going to be released and you and I were meeting for our regular Backgammon session, which I think we’re still on the same match 10-years later.  We were meeting, and towards the end I almost visually remember your hands were holding your head and you were like, “What if this next book Freakonomics doesn’t work out for me? I don’t know if it’s going to work out.” You were really unsure.  I had read an advanced copy of the book and I told you, “Don’t worry about it.  This is a guaranteed best seller.” I’ll be honest right now, I didn’t know.  I was just trying to be nice.  Nobody really knows what’s going to be a best seller or not.  Then, you called me up a few days later and you were like, “Check Amazon for the Freakonomics rank.  I thought, “Okay.  This is going to be cool.  Maybe he’s number 1,000 or number 2,000.” I looked at it, and you were number 2.  Harry Potter was the only book ahead of you, and you’re still at number 2.  Freakonomics is still one of the top selling non-fiction books a decade later.  There’s no way you could have predicted that.  What were your first feelings when you realized, “Man, this is beyond me, now.” No book in the past decade, I think, has sold as much non-fiction as Freakonomics.

 

Stephen Dubner:         Well, I’m not sure that’s true, although it’s kind of hard to figure out believe it or not because the publishing industry is so weird.  It was a total, total surprise.  You’re right.  Every writer, as you know and a lot of people listening to this know, whenever you write something or produce something whether it’s a creative work or a product or whatever, you invest so much of yourself in it – both your sweat equity and your emotions and your money and so on, that you become super biased in favor of its success.  There are many different versions of this – one that we write a little bit about in Think Like a Freak is this thing called “go fever” which comes from NASA terminology which is once you’ve decided that you’re going to go on a project, you kind of get feverish about it.  Moreover, you convince yourself that it’s more awesome than anything that has ever come before.  I think most writers vacillate between a feeling of intense pride and superiority and intense self-flagellation and doubt where you think, “I’ve jus wasted 3 or 4 years of my time.” You just don’t know.  I think at the time that Freakonomics came out, I had worked at the New York Times Magazine and my boss there, the top editor Adam Moss, had recently moved to New York Magazine.  He had asked me to kind of help him a little bit staffing up New York Magazine, and I was playing around with the idea of maybe going back there as an editor because I just didn’t know if book writing was going to happen.  I wasn’t desperately sad about that idea.  I really liked him and I really liked working at magazines, but I quit the New York Times to write books.  Freakonomics was now my third book.  My first one had done pretty well, but in the scheme of things so-so.  The second one had done less good, and now I really did kind of see this as, “I really hope this one works because I would like to continue writing books.” I remember the day that we got the news from the publisher, because they really did have good numbers early on,” that it was going to enter the New York Times list – the best seller list – at number 5 or something.  I could not believe that was going to be me that was going to be attached to a book that was on the Times Best Seller list.  It was full of people who I thought were somehow made of different stuff than me.  It’s interesting to look back because now we’ve been there a long time and it’s easy to take that for granted.  I certainly did not see it coming.  The only argument I would say of people who maybe did see it coming was our publisher.  They paid me and Levitt a pretty good book advance.  Of course, in an industry like that, a lot of people make wrong bets all the time.  Publishers spend $3 million on some celebrity memoir that ends up selling 50,000 copies.  That happens all the time.  They plainly had a fair amount of confidence in us based on an article about Steve Levitt and his work I had written in the Times Magazine.  In retrospect, I’d say that they were probably a little less surprised than we were, but I will tell you that I wouldn’t trade the surprise for anything.  It was a great treat.  The biggest thing for me is that I got to keep being a writer.  That’s the biggest reward. 

 

James Altucher:          It’s really exciting, and now – I don’t know if you can say – but all together between Freakonomics and Super Freakonomics, how many books do you think have sold around the world between the two books?

 

Stephen Dubner:         That’s a pretty hard number to get for a variety of reasons, but I think a pretty good estimate would be about 6 million.

 

James Altucher:          Wow! That is so great.  Congratulations.

 

Stephen Dubner:         Thanks.

 

James Altucher:          I want to get into Think Like a Freak, which could probably be the best out of all of them just because it gives practical advice of how to think like you guys – how to solve problems from an economics perspective.  First, one more thing about why Freakonomics probably did become a best seller because there’s been many good books published since then.  A lot of books have controversial problems that they solve and problems they solve in interesting ways, but I think it’s the unique combination of how you write, how Levitt thinks, how you guys think like a freak, and so on.  So, I have this list of five and I just wanted to run it by you and see what you thought.

 

Stephen Dubner:         Hit me.

 

James Altucher:          The first thing on my list is you’re really good at not only presenting the science, but you take the scientist and it’s sort of like you give his secret origin.  You give his background of like what happened to him as a kid or as a student or as a young adult that made him so offbeat that he would think of a problem in such a weird way.  So, I call this the Secret Origin Strategy that I think writers, in particular, of non-fiction should do.

