Teo Degas' Books & Decks

In Phising for Phools George A. Akerlof --co-Winner of the 2001 Nobel Prize in Economics--, and Robert J. Shiller --co-Winner of the 2013 Nobel Prize in Economics--, discuss the myriad ways in which Politics, the Economy (stock market, businesses, marketers, advertisers) actively use deception and manipulation with all of us, they phish for phools, us. The chilling part is that most of those people are not evil people, they are playing by the rules in an Free-Market Economy that  allows them to deceive and trick us for their benefit using the natural working of the economic system, first, and by exploiting humans' psychological cognitive biases and weaknesses, then. "The free-market system exploits our weaknesses automatically". They lead us to misinterpret reality and act on our misinterpretations, they exploit the conflict between what we need and what we crave, they exploit the volatility of our emotions, they present things in ways that are deceiving but trigger our automatic responses. Thus, we will buy things and services we don't need, at prices that are way over their real value, they will are sell products and services that aren't what they say they are.  Phishing is inevitable. We are all phools by nature. 

The book is structured in three parts. The first is a sort of framework on Behavioural Economics. The authors heavily and explicitly rely on Robert Cialdini's lists of basic biases and principles exploited by marketers and sellers, and everyone that want something from you:   

"we are phishable because we want to reciprocate gifts and favors; because we want to be nice to people we like; because we do not want to disobey authority; because we tend to follow others in deciding how to behave; because we want our decisions to be internally consistent; and because we are averse to taking losses. 23 Following Cialdini, each of these respective biases is paired with common salesman’s tricks." (p. 7). 

Here we also find defined Phishing Equilibrium (those economic forces that build manipulation and deception into the system unless we take courageous steps to fight it.), a concept that will be repeatedly mentioned throughout the book.

Part Two presents the microeconomics of phishing for phools in different contexts: advertising, marketing, politics, real estate, car sales, credit cards, the food and drug industries and the alcohol and tobacco industries. We are also presented with two specific examples from the financial markets, how bankruptcy is used for profit by some financial institutions or financial gurus (examining the case of Michael Milken and his junk bonds) and the crisis of the 1980s. This part ends with a brief exam of anti-phishing heroes, that is, people, private and public organisations and associations in the US that have fought for the right of consumers and for fairer and more ethical business practices. 

Part Three contains two chapters.The Conclusion, which focus on the Economical policies of the US Government and how the change on focus after Regan had dramatic repercussions in the Economy, favouring phishing-for-fools practices like  never before. In the Afterword we are presented with the authors' particular view on the nature of the Free Market, what is good and bad with iy; they explicitly state that this chapter is addressed to their critics, i.e. other economists who advocate the wonders of Free Market and ignore its dark side, or consider economic crisis (resulting from phishing for phool practices) as something exogenous and exceptional, when they are actually endogenous, at the very core of how the Marke works. In this chapter, Akerlof & Shiller also try to contribute to behavioural economics by adding another element to Cialdini's list. The core of their contribution is:

We are claiming that economists’ view of markets makes similar oversimplification. It may be standard economics to pretend that economic pathologies are only “externalities.” But the ability of free markets to engender phishing for phools of many different varieties is not an externality. Rather, it is inherent in the workings of competitive markets. And the same motives for profit that give us a healthy benign economy if everyone is fully rational are the same motives that give us the economic pathologies of phishing for phools. (p.166)

***

This an interesting book, that succeeds mainly at three levels. Firstly, the authors make a terrific job at letting us distinguish the forest from the trees and vice versa. The trees are the phishers (businesses, industries, financial groups, corporations, dealers and facilitators of services, networking sites that have Phishing at the core of their economical practices). Phishing is everywhere, and that is so because the trees are part of a forest, the Economy of Free Market, of how this  works, and of the Politics and economical practises associated with it, which make possible the growth of the forest. Secondly, they succeed at presenting the forest for what it is, a beautiful luscious green forest full of berries and edible wonders that is inhabited by wolves, witches and nasty beings, allow me the analogy. Thirdly, the authors succeed at having a social conscience and at seeing beyond their own noses, and analysing the Economy with a bit of objective distance and with a good deal of ethics, advocating economical practices that are more beneficial for both the Economy and Society in general, not just a parasitic symbiosis that benefits the Economy and its actors. Fourthly, they succeed at adding another layer of interpretation to the biases mentioned in Cialdini's list, that of the mental script or framework. People are phishable because of the stories they tell themselves, or place themselves in, are very important (subconsciously) in the decisions they make, something that leads phishers to create manipulative stories that resonate with the phools and are advantageous to the phishers.

