Howard Kunreuther on Behavioral Economics of Risk

episode page:

youtube link:

Howard Kunreuther is the foremost authority on applying behavioral economics to unlikely, high consequence events. I remain astounded that Howard’s teachings are not part of the educational canon for all insurance professionals. This is important stuff!
In this episode we discuss:

  • Cognitive bias and how it impacts society generally and insurance in particular
  • How we might overcome cognitive bias in our decision making
  • Prioritization of risk
  • How politics really is the mediating force for discussing risk
  • Does voter irrationality give us cause for hope?

Why did I do this show?

Howard is the foremost expert on behavioral economics of insurance. I mean… I still can’t get over how it took me 20 years in this business to learn his work exists. I’m embarrassed this wasn’t my first episode!

What did I learn?

Howard has a lot of ideas for ‘hacking’ our lives to overcome cognitive biases and bring about a better world.

What was my favorite part?

Our discussion of hope. Howard’s bet is that we have genuinely learned things about how humans work that can translate into action and ways to improve the world. Very hard!

Robin Hanson on Distant Futures and Aliens

Episode link:
Youtube link:

Why did I do this show?

Social science is brutally hard to do well. I got one of my guests to admit there has been no progress on it ever and another one to say that moral progress is literally impossible. I think there’s a deeper link to morality and social science than most so this is depressing stuff for me. This episode was part of an effort of mine to get back to first principles. But, uh.. what ARE the first principles of social science? Enter Robin!

What did I learn?

Competition, competition and more competition. That’s the most central concept that Robin uses when reasoning about what might be. Indeed, you may or may not like some cultural feature or another but to predict how successful it will be requires a mechanism for it to be outcompeted in the cultural marketplace. No small feat!

What was my favorite part?

Straightaway we got into a disagreement about generality vs immutability. That was fun. He didn’t convince me I was off base. There was another spot where I disagreed with Robin on speculation about the state of past social science. Again he didn’t convince me! I read somewhere that Robin is ‘not the kind of person you sorta agree with on everything’. It’s such a treat to talk to as creative and deep and original a thinker as Robin.

Joshua Gans on Prediction Machines

Episode link:

Youtube link:

Why did I do this episode? I first heard about the book from this review by Robin Hanson (podcast guest!) where the authors frame the rise in AI as a drop in the price of prediction. Forecasting is a very important idea to me so I checked it out!

What did I learn? The concept of AI and intelligence generally as a prediction machine is a pretty interesting and useful one.

What was my favorite part? We had a conversation about how useful academic economics and economists are in private companies. A lot of the big tech companies employ economists and one could argue that most cryptocurrency is, in a social sense, an innovation in behavioral economics!

Social Media Changes Politics with Martin Gurri

Episode Link:

Youtube Link:

Why did I do this show? Martin has been studying the effects of information on politics around the world for decades and released a book describing how the democratization of access to information corrodes our political decision making process.

What did I learn? My biggest takeaway is that in some weird way, people actually don’t want the information they’re given because we don’t like the resulting destabilization. It’s one reason why I’m a bit more optimistic than most that this latest round of information-overload will self-correct somehow.

What was my favorite part? Immediately, right out of the gates Martin disagreed with me! Calling me out on my American-centered view of social media when I base some conclusions on Twitter. Twitter is not a big deal elsewhere!


Alex Tabarrok on Innovation and The Baumol Effect

Episode Page:

Youtube Channel Link:

Why did I do this show: I am a massive fan of Alex’s blog and I found out he released a book on innovation!

What did I learn: That policing is a massive opportunity for reform!

What was my favorite part: talking to Alex about his work in online education, marginal revolution university!

Matt Moore on Analyzing Highway Safety

Episode Link:

Youtube channel link:

Why did I do this show? Matt is a very common speaker at actuarial conferences and he’s has fantastic, analytically driven insights into automobile safety. It’s the biggest risk to us all!

What did I learn? I learned about all the ways that AI fails on self-driving cars. And that speed is really the big problem on highways!

What was my favorite part? Having Matt dodge questions about what those JD Power awards are all about!

Monica Mason on Catastrophe Modeling

Episode Link:

Youtube link:

Why did I do this show: Catastrophe modeling is a big part of what makes property reinsurance the most dynamic and innovative market in the insurance industry. Yet there are a lot of misconceptions to explore!

What did I learn: I learned that the core value of the catastrophe modeling vendors is their scrubbing of a variety of data sources.

What was my favorite part? I got to talk about how the models aren’t really all that important, ironically enough!

Melissa Perri on Escaping The Software Build Trap

Episode Link:

Youtube Channel Link:

Why did I do this show: I had been fascinated by how great software is made and what really makes great tech companies so much better at software than anyone else. This show came about as part of me trying to figure out how to think about technology.

What did I learn: I learned way too much and had to recognize what I learned only over the years following this interview. In a certain sense I did learn about software but I wasn’t ready to learn about it. I needed to try to build real software at a real software company to genuinely understand what Melissa taught me. So the thing I learned was that we can’t always learn the easy way.

What was my favorite part: This was the beginning of me figuring out that strategy is about constraints. Melissa’s book is entirely about how to effectively constrain an organization to make great things. It’s a very deep thing that I am still working to grasp!

Stan McChrystal on Risk and Leadership

Episode page:

Youtube link:

Stan McChrystal retired as a 4 Star General in the US Army and has since founded the McChrystal Group, written four books and launched a podcast. Stan is one of the world’s foremost scholars and practitioners of leadership and in this conversation we focus on his latest book, Risk: A User’s Guide. As I say in the interview, I think this is Stan’s most straightforward how-to guide on leadership and we dig very deeply into the nuanced and fascinating connection between leadership and uncertainty, including:
* What the history of military tactics can teach us about social progress
* How hard is it to manage Special Forces? Why might it be different than other branches of the military?
* When and why is Stan skeptical of using data to make decisions?
* How does uncertainty reduction help you judge a leader? 
* How do we use morality to help guide us through uncertainty? Who are the best at this in the military?
* What kind of information is toxic to decision making?

Why did I do this show?

I’ve been thinking a lot about the relationship between leadership and risk. Then holy cow I learn that one of the most celebrated military leaders in a generation wrote a book about leadership disguised as a book about risk!? An incredible opportunity for me!

What did I learn?

I learned that the most distinguishing characteristic of Special Forces is (what I call) their moral clarity. An astounding and profound thing.

What was my favorite part?

Definitely Stan’s reaction to how President Bush judges leaders. Deeper than it seems!

Ty Sagalow on the Making of Lemonade

Episode Link:

Youtube Channel Link:

Why did I do this show? Lemonade is a legendary insuretech success and Ty was a co-founder. For those of us interested in insurance and technology this one was a no-brainer!

What did I learn? I learned that Ty was involved in a lot of insurance innovation in his career. The most common way new insurance products fail is not that they are underpriced and blow up a company, it’s that nobody gives a damn and sales are near-zero. Very important!

What was my favorite part? I loved digging into the superpowers of awesome engineering and product teams and Lemonade has those in spades!