 

Stephen Dubner:         First of all, thanks for noticing.  Honestly, when most people ask about the books, they just ask about content and not the process and they don’t realize that the process is what makes the content either work or not work.  I firmly believe in that.  I think that writing, like a lot of other things – computer science or cooking – there are a lot of things where if you’re consuming something, you shouldn’t be thinking about the process.  That’s not your job, but if the software works, if the food is good, or if the book is good, somebody did their job, but there’s a lot that goes into doing all of those different jobs.  That’s why I love writing.  I love figuring out all of those different components.  Probably 9 out of 10 words that I’ll write in the given course of writing a book gets thrown out.  It’s a very labor-intensive thing.  In terms of the Secret Origin idea, I guess that’s just my personal preference for it, and that probably just comes from still thinking a lot like a kid.  When you’re a kid, what I read a lot were biographies.  There’s just something unbelievably fun in a buried treasure kind of way.  When you’re a kid, you read a biography of someone whether it’s a sports person or a president or whatever and you already know the whole patina of the reputation and the accomplishments and reading that biography is a way to kind of reverse engineer to figure out what kind of kid became that person and what were the up sides, the down sides, the struggles, the choices, the obvious things they did, and the not obvious things they did.  When you do that, it’s really important to remember that you’re dealing with an anomaly.  Almost anybody who becomes very, very accomplished is pretty anomalistic.  They are better or different than most people around them because most people don’t become that.  So, I think that’s the most important thing to consider is not only the way in which they’re interesting but in which they’re maybe not representative.  I think there’s a lot to be learned from what is not representative about them.  I do like that, but I also think the broader point you raised is that I like narrative story telling.  I think ideas are where it’s at.  When you write a book that’s the real value, but I think that for an idea to come alive in the mind of a rider from my perspective, it is good to imbed that idea in a narrative.

 

James Altucher:          I’m sorry to interrupt, but that is really a big difference between Freakonomics and many other popular science books where they’ll get right into the science and they’ll forget to tell a story.  This works, too, with entrepreneurship.  There are many examples where if you tell a story around your product, that’s going to do much better.  Zappo’s, for example – and you mentioned this in Think Like a Freak – has this incredible story around their customer service and how they treat their employees and how they treat their customers.  That’s helped build the Zappo’s brand.

 

Stephen Dubner:         I think that secret is out now, which I think is great – the power of storytelling.  We actually talk about the power of storytelling in Think Like a Freak, as well.  You have to be careful.  Not all stories are true.  It’s easy to deceive people with a good story.  People are always asking about how you learn writing and how much you can learn and I can go on for months about that, which I wont.  I’ve been writing since I was a kid, basically.  My dad was a newspaperman.  In my family, everybody kind of just wrote something all the time.  We even had this little family newspaper.  So, I finished my first year of graduate school.  It was okay, but I didn’t think I was going to come back for my second because it was really expensive, and I didn’t know if it was really working for me, but I had this opportunity to apply for a teaching fellowship in Columbia.  If I got it, I would teach one course of freshman comp, and I would get a totally free tuition plus a stipend, so it was an amazing financial deal.  So, I put everything I had into that fellowship deal.  I ended up getting it, and I was over the moon because it meant that I could stay in school and not go deep, deep into debt.  What I didn’t realize was that teaching that class would be the best experience for me as a writer that I would ever have.  The reason why is that this is a course that had been at Columbia for many, many years.  I think it’s gone now.  I think they got rid of it.  I think the students and the parents thought that it was too much work and too hard or something, although I’m not sure on that.  It was a course called “Logic and Rhetoric.” It was standard freshman comp and part of the core curriculum at Columbia.  What was great about it is that it treated writing in this very, old, Greek model that anytime you wanted to communicate – whether it’s writing, speech, or whatever – there are these two pillars that are not necessarily equal, but incredibly important.  The logic is all the facts – all the pieces of the argument that add up to what you’re trying to articulate – and there’s the rhetoric, which is how you tell the story, who is telling the story, the pace, the tension, the timing, and so on.  In my view, I really came to believe that in order for a piece of writing to be successful, you have to be really good at both the logic and the rhetoric.  So, there are a lot of brilliant people in academia and elsewhere whose logic is maybe perfect but whose rhetoric for whatever reason doesn’t connect.  Then, there are a lot of people who have fantastic rhetoric.  They live on TV and they go on and on and on with these stories and opinions, but their logic is not very defensible.  To me, that’s the very basic model that I think any writer should try to follow to some degree, but I would say it goes beyond writing.  I’d say it goes into entrepreneurship.  It goes into business.  It goes into politics.  Politics to me is the place where the rhetoric to logic ratio is probably the largest, unfortunately.  That was kind of the light bulb going off to me.  Ever since then, I’ve been just trying to execute that idea. 

 

James Altucher:          It seems like these are not two separate pillars because you interweave them.  For instance, in both books – and I’m sure in Think Like a Freak – you created a lot of controversy.  In Super Freakonomics you had the controversy of global warming and you had the controversy over completely revealing – or revealing most of the algorithm for how you keep track of terrorists.  You discuss that again in Think Like a Freak.  That’s an interweaving of the story with the science – with the facts.  It’s this sort of controversy, I think, that propelled the books.  Every book had something where it was an argument.  People could argue in a bar about what you bring up in the book.

