by Steven Levitt)
When put on the spot and asked how we'd behave in a situation that pits a private benefit against the greater good, most of us won't admit to favouring the private benefit. But as history clearly shows, most people generally put their own interests ahead of others'. This doesn't make them bad people, it just makes them human. But this can be frustrating if your ambitions are larger than simply securing some small private victory. Maybe you want to ease poverty, or make government work better, or persuade your company to pollute less, or just get your kids to stop fighting. How are you supposed to get everyone to pull in the same direction when they are all pulling primarily for themselves?
Most people think there is a "right" way to think about solving a given problem and a "wrong" way too. This inevitably leads to a lot of shouting – and a lot of unsolved problems. We'd like to bury the idea that there's a right way and a wrong way, a smart way and a foolish way.
The modern world demands that we all think a bit more productively, more creatively, more rationally; that we think from a different angle, with a different set of muscles, with a different set of expectations; that we think with neither blind optimism nor sour scepticism. That we think – ahem – like a freak.
Thinking like a freak involves three relatively simple, core ideas. 1. Incentives are the cornerstone of modern life. And understanding them – or, often, deciphering them – is the key to understanding a problem, and how it might be solved. 2. Knowing what to measure, and how to measure it, can make a complicated world less so. There is nothing like the sheer power of numbers to scrub away layers of confusion and contradiction. 3. The conventional wisdom is often wrong.
Our thinking is inspired by what is known as the economic approach. That doesn't mean focusing on "the economy" – far from it. The economic approach is both broader and simpler than that. It relies on data, rather than hunch or ideology, to understand how the world works, to learn how incentives succeed (or fail), how resources get allocated, and what sort of obstacles prevent people from getting those resources, whether they are concrete (such as food and transportation) or more aspirational (such as education and love). There is nothing magical about this way of thinking. It usually trafficks in the obvious and places a huge premium on common sense. Thinking like a freak is simple enough that anyone can do it.
One reason that people don't is that it's easy to let your biases – political, intellectual or otherwise – colour your view of the world. Even the smartest people tend to seek out evidence that confirms what they already think, rather than new information that would give them a more robust view of reality. It's also tempting to run with a herd. Even on the most important issues of the day, we often adopt the views of our friends, families, and colleagues. But this means we are quick to embrace the status quo, slow to change our minds and happy to delegate our thinking.
Another barrier to thinking like a freak is that most people are too busy to rethink the way they think – or even to spend much time thinking at all. When was the last time you sat for an hour of pure, unadulterated thinking? If you're like most people, it's been a while. Is this simply a function of our high-speed era? Perhaps not. The absurdly talented George Bernard Shaw – a world-class writer and a founder of the London School of Economics – noted this thought-deficit many years ago. "Few people think more than two or three times a year," Shaw said. "I have made an international reputation for myself by thinking once or twice a week."
HOW TO THINK LIKE A FREAK
Don't be embarrassed by how much you don't know
Imagine you are asked to listen to a simple story and then answer a few questions about it. Here's the story: a little girl named Mary goes to the beach with her mother and brother. They drive there in a red car. At the beach, they swim, eat some ice cream, play in the sand and have sandwiches for lunch.
Now the questions: what colour was the car? Did they have fish and chips for lunch? Did they listen to music in the car? Did they drink lemonade with lunch?
All right, how did you do? Let's compare your answers with those of a bunch of British schoolchildren, aged five to nine, who were given this quiz by academic researchers. Nearly all the children got the first two questions right ("red" and "no"). But the children did much worse with questions three and four. Why? Those questions were unanswerable – there simply wasn't enough information given in the story. And yet a whopping 76% of the children answered these questions either yes or no.
Kids who try to bluff their way through a simple quiz like this are right on track for careers in business and politics, where almost no one ever admits to not knowing anything. It has long been said that the three hardest words to say in the English language are "I love you". We disagree. For most people, it is much harder to say "I don't know". That's a shame, for until you can admit what you don't yet know, it's virtually impossible to learn what you need to.
Think like a child
When it comes to generating ideas and asking questions, it can be really fruitful to think like a child. Because they know so little, they don't carry around the preconceptions that often stop people from seeing things as they are. When it comes to solving problems, this is a big advantage.
Kids are not afraid to share their wildest ideas. As long as you can tell the difference between a good idea and a bad one, generating a boatload of ideas, even outlandish ones, can only be a good thing. You may find that only one idea out of 20 is worth pursuing – but you might never have come up with that one unless you were willing to blurt out, childlike, everything that wandered through your brain. So when it comes to solving problems, channelling your inner child can really pay off. It all starts with thinking small.
