Misbehaving
Nobel laureate Richard H. Thaler has spent his career studying the radical notion that the central agents in the economy are humans―predictable, error-prone individuals. Misbehaving is his arresting, frequently hilarious account of the struggle to bring an academic discipline back down to earth―and change the way we think about economics, ourselves, and our world. Traditional economics assumes rational actors. Early in his research, Thaler realized these Spock-like automatons were nothing like real people. Whether buying a clock radio, selling basketball tickets, or applying for a mortgage, we all succumb to biases and make decisions that deviate from the standards of rationality assumed by economists. In other words, we misbehave. More importantly, our misbehavior has serious consequences. Dismissed at first by economists as an amusing sideshow, the study of human miscalculations and their effects on markets now drives efforts to make better decisions in our lives, our businesses, and our governments. Coupling recent discoveries in human psychology with a practical understanding of incentives and market behavior, Thaler enlightens readers about how to make smarter decisions in an increasingly mystifying world. He reveals how behavioral economic analysis opens up new ways to look at everything from household finance to assigning faculty offices in a new building, to TV game shows, the NFL draft, and businesses like Uber.
Stats for nerds
8recommend
17mentions
10people
2015–2024years
76% recommend24% neutral
Mentions per year
What Hacker News says
- It was Richard Thaler's Misbehaving: The Making of Behavioral Economics book that finally broke through my thick, anxiety ridden skull and convinced me to stop reading economic news everyday and just forget the the retirement accounts existed. If I'd read that book earlier, I'd be up 3X on my positions.
- Entrepreneurship Negotiation by Dinnar and Susskind covers some of the most fundamental topics anyone wanting to become an entrepreneur must know.
I also find Richard Thaler work (Nudge, Misbehaving) very helpful particularly if you are in the B2C domain.
The Black Swan by Taleb is another book I find myself going back to often; it's been of great help for decision making under lots of uncertainty.
- Books:
- Deep Work, and anything by Cal Newport (You can get a taste of most of his ideas for free on his blog and podcast)
- The Art of Learning. Note that he “jumped around“ at the peak of his original career, but ended up finding a common thread. To your dilemma, a major take away is that single domain can have nearly infinite novelty if you keep looking deeper
- moonwalking with Einstein: this will seem unrelated, but really listen for how The author ends up falling in love with this weird hobby. Can you find that love for anything in your life?
- Misbehaving (Richard Thaler): A young economist bumbles around for years until it starts to come together into a coherent research direction.
- The age of Wonder (Holmes): biographies of romantic scientists, know how different they all are, and also how many different phases of life they each have. I guarantee you you will see yourself in one of them, I just don’t know which
Though I do not have a book for it, my final piece of advice is to except that even the “right“ path will have some boring or even painful stretches. I don’t have a clear cut decision rule for when to stick with it, but it’s definitely not “quit immediately”. I think there’s a book called The Dip about that. Also like Adam Savage YouTube channel where you can see essentially endless hours of the sky who is definitely doing what he is passionate about, but also gets frustrated all the time when things break and such. He’s making physical things, even successful projects take many tedious hours. But there’s no question in his mind that he is going to power through.
- Go back to the 1980s or so and a lot of economists may have recognized that their assumptions didn't really hold in a some cases but the orthodoxy was still that underlying theory was fundamentally economically rational [in the sense of assuming, for example, that people maximize expected value] in nature. What behavioral economics has done is started to provide intellectual foundations for observed behavior that isn't explained by traditional economic models.
Richard Thaler's Misbehaving is a good read on how this developed. I had Thaler as a professor for a couple of classes in the early 80s and I found some of the insights from early-on behavioral economics some of the more useful things I learned in my MBA.
- Segments of economics have problem deciding whether to be descriptive or prescriptive; a theorist will come up with a proof of what a rational actor would do in a given situation. When it's pointed out that no one does that, the theorist responds that he is uninterested in the economics of stupid people.
Check out Misbehaving by Richard Thaler for the entertaining details.
- Plenty. A consequence of being a founder is that you will have to report results. As well as financial projections. Even if its just to yourself and your "executive team" of one other co-founder. More probably on an investor conference call. Or in legally-actionable board meeting minutes. Perhaps it may even occur live one morning on CNBC's Squawk Box.
You need to know the finances of your own company. And need to know the economics of your chosen space. Cold.
To grow, you need to design for growth. And communicate your business objectives with crystal clarity. To speak intelligently and forthrightly requires you to master the language of entrepreneurship. It begins with your peer network. Reach out to other founders, even competitors. Go to events. Don't be afraid to cold email. Ask direct questions relating to everything and research every concept you don't know.
Also begin a steady diet of news: Economist, Bloomberg, FT, WSJ, Reformed Broker. Treat it like you would an essential component of your startup's "culture". Because you may think the fact that 10Y US Treasury yields are holding above 2.40% doesn't directly effect your company. But it does.
The advantage to begin mastery of econ in your 20s, is that a decade later when you hit 30 and need to make long term decisions out of necessity, it will no longer be guesswork. You'll know mathematically what your risk appetite is. And know on an instinctual level, what separates a good investment from the pack.
As for the social science side, there is no better place to start than the "Neuroeconomics" work of this year's Nobel Laureate Richard Thaler. Start on "Nudge" and "Misbehaving". True game-changers. And then onto Daniel Kahneman's "Thinking Fast and Slow".
And do give credence to the classic that kicked it all off: Adam Smith and "The Wealth of Nations". As important as Descartes, Kant, Locke, Rousseau and Jefferson to our modern world.
Best of luck, dprophecyguy!