 

Stephen Dubner:         I guess so.  It’s funny.  I think people don’t believe us when we say this, but I’m pretty sure it’s true or mostly true.  I don’t think we ever decided to write about something because it would seem controversial or to not write about something because it would be controversial either.  I think it’s as simple as this – neither Levitt nor I had a huge appetite in doing the stuff and following the topics and ideas that a whole lot of other people are already following.  If you’re in the realm of politics or even business or sports or religion, there are tons and tons of people writing about everything all the time.  Most of it is pretty predictable.  It’s not to say it’s bad.  It can often be great, but we don’t really write about a topic unless it’s a topic or an idea related to it that really hasn’t been out there before.  I think that’s going to inherently lead to some controversy, but it’s only because we’re trying to say something new.  Probably 9 out of 10 e-mails that we get of people asking us to address a question or solve a problem are questions or problems that hundreds and thousands of people are working on – income inequality and a lot of the times it has to do with real economics, which we also, by the way, don’t really do that much.  Our view is that we probably just don’t have anything meaningful to add to that.  If you look at the topics that we write about in Think Like a Freak, you can understand why people don’t want to spend months doing research on ridiculous stuff like-

 

James Altucher:          Hot dog eating.

 

Stephen Dubner:         Yeah.  We tell an in-depth story about competitive hotdog eating.

 

James Altucher:          That was fascinating.

 

Stephen Dubner:         It’s stuff that turns us on, so hopefully if we throw stuff into it, people will be interested when they read it.

 

James Altucher:          Stephen, I will quote specifically from Think Like a Freak, one of the ways to think like a freak – and this, again, applies very strongly to business and just as strongly to writing – you say specifically, “The conventional wisdom is often wrong and the blind acceptance of it can lead to sloppy, wasteful, or even dangerous outcomes.” This is incredibly true for entrepreneurship.  It’s incredibly true if you’re an employee of a business, and it’s incredibly true in writing.  In Freakonomics, the first book, you talk about the reasons why crime went down in ’90.  You came up with a startling conclusion.  In Super Freakonomics, you talk about Global Warming, and you basically say that conventional wisdom is often wrong and you discuss the science of what’s going on with Global Warming.  In Think Like a Freak, you kind of turn Super Freakonomics upside down and you discuss the whole terrorism issue and how you basically helped identify terrorists in Britain in this way that was completely unconventional.  So, it not only helps with the writing.  It helps with real world problems.  It’s going to be by nature controversial.  They even tried to block you in England to some extent.

 

Stephen Dubner:         Yeah.  I guess so.  The thing is that we’ll sometimes write something that we think might agitate people in some direction, and then it doesn’t.  Then, you’ll write something else that we think is unsurprising and un-agitating at all, and people get very distraught about it.  I think this all has to do with how hard it is to predict the future generally, which is what we write a lot in this book about, too.

 

James Altucher:          Not only predict the future, but there’s also a cognitive bias, which you already mentioned, that if you do something you’re going to think it’s great.  So, everybody who does research on a particular scientific subject and comes to a conclusion is going to have a cognitive bias that they are correct, more so than if somebody has done no research on it.  It’s very hard to overcome that cognitive bias. 

 

Stephen Dubner:         I have polar views on the idea.  Let’s say we want to talk about it as conventional wisdom.  So, on the one hand, you think, “Wouldn’t it be great if everybody could approach every question or topic with sort of a blank slate?” Let’s say it’s a business proposition.  You could bring all of your knowledge and your experience to bear, but none of your biases or conclusions.  You think, “Wouldn’t that be great?” That’s kind of what we advocate in Think Like a Freak, and we give a lot of steps on how to figure out and do that, although we admit that it’s not always easy and it won’t always make you popular.  On the other hand, let me argue against myself for a minute.  I would say that all of these mental shortcuts that we engage in all the time and all the conventional wisdom that we do accept, I certainly empathize with it because if you tried to spend your entire day making every decision based on your own assessment of the reality and the facts and the incentives, you’d be paralyzed.  You’d never do anything with your life.

 

James Altucher:          Right.  This is almost like the brain’s way of conserving energy.  I’ve got a bias, and I stick with it and I move on to other things.  I make a decision that’s probably 99% correct in most cases, and I’m going to move on to other things.

 

Stephen Dubner:         Right.  This is one of the really interesting things that we discovered.  When you come to the hot button issues of the day – whether you want to talk about climate change and what should be done about it or nuclear power or gun control or the HPV vaccine – all these topics that get people really agitated and produce a big schism – it turns out that especially on topics like those, the smarter that a person is, the more likely he or she is to hold a rather extreme view on that.  It’s not necessarily positive or negative, but extreme.  So, some will be extremely positive and some will be extremely negative.  My first response was, “That’s really surprising.  You would think that people who are really educated and maybe experienced would be more enlightened.  Enlightenment – we kind of told ourselves for centuries – leads to moderation.  That’s kind of the idea.  It turns out that the smarter someone is generally, it seems that they get more confident in how smart they are and how right they are.  So, they’re more convinced that they’re right.  I think that’s a huge issue that when people are smart and accomplished and really good at something, it’s easy for them to assume that their ideas about anything will be better than average.  That’s just demonstrably not true.  I think that’s what you have to watch out for.