On the other hand the authors also fail at several levels. They fail at times to go beyond what we already know in general. Let's be honest, haven't you found two grandpas in a park talking about how the Economy was different in the old days when there was more protection for workers, Medicare was better when, University free and there was some sort of better life balance Don't you know, upfront, that Politicians would lie and manipulate in pre-election campaigns to get your vote? that lobbies are happy lobbying everywhere and selling things that make you sick? that the commercial that says that  a moisturiser is going to get rid of your wrinkles or the lotion that will make your receding hairline come back are BS and  manicured lies? or that the free stuff given to you by some businesses is never ever free? Don't you tell yourself at times, damn it, this seller was so good that despite me knowing that he was selling half-truths I still fell for them? Secondly, the psychological part, the biases and heuristics, and all the psychology on which Behavioural Economics rely are barely sketched as the information used, although very well presented, is not theirs. They haven't done any psychological study on phishing for phools.
Overall the book is very well edited, with barely any typo, and a good rendering for Kindle. I just noticed a few thingies, resulting from the conversion, like words whose syllables have been automatically split.

The noting system, the bibliography and the index are properly done and a a pleasure to go through. I love and respect any author that bothers to provide these following academic criteria, and that provides notes that are rich in content. Indeed, some points are discussed at length in them. In these case, they are also a sort of  treasure chest for me and I got a good list of new readings to add to my reading list. The notes occupy  52 pages! The index is properly linked back in the Kindle edition, something that I expect from any Kindle edition but it is rarely there.

Akerlof & Shiller have produced a book that has an unified style, with occasional references to them as individuals. They use a very approachable language and the examples they present are really interesting, intriguing and to the point under discussion. and some of them very entertaining. I am not familiar or comfortable with the language of Economics and Finances, so I really enjoyed how the authors describe and analyse the World crisis in the1980s and the collapse of the markets in 2008, or on how crap-bonus work. Some of their explanatory analogies are great.

The book is well structured and organised, very didactic. "We are going to", appears frequently. At the beginning of the book they summarise the parts and chapters of the book and this repeated again at the beginning of Part 2, which is the bulkier one, and the conclusion also makes good points summarising the approach, findings and conclusion. Besides. each chapter ends with a very pertinent summary about the main points discussed in it. However, overall,  the style of the book is a bit conference-like, sophomores course like, and a bit simplistic at times, a bit complex at others.

I dislike it when authors use pretentious words that aren't relevant for what is being said. For example, in this book, I found six times "parenthetically" in expressions like "(We note, parenthetically, that perhaps....) Can you see the brackets, yes? So do I. Unless you are blind you don't need this sort of thing.  I also dislike when the contrary happens, when words that are not popular should be there and are replaced for something too simplistic, in this case "monkey-on-the-shoulder" instead of subconscious. To put it differently, if your are going to be snobbish, great, do that consistently all the way, and if you are going to be pro-general-reader do so consistently and all the way.

I have an problem with Academics using Wikipedia as a source of anything. We all love Wikipedia, don't we?, but we cannot ignore that, unless we are reading an entry about a celebrity (and even those) the Wikipedia can be misleading and heavily biased, and is not always properly curated. And hey, the Wiki is becoming the only source of knowledge, that is another way of phishing for phools... Wikipedia has the best phishers's crafted grabbing story ever. Besides, any professional editor will tell you that references to encyclopaedias and dictionaries are not recommended in an academic publication unless you are using very specialised terminology that is difficult to find in your usual Oxford dictionary or encyclopaedia or when the definition of word is vital a la Wittgenstein. Now, you can understand my surprise at finding 25+ references to the Wikipedia in the footnotes, when the information could have been obtained through other sources. If this wasn't enough, our Nobel couple use it to provide a contrast definition opposing theirs in the use of the expression... 'rip-off'. Yes, no joke. I'd rather go to the Urban Dictionary for definitions of modern terms, as they show that words aren't always used like a monolith or, I wanted to be  rigourous, I would go to any Oxford dictionary. Yet, do you need any dictionary or encyclopaedia to define 'rip-off'? And, if this wasn't enough, the definition the give of 'rip-off' is like buying "overpriced". Not only that, the same definition of what they mean by rip-off is repeated several times throughout the book as this was just a novelty.  I see in all this the hand of the undergraduates "assistants", not the work of two Nobel laureates.

Arkof & Shiller are gracious enough to enthusiastically acknowledge everybody, every single person!, who has contributed to the book. They are very honest about what they did personally and what their research assistants did. That is always to praise, especially with Academics, as too often this is not the case, sadly. They especially praise their three research assistants, three exceptional Yale undergraduates, who did the research for them, edited the book for them, and made suggestions: Victoria Buhler, Diana Li, and Jack Newsham. So, if they did the editing, why aren't they presented as editors of the book or co-authors? Undergraduates co-authors with Nobel prices, you must be joke, you might say. Yet, they are good enough to make some of the work for them. And the authors themselves say, :

 The ideas in this book are a collage of what we have learned, and what we have listened to, over the course of our lives as economists. (p. 77)

After seeing the bibliography, well, I understood why is so good and so large

 ***

Brilliant at times, mediocre at others, pretentious at others, thought-provoking overall, Phishing for Phools is a great reading that I don't think showcases properly the brilliant mind of the authors, but it is intriguing and entertaining enough.

Phishing for Phools reminds me of the brilliant animated clip below. I watched it about 3-4 years ago and is still one of my favourite animated shorts, i-Diots could be called i-phools as well.