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.
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Morris: Before discussing Feeling Smart, a few general questions. First, who has had the greatest influence on your personal growth? How so?
Winter: That would be my father, Johanan Winter, whose childhood as a Jewish kid in Nazi Germany was tough but at the same time offered him an important experience with critical insights about life, humanity, and social interactions. He conveyed all these insights to me over the years and they are engraved in who I am.
Morris: The greatest impact on your professional development? How so?
Winter: Bob Aumann, the 2005 Nobel laureate in Economics, who taught me game theory and decision-making. He inspired much of my academic work.
Morris: Years ago, was there a turning point (if not an epiphany) that set you on the career course you continue to follow? Please explain.
Winter: I started my academic career as a pure game theory student using primarily mathematical modeling to understand human behavior. But conventional game theory relies heavily on the assumption that we always act in a fully rational manner. A turning point in my career happened when I realized that emotions play a major role in our decision-making which is much more important than I previously believed. This was an insight that I gained through introspection and by observing the behavior of people around me. This led me to study emotions and the way they affect our decision making.
Morris: To what extent has your formal education been invaluable to what you have accomplished in life thus far?
Winter: As an academic my formal education was indispensible to my accomplishments, and while my current research challenges and criticizes assumptions that were quite vital during my formal education I probably wouldn’t have been able to arrive at the research findings I made without my formal education.
Morris: What do you know now about the business world that you wish you knew when you went to work full-time for the first time? Why?
Winter: I know that the business world is run by human beings who make decisions with all their strengths and weaknesses. I know that emotions such as envy and anger on one hand but also sympathy and empathy on the other hand play a critical role in the way these human beings are making business decisions that require interactions with others. That much of the errors people make in their individual financial decisions are not due to the fact that they aren’t sophisticated enough but because they fear regretting their decision in the future. These are not insights based on personal experience as a businessman. I am not a businessman. These are insights that I gained by looking at dozens of research studies based on the behavior of thousands of individuals that I either read or conducted myself.
Morris: Of all the films that you have seen, which – in your opinion – best dramatizes important business principles? Please explain.
Winter: It’s Rebel Without A Cause with James Dean. Please check out one scene by clicking here. It shows how the pursuit of superiority and dominance can drive people and their businesses to madness that can eventually lead to extinction.
Morris: From which non-business book have you learned the most valuable lessons about business? Please explain.
Winter: The Strategy of Conflict by Nobel laureate Thomas Schelling is not a typical “business book” but I believe it should be read as such. Businesses operate in a permanent mode of conflict and Schelling’s book offers important insights about how conflicts emerge, then managed and settled.
Morris: Here are several of my favorite quotations to which I ask you to respond. First, from Lao-tse’s Tao Te Ching:
“Learn from the people
Plan with the people
Begin with what they have
Build on what they know
Of the best leaders
When the task is accomplished
The people will remark
We have done it ourselves.”
Winter: It’s an excellent one. The way we feel about a person, whether we like them fear them or dislike them, depends critically on how we see ourselves through their eyes. If we manage to help people feel good about themselves we gain gain their sympathy, their trust, and eventually their cooperation. Being able to empower people by recognizing their accomplishments is the key to successful leadership.
Morris: From Michael Porter: “The essence of strategy is choosing what not to do.”
Winter: I am less sure about this insight, at least if one interprets it as advocating passivity. Often people over act and over react. We know, for example, that portfolio managers on Wall Street tend to make many more buy-sell decisions than are rationally justified. But in general, avoiding decisions can be equally harmful. We know that some people avoid making critical decision because they fear that they will regret them and this can be detrimental to their businesses.
Morris: From Richard Dawkins: “Yesterday’s dangerous idea is today’s orthodoxy and tomorrow’s cliché.”
Winter: Very true! Beliefs, conventions and moral standards constantly change and we are required to adapt to new rules. A good example are those Wall Street executives who walked to jail while mumbling “the bastards changed the rules without letting me know.” They indeed have used practices that were considered legitimate for decades. Decisions and practices should be judged not only based on today’s perspective but also based on how it might be viewed in the future.
Morris: From Isaac Asimov: “The most exciting phrase to hear in science, the one that heralds the most discoveries, is not “Eureka!” (I found it!) but ‘That’s odd….’”
Winter: Yes, great discoveries defy our conventional beliefs, but no, they don’t emerge by coincidence but by hard work and deep thinking.
Morris: From Thomas Edison: “Vision without execution is hallucination.”
Winter: Very true. Vision and execution are very often intermingled and the interface is a blur. One cannot survive without the other.
Morris: From Hillel the Elder: “If not you, who? If not now, when?”
Winter: The original Hebrew phrase says “If not me for myself, who? If not now, when? People sometimes interpret it as propagating selfishness. But this is wrong. Hillel the Elder meant to stress responsibility. It’s the following twist on JFK’s famous sentence: Don’t ask what your country can do for you ask what you can do for yourself – very valuable advice.
Morris: Most change initiatives either fail or fall far short of original (perhaps unrealistic) expectations. More often than not, resistance is cultural in nature, the result of what James O’Toole so aptly characterizes as “the ideology of comfort and the tyranny of custom.”
Here’s my question: How best to avoid or overcome such resistance?
Winter: We call this resistance the “Status Quo Bias”. The resistance against change is driven by two mental sources: our reluctance to take risk and our fear of regret. One way to overcome it is to realize and stress the fact that sticking with the status quo also involved a decision that one might regret and it often involves more risk and uncertainty than moving away from the status quo.
Morris: Looking ahead (let’s say) 3-5 years, what do you think will be the greatest challenge that CEOs face? Any advice?
Winter: Creating incentives for workers to find the right balance between competition and cooperation is, in my opinion, the greatest challenge that CEOs are facing today, and will still be facing in the future. HR consulting won’t be enough to deal with this challenge. CEOs will have to be mentally engaged to find the right path.
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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
TIME linkTags: Albert Einstein, Amazon, Brooke Manville, Center for the Study of Rationality at the Hebrew University of Jerusalem, Darrell Royal, emotional impostor, Ernest Hemingway, Eyal Winter on "Feeling Smart”: Part 1 of an interview by Bob Morris, Federal Republic of Germany, Feeling Smart: Why Our Emotions Are More Rational Than We Think, Harvard University, Henry Ford, James O’Toole, Judgment Calls, Lao-Tse, Peter Drucker, Princeton University, Psychology Today, PublicAffairs, Stanford University, Tao Te Ching, The Guardian, the Humboldt Prize, the University of California at Berkeley, TIME, Tom Davenport, University of Cambridge, Voltaire, “Prisoner’s Dilemma”, “the ideology of comfort and the tyranny of custom”