 

James Altucher:          The very first thing you mentioned in Think Like a Freak in terms of how to think like a freak – and this is something that you explore in Freakonomics and Super Freakonomics.  You say this in Think Like a Freak, “Incentives are the cornerstone of modern life.  So, essentially, we as humans on the whole do things out of self-interest.  This is something that’s been repeated many times in marketing literature and also libertarian literature like Harry Brown’s book How I Live Free in an Unfree World.  He basically says all action is out of self-interest.  This is not necessarily something that’s selfish, although it sounds like it.  It’s just that that’s the way people are.  So, you have to figure out the right incentives if you want to get people to do things.  I remember in Super Freakonomics you had the great chapter on incentivizing chimpanzees with sex and so on.  It was very funny – prostitution among chimpanzees.  What other examples that you talk about in Think Like a Freak? If I want to think like a freak, how should I make use of this that incentives are the cornerstone of modern life?

 

Stephen Dubner:         It’s really easy and popular to argue that moral incentives are paramount in modern society.  In other words, there’s a baseline assumption or maybe a hope that people will do the right thing or the pro-social thing because it is the right thing or the pro-social thing.  I think in a perfect world a lot of us would like that to happen.  The evidence suggests that just isn’t so.  The evidence suggests that if you ask people whether they would like to do a certain behavior – Behavior A versus B – conserve energy because it’s good for the environment or conserve energy because it will leave the planet in better shape for their grandchildren.  They’ll say, “Yes.  That’s exactly why I would like to conserve energy.” If you ask them, “Would you like to conserve energy because it will save you money?” People might say, “Well, that would be okay, but the environment is more expensive.” Then, if you ask them, “Would you like to conserve energy because other people in your neighborhood are conserving energy?” They’ll say, “I’m not a pack animal.  That’s not what makes me behave the way I behave.  I behave the way I behave because of the way I think is right and true and so on.” That’s what people say when you ask them about behaviors.  They claim that the moral or social incentives are the most powerful – in this case with energy consumption – more powerful than financial, and certainly more powerful than a herd mentality incentive.  However, when you try to find some real data or generate some real data – in this case I’m talking about some research done by the wonderful psychologist Robert Cialdini and some colleagues in California – they did exactly this.  They did a phone survey, first of all, in California asking people what would lead them to use fans in summer more than air conditioning.  Again, they gave them the options of moral and social incentives versus financial and herd mentality.  The overwhelming choice – the most popular – was moral incentive and social incentive.  That’s what’s going to make us act or change our behavior.  That’s what economists call your declared preferences – what you say is true or how you say you’ll behave or invest or vote or whatnot.  Then, you get into revealed preferences.  That’s what people actually do.  So, in some cases in life there isn’t much of a gap between declared preferences and revealed preferences.  Voting, for instance – polling for voting on big elections has gotten much, much better over the years because pollsters have figured out how to limit the gap between what people say they’ll do and how they’ll vote by asking better questions, getting better data, zeroing in on the right people to ask the questions of an so on.  There are some realms in life where the gap between declared and revealed preferences is huge.  One of them as Cialdini and his colleagues found was energy consumption.  People say they want to use less energy because it’s good for the environment, but it turns out when you deliver messages – they went into these neighborhoods and hung up signs on every house, but there were different versions of the signs.  This was designed as an experiment.  Some said, “Hey, homeowner, you should use fans in summer more because it’s good for the environment and so many fewer tons of greenhouse gasses will be emitted if you do that.” Others said, “Hey, homeowner, you should use less energy because you’ll save some money on your bill.” Others said, “Hey, homeowner, you should use fans this summer because other people in your neighborhood are thinking about doing the same thing.” The herd mentality.  It turns out that the only one of those suggested incentives that lowered energy consumption was the herd mentality one.  So, people say on the phone, “Yeah.  I will use less electricity because it’s good for the planet.  It’s good for future generations, and so on, and/or maybe I’ll save a little money.” When it comes to actual action and revealed preferences, the one that worked crazily enough was the herd mentality.  None of us would want to admit that we act as we do and that we make decisions as we do because “everybody else is doing it,” but there’s a lot of evidence in various realms of science that suggest that’s actually true.

 

James Altucher:          Also, it’s not just the herd mentality, it’s the idea of social proof.  You might say to yourselves, “I live in this neighborhood, so I like all my neighbors or I think they’re smart or whatever because they’re doing the same thing that I’m doing.  Since they’re doing this, I should be doing this.” It’s social proof, and that’s a marketing technique that many businesses use.

 

Stephen Dubner:         That’s a great point.  I hadn’t thought of that, but that makes a lot of sense.  Yeah.

 

James Altucher:          It is interesting though because you do say in Think Like a Freak, “Another way to think like a freak is knowing what to measure and how to measure it.” So, not just, for instance, doing a poll, but coming up with other ways to measure that might not be so obvious on how to measure it.  You did this throughout all of your books.

 

Stephen Dubner:         Yeah.  This is-

 

James Altucher:          How do you learn how to measure something?