Why? For starters, every big problem has been thought about endlessly by people much smarter than we are. The fact that it remains a problem means it is too damned hard to be cracked in full. Sure, there are some truly brilliant people out there and they probably should think big. For the rest of us, thinking big means you'll spend a lot of time tilting at windmills. Here are a few reasons why it's much better to ask small questions than big ones.
1. Small questions are by their nature less often asked and investigated, and maybe not at all. They are virgin territory for true learning. 2. Since big problems are usually a dense mass of intertwined small problems, you can make more progress by tackling a small piece of the big problem than by flailing away at grand solutions. 3. Any kind of change is hard, but the chances of triggering change on a small problem are much greater than on a big one. 4. Thinking big is, by definition, an exercise in imprecision or even speculation. When you think small, the stakes may be diminished but at least you can be relatively sure you know what you're talking about.
Here's another cardinal rule of thinking like a child: don't be afraid of the obvious. If you are willing to confront the obvious, you will end up asking a lot of questions that others don't. As Albert Einstein liked to say, everything should be made as simple as possible, but not simpler.
Incentives are the cornerstone of modern life
Amanda, three years old, had been successfully potty-trained but then backslid. None of the usual enticements – stickers, praise, and the like – could get her back on the toilet.
Her mother was so frustrated that she turned the task over to her father, one of the authors of Think Like a Freak. He was supremely confident. Like most economists, he believed he could solve any problem by setting up the right incentives. The fact that his target was a child made it even simpler. He got down on his knees and looked Amanda in the eye. "If you go to the toilet," he said, "I'll give you a bag of M&M's."
"Right now?" she asked. "Right now." He knew that every parenting book frowns on using candy as a bribe, but parenting books are not written by economists. Amanda trotted off to the toilet, did her business, and raced back to claim her M&M's. Victory! It was hard to say who was prouder, daughter or father.
This scheme worked perfectly for three days – not a single accident. But on the morning of the fourth day, things changed. At 7.02am, Amanda announced: "I have to go to the bathroom!" She did and got her M&M's. Then, at 7.08: "I have to go again." She did, just a quick tinkle, and came for her candy. At 7.11: "I have to go again." Again, Amanda made a minimal deposit in the toilet before claiming her next tranche of M&M's. This went on for longer than any of the interested parties care to remember.
How powerful are the right incentives? Within four days, a little girl went from potty-challenged to having the most finely tuned bladder in history. She simply figured out what it made sense to do given the incentives she faced. If there is one mantra a freak lives by, it is this: people respond to incentives. As obvious as this point may seem, we are amazed at how frequently people forget it and how often it leads to their undoing. Understanding the incentives of all the players in a given scenario is a fundamental step in solving any problem.
Not that incentives are always so easy to figure out. Different types of incentives – financial, social, moral, legal, and others – push people's buttons in different directions, in different magnitudes. An incentive that works beautifully in one setting may backfire in another. But if you want to think like a freak, you must learn to be a master of incentives – the good, the bad and the ugly.
Think like a rock star
David Lee Roth fronts the rock band Van Halen and was known throughout the land for his prima donna excess. By the early 1980s, Van Halen had become one of the biggest rock bands in history. They were known to party particularly hard while on tour. "No matter where Van Halen alights," Rolling Stone reported, "a boisterous, full-blown saturnalia is bound to follow."
The band's touring contract carried a 53-page rider that laid out technical and security specs as well as food and beverage requirements. On page 40 was the "munchies" section. It demanded potato chips, nuts, pretzels, and "M&M's (WARNING: ABSOLUTELY NO BROWN ONES)." What was up with that? The nut and chip requests weren't nearly so nitpicky. Nor the dinner menu. So why the hang-up with brown M&M's? Had someone in the band had a bad experience with them? Did Van Halen have a sadistic streak and take pleasure in making some poor caterer hand-sort the M&M's?
When the M&M clause was leaked to the press, it was seen as a classic case of rock-star excess, of the band "being abusive of others simply because we could," Roth said years later. But, he explained, "the reality is quite different".
Van Halen's live show was an extravaganza, with a colossal stage set, booming audio and spectacular lighting effects. All this equipment required a great deal of structural support, electrical power and the like. But many of the arenas they played were outdated. Thus the need for a 53-page rider. "Most bands had a contract rider that was like a pamphlet," Roth said. "We had one that was like a phone book." It gave point-by-point instructions to ensure that the promoter at each arena provided enough physical space, load-bearing capacity and electrical power. Van Halen wanted to make sure no one got killed by a collapsing stage or a short-circuiting light tower.
