Eyal Winter is professor of economics and the former director of the Center for the Study of Rationality at the Hebrew University of Jerusalem, one of the world’s leading institutions in the academic study of decision making. He served as chairman of the economics department at Hebrew University and was the 2011 recipient of the Humboldt Prize, awarded by the government of the Federal Republic of Germany. He has lectured at over 130 universities in 26 countries around the world, including Harvard University, Stanford University, Princeton University, the University of California at Berkeley and the University of Cambridge. Winter is also the co-founder of CHANGE a company that develops a software to assist people to spend less and save more based on behavioral tools.
His latest book, Feeling Smart: Why Our Emotions Are More Rational Than We Think, was published by PublicAffairs (2014). The book has been blurbed with endorsements by seven Nobel laureates in economics and by Larry Summers. It is currently translated by publishers in China and Japan.
Here is an excerpt from Part 2 of my interview of Eyal.
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Morris: When and why did you decide to write Feeling Smart?
Winter: I have been working on decision-making and game theory since the beginning of my academic career. We tend to think about decision making as a territory in which emotions harm rather than help. This is largely wrong. In fact emotions facilitate our decision making especially those that involve interaction with other people. In the last several decades economists and psychologists made a substantial progress in understanding how emotions affect our decision-making. I have contributed to this literature and I wrote the book in order to share these fascinating research findings with the general public.
Morris: To what extent (if any) does the book in final form differ significantly from what you originally envisioned?
Winter: When my father passed away in 2007 he left a fascinating document that summarizes his childhood memories as a Jewish kid in Nazi Germany. I had been planning to write the book before my father’s death but I really got myself to do it after I recovered from the grief over my loss. Going over my dad’s writing I was struck by the fact that many of the stories he was telling beautifully match with important scientific insights about the role of emotions in decision-making. I actually used some of these stories to explain his insights. I didn’t plan to do it in the first place but it seemed so natural and it made the outcome of my journey with the book much more accessible and interesting.
Morris: Long ago, Ernest Hemingway suggested that all great writers have a “built-in, shock-proof crap detector.” (Apparently his did not always work properly, especially when evaluating his own work.) Just because someone “feels smart” — or “feels dumb,” for that matter — does not necessarily mean that they are. Of course, there is also Henry Ford’s suggestion, “If you think you can or think you can’t, you’re probably right.” Your own thoughts about all this?
Winter: This is to a large extent true. Self-confidence and even slight over-confidence can help achieve their goals. But major over-confidence can be detrimental. I discuss it in detail in my book and show how investors often pay a heavy price because of the alarming over-confidence of their portfolio managers.
Morris: What is the relevance of game theory to the potential importance of emotions to decision-making?
Winter: Game Theory is the theory of strategic behavior. When we interact with other people whether it is in the workplace, at home with our spouses and kids or in the market place with clients and suppliers we use strategies. Emotional reactions are strategies, because they affect the behavior of our counterparts. Even when we are not fully aware of it we all use emotions strategically and we do so through a fascinating deliberation between our rational being and our emotional one.
Morris: What is the relevance of evolution (i.e. natural selection) to the potential importance of emotions to decision-making?
Winter: Much of our emotional reactions can be thought of as evolutionary mechanisms to improve our social interaction. A nice example is embarrassment. How can it be that at a moment of embarrassment, when we wish we could vanish and be unnoticeable, we blush like an alarm lamp making ourselves more salient and visible. Darwin himself speculated that blushing is an evolutionary mechanism for admitting wrong doing and asking for forgiveness. Interestingly, recent laboratory experiments confirmed Darwin’s explanation. People tend to be more forgiving toward an asocial behavior of a person if this person reacts with embarrassment by blushing. This is only one example but my book is full of those.
Morris: My use of “potential” is deliberate. I agree with Darrell Royal: “potential means you ain’t done it yet.” There is great value in understanding what you have to say about emotional rationality but even greater value in using that understanding to make better decisions. Why do so many people make so many decisions based on emotional [begin italics] irrationality [end italics]?
Winter: Evolutionary mechanisms are not perfect. They rarely fine-tuned. Consider physical pain. Clearly it is one of the most critical mechanisms for our survival. It is an indispensible alarm system about our body condition. But very often it provides us with information that we already know, and we can’t shut it off. Pain at this stage has negative effect on our well-being and even on our survival. Emotions can have similar effect. Anger and frustration, for example, are useful mechanisms that motivate us to change our unfavorable social situation but they may persist even if we can do nothing to improve our social situation, and sometimes our emotional reaction is so severe that it can even worsen our social situation. To minimize these negative effects of emotions we must recruit our rationality. We have no mechanism to fine-tune our physical pain but we do have a mechanism to fine-tune our emotional reaction. This mechanism is called rationality.
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Here is a direct link
to the complete Part 2.
To check out Part 1, please click here.
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Eyal cordially invites you to check out the resources at these websites:
Feeling Smart Amazon link
The Guardian link
Psychology Today link