 

Stephen Dubner:         Obviously academia and the social sciences, but this is just as common in the business world where the earliest days of management consulting were about, “Yeah.  You guys have a bunch of dogma, but do you have any evidence that it actually works?” Now, the problem is in the business community even though measurement is considered an extremely valuable tool, the business community is not necessarily so well trained or incentivized to measure what they often should be measuring.  I’ll give you a “for instance.” We write a story in Think Like a Freak about a company.  My co-author Steve Levitt, before he became an academic, he was in consulting for a few years and then he went to get his Ph.D.  and he stayed in academics.  Now, he’s doing consulting again.  He started this firm called The Greatest Good or TGT.  One firm wanted to know what to do exactly to optimize the hundreds of millions of dollars it was spending annually on advertising.  Okay? It was spending a lot of money on TV advertising and print advertising in Sunday newspapers.  They had already had an analysis done that persuaded them that their TV advertising, while much more expensive, returned four times on the dollar what the newspaper advertising did.  So, when asked how they knew this, they took out this analysis that some economic consultants had provided for them.  It showed that indeed whenever they ran TV ads, there was this huge spike in sales that in their mind accounted to a four times return on ROI versus the newspaper advertising.  Then, however, when asked, “What is your schedule for this TV advertising? Do you advertise weekly? Is it monthly? What markets?” and so on.  They said, “Well, because TV advertising is so incredibly expensive, we only do it three times a year – black Friday right after Thanksgiving, right before Christmas, and Father’s day.  So, we said, “Given what you sell, are those significant boom periods for your product?” They said, “Oh, yeah.  This is when people buy.” He said, “Wait a minute.  You’re saying that you’re spending hundreds of millions of dollars to tell people to go buy your stuff at exactly the same time that hundreds of millions of people are already getting ready to go shopping to buy exactly the kind of stuff you want to sell?” They said, “Well, yeah.” He said, “How do you know that you wouldn’t sell as much as you sell now without spending all of that money on TV ads?” The fact is that they didn’t know.  Then we asked them about their newspaper advertising.  They did that every week in every market in America where they sold - again, no variation and no way to really measure the efficacy of it.  So, we suggested to them that they run an experiment.  We said, “What if you could peel off out of your 250 markets 40 markets and randomize them and have a control group where you keep advertising Sunday as you do in the newspapers, and the other group where you stop advertising.  You go totally dark for 3-months.  That would give us some data to know the efficacy.  We could measure sales versus advertising or lack thereof – as basic as that.” They said, “Oh, god! No! We can’t do that.  We’d get fired.  The head of marketing would kill us – the CEO.  There’s no way.  This is part of what we do.” We said, “How will you ever find out how effective it is if you can’t adequately measure it?” He said, “That would be terrible if we went dark.  There was this one intern in Pittsburgh.  Do you remember what he did?” We said, “No.  What did he do?” It turns out there was this one intern who was a recent MBA whose job was to call the papers and make the media buys and he screwed up.  So, in one market for most of the summer, there were no add inserts.  We said, “That’s great.  It’s small, but that’s a great little accidental experiment.  What happened to sales in that market during that summer?” He said, “We were just so desperate to cover up this idiocy that we never looked at numbers.” We looked at the numbers, and it turns out their sales had not decreased at all even though this one summer in this one market, they didn’t advertise.  We said, “This isn’t definitive, but it would certainly give ammunition to want to do this broader experiment of taking these 40 markets and randomizing.” We were sure they’d say, “Oh, yeah.  Let’s do that experiment.  That’s great.  We understand now that if we can measure it, we can figure out what to do.” They still had no interest in doing that experiment.  This is one of the big arguments we make in Think Like a Freak.  People love to pretend they know the answers when they don’t out of ego and job preservation and all of the obvious answers.

 

James Altucher:          That seems like something so obvious.  Why didn’t they listen to you after you showed them two obvious things – of course sales are going to go up when they do TV advertising around Black Friday, and the second thing which is that the one time you didn’t do advertising in print, your sales stayed the same.  That’s so obvious.  Why didn’t they listen to that?

 

Stephen Dubner:         I think there are a couple of reasons.  One is that conventional wisdom is strong.  Conventional wisdom says that TV advertising is effective.  Where it comes from is a number of sources, including, of course, the industry that sells TV advertising.  I think the other reason that they didn’t listen is because they’re living in an ecosystem – this big firm that’s got divisions that exist only to execute this plan.  They have a marketing and ad division that if they did not have this work to do, they would literally have no reason to exist.  So, to even suggest that what this money is being spent on and the effort that these people are putting into something is perhaps not as valuable as one might think is to suggest that people are not as good as they might think.  I understand that.  I certainly understand the human incentives involved, but that doesn’t mean it’s the right answer from a financial standpoint.  Maybe you want to be a company that wastes 30% of your money on stuff that doesn’t give return because it provides jobs.  There are some companies like that.  They tend to go out of business, but to each his own. 

 

James Altucher:          A lot of this is related to another thing you point out in Think Like a Freak.  I have suffered from this bias in a huge way.  You say, “Just because you’re great at something doesn’t mean you’re good at everything.” I remember when I sold my first business in the late 90’s I suddenly thought I was a genius at everything.  Of course, it was that almost problem with my thinking that caused me to lose all of my money – that caused me to lose basically everything – home, money, family, and everything.  You say, even, “Unfortunately, this fact is routinely ignored by those who engage in it.” You give it a name.  I had never heard this before – ultracrepidarianism – the habit of giving opinions and advice on matters outside of ones knowledge or competence.  So, if I want to think like a freak, how do you avoid this bias?