But every time the band pulled into a new city, how could they be sure the local promoter had read the rider and followed all the safety procedures? Cue the brown M&M's. When Roth arrived, he'd immediately go backstage to check out the bowl of M&M's. If he saw brown ones, he knew the promoter hadn't read the rider carefully and that "we had to do a serious line check" to make sure the important equipment had been properly set up. He also made sure to trash the dressing room if there were no brown M&M's. This would be construed as nothing more than rock-star folly, thereby keeping his trap safe from detection. But we suspect he enjoyed it all the same.
Don't let emotion get in the way
Shortly after the publication of Superfreakonomics, while on a book tour in England, we were invited to meet David Cameron, who would soon become prime minister of the UK. Mr Cameron burst through the door. "All right," he boomed, "where are the clever people?" He wore crisp white shirtsleeves, his trademark purple tie, and an air of irrepressible optimism. As we chatted, it became instantly clear why he was projected to become the next prime minister. Everything about him radiated competence and confidence. He looked to be exactly the sort of man whom deans at Eton and Oxford envision when they are first handed the boy.
Cameron said the biggest problem he would inherit as prime minister was a gravely ill economy. The UK, along with the rest of the world, was still in the grip of a crushing recession. The mood, from pensioners to students to industry titans, was morose; the national debt was enormous and climbing. Upon taking office, Cameron told us, he would need to make broad and deep cuts. But, he added, there were a few precious rights that he would protect at any cost.
Like what? we asked. "Well, the National Health Service," he said, eyes alight with pride. This made sense. The NHS provides cradle-to-grave health care for every Briton, most of it free at point of use. One former chancellor of the exchequer called the NHS "the closest thing the English have to a religion", which is doubly interesting since England does have an actual religion. There was just one problem: UK healthcare costs had more than doubled over the previous 10 years and were expected to keep rising.
Although we didn't know it at the time, Cameron's devotion to the NHS was based in part on an intense personal experience. His eldest child, Ivan, was born with a rare neurological disorder called Ohtahara syndrome. It is marked by frequent, violent seizures. As a result, the Cameron family had become all too familiar with NHS nurses, doctors, ambulances and hospitals. "When your family relies on the NHS all the time, day after day, night after night, you really know just how precious it is," he once told the Conservative party's annual conference. Ivan died in early 2009, a few months short of his 7th birthday.
So perhaps it was no surprise that Cameron, even as head of a party that embraced fiscal austerity, should view the NHS as sacrosanct. To monkey with the system, even during an economic crisis, would make as much political sense as drop-kicking one of the Queen's corgis.
But that didn't mean it made practical sense. While the goal of free, unlimited, lifetime health care is laudable, the economics are tricky. We now pointed this out, as respectfully as possible, to the presumptive prime minister.
Because there is so much emotion attached to healthcare, it can be hard to see that it is, by and large, like any other part of the economy. But under a set-up like the UK's, healthcare is virtually the only part of the economy where individuals can go out and get nearly any service they need and pay close to zero, whether the actual cost of the procedure is £100 or £100,000.
What's wrong with that? When people don't pay the true cost of something, they tend to consume it inefficiently.
Think of the last time you sat down at an all-you-can-eat restaurant. How likely were you to eat a bit more than normal? The same thing happens if healthcare is distributed in a similar fashion: people consume more of it than if they were charged the sticker price. This means the "worried well" crowd out the truly sick, waiting times increase for everyone and a massive share of the costs goes to the final months of elderly patients' lives, often without much real advantage.
This sort of overconsumption can be more easily tolerated when healthcare is only a small part of the economy. But with healthcare costs approaching 10% of GDP in the UK – and nearly double that in the United States – you have to seriously rethink how it is provided and paid for.
We tried to make our point with a thought experiment. We suggested to Mr Cameron that he consider a similar policy in a different arena. What if, for instance, every Briton were also entitled to a free, unlimited, lifetime supply of transportation? That is, what if everyone were allowed to go down to the car dealership whenever they wanted and pick out any new model, free of charge, and drive it home?
We expected him to light up and say: "Well, yes, that'd be patently absurd – there'd be no reason to maintain your old car, and everyone's incentives would be skewed. I see your point about all this free healthcare we're doling out!" But he said no such thing. In fact, he didn't say anything at all. The smile did not leave David Cameron's face, but it did leave his eyes. Maybe our story hadn't come out as we'd intended. Or maybe it did and that was the problem. In any case, he offered a quick handshake and hurried off.
Redefine the problem
In the autumn of 2000, a young man who would come to be known as Kobi was studying economics at Yokkaichi University. He lived with his girlfriend, Kumi. They lit the apartment by candle since they could no longer afford the electricity bill.