 

Stephen Dubner:         Honestly, I think this is among the easiest biases to avoid.  I think this is something that the minute you look at it in the face, it’s very, very easy to see.  There’s been some experimentation done – this is kind of small, academic experiment, but it proves a point.  You take people who are very, very good.  There’s been some work done with chess players, for instance.  You may know this research.  You know about 100-times more about chess than I do, so I may express this wrong.  If you take great chess players and ask them to look at a game in progress or ask them to look at a board and then look away and recreate the set up, that’s a pretty simple thing for them to do.  Then, you ask them to take a look at a nonsense board – a board setup in a way that no game could ever really be played – and ask them to reproduce that, they can’t do that because what we think of as this power of memory or cognitive organization is, in fact, this muscle that you’ve developed from playing this game over and over again in understanding patterns that are real.  Levitt and I helped a little bit on this years ago.  We did something with taking poker players who need to randomize well.  They need to randomize bluffing, they need to randomize betting, etc.  You take them and you look at their ability to randomize while in their domain – poker.  Then, ask them to randomize in a very related but slightly different domain, which is rock, paper, scissors.  So, we actually did this experiment out in Vegas during the World Series of Poker when all of the poker players were there, and they also hold this fun rock, paper, scissors tournament.  It turns out that when it comes to rock, paper, scissors and other related randomization games, they’re just not very good.  So, I think if you can be not very good at something that’s so close to your own domain, it’s really easy to persuade yourself that you have no reason to expect that you’re going to be really good at something that’s unrelated.  I think doctors have been famous for having the god complex within medicine that they try to transfer over to non-medical realms.  You see this with business people, and you certainly see it with politicians.  To me, once you realize this problem if you have it, it’s pretty easy to self-correct.

 

James Altucher:          Again, it’s like you said in the book.  It requires someone to say, “I don’t know.” I think these are three incredibly valuable words for a lot of reasons.  One thing you point out – you look at two different research studies.  One is about political pundits who make different predictions.  The other is about financial pundits who make predictions.  I was actually probably included in that second study.  The financial pundits were correct on their predictions only 47% of the time, which is worse than 50%.  These guys just don’t know anything.  You can throw darts at the Wall Street Journal and pick better companies.  So, I think for people to just practice saying, “I don’t know,” and have that state of mind of, “Oh, this bears further thinking,” particularly when an issue is important, I think that’s an important part of thinking like a freak.

 

Stephen Dubner:         Yeah.  To us, this is kind of like step one to thinking like a freak or whatever you want to call it.  Just being a little bit better at what you do is learning the difference of what you know and what you don’t know.  I’ll be honest.  It’s easy for us to say this – Levitt and I – because what we do for a living is try to find out stuff.  So, I as a writer will get interested in something and then will try to find people who know a lot about it.  If it’s a complicated scenario like trying to really understand cause and effect where what we “know” is not as simple as aggregating a set of facts, then it becomes this journey of exploration and getting feedback and experimentation and so on.  Levitt is in academia.  You don’t have a job unless you have some good questions that haven’t been answered.  That’s the whole point, at least in academic economics.  It’s to try to ask questions that haven’t been asked yet and try to find good data that will help you answer them.  It’s easy for us to say this, but out in the real world – not in writing and not in academia, people’s reputations are on the line.  So, people who work at firms whether you’re startup pitching yourself to VC guys or the VC guys hearing the pitch, I totally understand all the go and the cognitive biases that conspire to assume that you’d know the way things will work out and what effects have been caused by what causes.  The fact is that we know a lot less than we do.  Once you stop admitting what you don’t know, you also stop gathering good feedback, whether it’s data or otherwise.  You also stop experimenting, which is a fantastic and really cheap way.  We make the argument that experimentation has been the foundation of the hard sciences for centuries, and businesses argue – and certainly in politics, too – it’s just kind of leery of experimentation for a variety of reasons.  One of the biggest is that it requires someone to admit that they don’t know the answer.  So, every time there’s a horrible spree shooting at a school or whatever, you’ve got thousands of people standing up on all sides of the issue saying, “If you only did this, that would improve.” Then you ask for their proof and you look at their evidence and you see what the argument is and you see that they have no idea if it’s true.  There’s this assumption that they do know.  When you make that assumption, you stop trying to embark on creative ways to gather feedback and experiment and find out.  So, that’s our argument.  People should be much more willing to admit what they don’t know because that’s actually the way to figure stuff out.

 

James Altucher:          This is actually related to your chapter in Think Like a Freak called “Think Like a Child” in that children’s incentive is to do what’s fun as opposed to what society tells them to do.  They’d rather play video games than go to the opera, but they’re also a lot more curious and they’re not engrained with the stories that have been told over 30-40 years of their life.  So, when someone thinks like a child that also lends to curiosity, which leads to thinking like a freak.

 

Stephen Dubner:         I agree.  We’re talking about biases and how to override them or whatever.  Let me say this – everybody has biases.  That certainly includes me, Levitt, and you.

 

James Altucher:          No.  That doesn’t include me.

 

Stephen Dubner:         I think one reason that you and I both like the idea of thinking like a child is that you and I pretty much are children still for the most part.  The things that we do that excite us – we do love to play and discovery through games and like the thrill of having new ideas.  I think all of that is true about children.  I think it’s weird and almost inexplicable how all of those traits about children magically evaporate in most people by the time they’re 21 – all of that curiosity and willingness to buck the trend just kind of goes away.  There’s also the fact that the young mind is more plastic than the older mind, and perceptually we are constantly getting duller and duller.  So, we write about magic, for instance – just one example – how kids are actually better at “figuring out” a magic trick if that’s the goal.  That’s not necessarily the goal when you watch a magician work.  If that’s the goal, the kids are actually better not only because they are perceptually sharper and cognitively a little bit more attuned, but they’re also cognitively more diffuse, which his to say adults are great at “paying attention.” What paying attention really means is laser focusing on a task at the exclusion of everything else.  We know that can be incredibly valuable.  On the other hand, it can also be valuable to have really diffuse attention where instead of focusing on the one thing that you think you should be focusing on, you’re taking in other stuff.  With the magician, for instance, that’s what happens.  The magician has an easier time fooling the adults or getting them to buy the trick because they can be beautifully misdirected exactly where the magician wants them to be.  So, if I’m moving one hand in the sweeping motion up, I know that the adults will follow it.  If you do it for kids, though, 20-30% of them will be looking at the other hand.  “What the hell is the other hand doing and why is it in his pocket and what’s it doing right now?” Obviously, these are not good traits for if you’re driving or running a nuclear reactor, but in terms of idea generation and problem solving, I think there are a lot of things that kids do that if we could smuggle those ideas into adulthood, we’d in some cases, at least, be better off.

 

James Altucher:          How could we do that? How could we bring this child-like thinking or at least practice it in our lives? What’s a practical way to start doing this?

 

Stephen Dubner:         I think one easy part of that is to some how turn off your shame meter.  When you go into a business meeting, everybody has been in this meeting where someone running the meeting will say, “Okay.  There are no stupid ideas.” Right? Then, the first stupid idea that comes up, everybody laughs uncomfortably and somebody will say, “Well, I guess there are stupid ideas.” That immediately kills everybody’s incentive or appetite for really thinking and actually thinking.  One thing that kids actually do all the time is think.  Adults – once you get beyond the required thinking period, which we think of as formal education, which, by the way, most of that isn’t thinking, either.  Most of that is learning a standard set of facts and figuring out how to talk them back in a way.  I think a lot of it is just being willing to get laughed at once in a while.  Realistically, if you look at the table of contents of these three Freakonomics books we’ve written or basically the title of any Podcast that we’ve done, I’d say that 50% of all of that is the stuff that most people would just think, “That sounds idiotic.  It sounds childish.  It sounds silly.” A lot of times of course you miss, but for every ten ideas we have, nine of them turn out to be ridiculous.  Unless you’re willing to engage in that level of thinking, as childish as it may be, you may not get that one.  That also leads into what we write about a lot in Think Like a Freak about willingness to fail, the upside of quitting – getting rid of this slavish devotion to stick things out even when they shouldn’t be stuck out and so on. 

 

James Altucher:          It’s your last chapter of the book, actually – “The Upside of Quitting.” You point out that sometimes people stick with things too much.  I think there’s a bigger picture here.  Life is sort of too short, so if you spend an extra year pursuing some business that’s not working out or some idea that’s not working out or a book that’s not working out, that’s a really long time.  You can always make money back, but you can never make time back.  How do people learn how to quit faster or how to fail faster?

 

Stephen Dubner:         I bet a lot of people who listen to your show are way ahead on this.  That’s because there is an ethos in modern business – especially smaller businesses, and especially startups – where it’s understood that failing fast is really important – failing fast and failing well.  I have a feeling that the people that are listening to you are probably in relatively good shape on that.  I would argue if not, there are two really basic economic concepts to keep in front of your face at all times.  One is sum cost.  Sum cost is the money or time or effort or whatever you put into a project or relationship or whatever.  Related to that is the sum cost fallacy, which is the idea that, “Oh, because I’ve invested X units, it would be counterproductive to not invest 2X next year,” which is not necessarily true.  It’s often a fallacy.  The other idea to consider is one of the really basic ideas of economics generally, and not just economics, but opportunity cost.  It’s hard to calculate opportunity cost.  If you say, “I really want to get an MBA, and I can figure out what it’s going to cost me in concrete costs in term of the dollars and the time and maybe I have to move and maybe I have to break up with my boyfriend or girlfriend temporarily.” I can calculate those concrete costs, but it’s much harder to calculate the opportunity costs if I didn’t do that.  If I didn’t spend those two years and that $80,000.00 or whatever and the mental energy to move, what could I be doing instead? What could those two years produce? I think part of it is a conscious decision to calculate your choices in a way that includes opportunity costs more baldly. 

 

James Altucher:          I think one way to look at this is almost to pretend you’re a different person and you’re putting yourself in the center of this situation mid-stream.  So, the common thing to do is an investment.  Let’s say someone buys Apple at $500.00 and the Apple stock goes down to $400.00.  They’re very reluctant at that point to sell $400.00, but you kind of have to look at it with fresh new eyes every morning like, “Would I buy Apple at $400.00 instead of just hold on to it.” That same thing can be applied to life situations.

 

Stephen Dubner:         That is a great, great point.  The only related thought I’ve ever had to that is that I hate shopping.  I think you do, too.  I love spending money on other people.  I don’t like spending it on myself for some reason.  Even if it’s stuff that I need, I just hate having to buy – I just don’t like shopping.  I don’t like the experience of being in the store and all of that.  Thank god for the digital world and so on.  I do have this thing of where if I’m ever thinking about buying something that is not a total essential, I just try to imagine that I’m looking at the thing in a very different setting, which is a yard sale in suburban Connecticut and that it was a tenth of the price it is now in the store and ask if it was sitting there on a table at a tenth of the price, do I even want this thing.  I would say that 80% of the time, the answer is, “No,” it’s just that the person selling it has done such a fantastic job of presenting it in a way that is so seductive – including maybe the high price tag – that it persuades me that I do want it.  I think that’s a great idea.  If you can throw your mind out of your own brain or throw your mind out of context when you’re making your own decision, I think that’s a great suggestion, James.