Kumi heard about a contest that paid $5,000 to the winner. Without telling Kobi, she sent in a postcard to sign him up. It was a televised eating competition. This was far from an obviously good idea. Kobi wasn't gluttonous in the least; he had a slight build and stood barely 5ft 8ins. He did, however, have a strong stomach and a good appetite.
Kobi reluctantly agreed to enter the contest. His only chance was to out-think the competition. At university, he had been learning about game theory and now it came in handy. The contest would have four stages: boiled potatoes followed by a seafood bowl, Mongolian mutton barbecue, and noodles. Only the top finishers from each stage would advance. Kobi studied earlier multi-stage eating contests. He saw that most competitors went so hard in the early rounds that even if they did advance, they were too exhausted (and stuffed) to do well in the finals. His strategy was to conserve energy and stomach capacity by eating just enough at each stage to qualify for the next. In the final round, Kobi wolfed down enough noodles to win the $5,000 prize.
Having tasted amateur success, Kobi was eager to go pro. He set his sights on the Super Bowl of competitive eating, as the sport is known: Nathan's Famous Fourth of July International Hot Dog Eating Contest, which is held in Coney Island in New York City and routinely draws more than a million viewers on ESPN.
The rules were simple. A contestant ate as many hot dogs and buns as he could in 12 minutes. In 2001, when Kobi decided to enter the contest, the record stood at a mind-boggling 25⅛ in 12 minutes. For months, he trained in obscurity and he arrived at Coney Island in obscurity as well. One contestant mocked him: "Your legs are thinner than my arms!"
How did he do? In his very first Coney Island contest, Kobi smoked the field and set a new world record. He ate 50. The slender 23-year-old Kobi – full name Takeru Kobayashi – had essentially doubled the world record. Kobayashi won Coney Island again the following year and the next four years too, pushing the record to 53¾ hot dogs. Some rivals thought he was cheating. Perhaps he took a muscle relaxant or some other foreign substance to quell the gag reflex? He was rumoured to have swallowed stones to expand his stomach. None of these charges was true. So why was he so much better than everyone else?
Kobayashi had observed that most eaters used a similar strategy, which was essentially a speeded-up version of how the average person eats a hot dog at a backyard barbecue: pick it up, cram the dog and bun into the mouth, chew from end to end, and glug some water to wash it down. Kobayashi wondered if there was a better way. Nowhere was it written, for instance, that the dog must be eaten end to end. What would happen if he broke the dog and bun in half before eating? This, he found, afforded more options for chewing and loading.
Kobayashi now questioned another conventional practice: eating the dog and bun together. The dog itself is a compressed tube of dense, salty meat that can practically slide down the gullet on its own. The bun, while airy and less substantial, takes up a lot of space and requires a lot of chewing. So he started removing the dog from bun. Now he could feed himself a handful of bunless dogs, broken in half, followed by a round of buns.
As easily as he was able to swallow the hot dogs, the bun was still a problem. So Kobayashi tried something different. As he was feeding himself the bunless, broken hot dogs with one hand, he used the other hand to dunk the bun into his water cup. Then he'd squeeze out most of the excess water and mashed the bun into his mouth. Eating soggy buns meant Kobayashi grew less thirsty, which meant less time wasted on drinking.
He videotaped his training sessions and recorded all his data in a spreadsheet, hunting for inefficiencies and lost milliseconds. He experimented with pace: was it better to go hard the first four minutes, ease off during the middle four and "sprint" toward the end – or maintain a steady pace throughout? (A fast start, he discovered, was best.) He found that getting a lot of sleep was especially important. So was weight training: strong muscles aided in eating and helped resist the urge to throw up. He also discovered that he could make more room in his stomach by jumping and wriggling as he ate.
Can the success of Takeru Kobayashi, as magnificent as it was, be applied to anything more significant than the high-speed consumption of hot dogs? We believe it can. If you think like a freak, there are at least two broader lessons to be gleaned from his approach.
The first is about problem solving generally. Kobayashi redefined the problem he was trying to solve. What question were his competitors asking? It was essentially: how do I eat more hot dogs? Kobayashi asked a different question: how do I make hot dogs easier to eat? The second lesson has to do with the limits that we accept, or refuse to. Kobayashi said that when he started training, he refused to acknowledge the legitimacy of the existing Coney Island record of 25⅛ hot dogs. Why? He reasoned that the record didn't stand for much since his earlier competitors had been asking the wrong question about eating hot dogs. As he saw it, the record was an artificial barrier.
It was by refusing to accept it that Kobayashi blasted right through number 25 that first year.
This is an edited extract from Think Like a Freak (Allen Lane £12.99)