 

James Altucher:          Another thing I want to cover is that you have this great story about David Lee Roth and M&M’s.  Describe that story.  It’s actually incredibly related, again, in a way to marketing that I don’t know if you’ve looked into.  What’s the David Lee Roth technique of thinking like a freak?

 

Stephen Dubner:         This is David Lee Roth’s claim of David Lee Roth’s technique, which he is very adamant in claiming.  It sounds 100% legit, and I can’t vouch that it worked exactly like he described it, but the argument is this – when Van Halen got really big and they started doing these really, really big road shows – you’re traveling around.  You’re showing up in a different city every night or couple of nights or whatever.  In these days, the rock touring business was a little bit different.  You were more reliant on the promoter to provide more stuff.  You didn’t travel with all of the stage and lighting gear – some of it was provided by the promoter.  You wanted to make sure that they had done everything right and that everything was safe, that it had been set up properly, that you had enough power, etc.  So, what you would do is in advance, your booking agent, you – the band, and your production company sent out a contract that sets down the date and a rider.  If you’ve ever looked at any kind of performance rider, it can often be expensive.  In this case, Van Halen’s had a lot of information about the technical requirements so that the show could work and be safe and so on.  David Lee Roth and Van Halen were looking for a way to make sure that the promoters actually read the rider carefully so that when they would get to the city and get ready to load in and set up, they’d know that the important stuff was done well.  How could you know that the important stuff was done well? If you say to the promoter, “Hey, did you read the rider carefully and do everything?” Of course, they’re going to say, “Yes.” According to David Lee Roth and Van Halen legend, he devised a test – a very simple and brilliant test that involved M&M’s.  So, in the rider, which included the security and technical specs, there was also the specs for what food and drinks and other outré mantes the band was to be provided.  Actually, the food requests weren’t that fancy or specific.  It was like, “On certain days it should either be fried chicken or lasagna,” or whatnot.  Then, there was one thing that was weirdly specific, which was M&M’s.  There should be a bowl of M&M’s backstage, but not brown ones.  Brown ones were not allowed.  So, this was interpreted just as a sign of what prima donnas they were.  Either they had some history with brown M&M’s maybe or they just liked to torture the poor caterers to pick out the brown ones.  In fact, according to David Lee Roth, at least, it was designed as a test.  It was designed as a test so that when they’d show up in a city, it was an easy signal to read.  You’d go backstage and see the M&M bowl.  If the brown M&M’s had not been removed, you could have a pretty high degree of confidence that this multipage rider had not been carefully read and followed, and therefore you might have bigger problems to worry about.  You know? It’s a canary in a coalmine kind of idea.  We write about this in a chapter in Think Like a Freak called “What do King Solomon and David Lee Roth have in common?” We include a lot of examples of where when you want to know the truth, it’s often hard because people often have the incentive to not tell you the full truth.  So, how can you – as we put it – teach your garden to weave itself? How can you get the bad guys or the people who are not being truthful to reveal that they’re not being truthful? The M&M story is one of the best in there.

 

James Altucher:          It’s related to marketing in that there’s a concept called “The long sales-liner” that if you write a really, really long sales-liner – almost too long – then by the end, you’re left with people who are going to simply buy.  It’s a similar type of technique.  You refer to that in a different way with the Nigerian letter.  The Nigerian 419 scams that are so stupid that if someone actually responds to them, they almost qualify themselves that they’re stupid enough to fall for the scam.

 

Stephen Dubner:         Yeah.  What you’re doing there is you’re trying to identify what’s an unobservable trait.  The unobservable trait you’re looking for is gullibility.  It turns out that anyone who gets a Nigerian scam letter and doesn’t think it’s a scam is perhaps in the right realm of gullibility that you can actually then follow-up with them and get them to deposit $20,000.00 in your Nigerian bank account.

 

James Altucher:          So, Stephen, thanks so much for coming on the Podcast.  I think Think Like a Freak is actually the best of the three books because I love Freakonomics and I love Super Freakonomics, but this one really tells you how I can be and I how I can think like a freak.  Your chapter titles like, “The Upside of Quitting,” “How to persuade people who don’t want to be persuaded” – you list all different ways to think like a freak.  You have the chapter “Think like a child.” I just think this is a great book.  I hope everyone buys it.  I hope you come on the show again and we talk more about it.  I really appreciate you coming on now when I’m sure you’re really busy out there promoting the book, which is being released essentially today.

 

Stephen Dubner:         Thanks a million.  I love talking to you and hanging out with you.  Thanks for having me on your show.  I just want to say that the next time we play backgammon, the outcome will not be what it was last time.  That’s my promise/threat to you.

 

James Altucher:          I don’t know about that because I’m getting better every single day.

 

Stephen Dubner:         All right, James.  Talk to you soon.  Thanks a lot.

 

James Altucher:          Okay.  Thanks, Stephen.

 

Stephen Dubner:         Bye.