Author Stephen Dubner and economist Steven Levitt took the stage at the at Envestnet’s 2013 Advisor Summit Wednesday afternoon in Chicago.
During the question and answer session, Levitt (left) was asked to comment about the recent mistakes uncovered in economists’ Carmen Reinhart and Kenneth Rogoff’s work.
“I know Carmen,” he answered. “They had a series of about 33 numbers that they simply added up incorrectly. That doesn’t reflect well on a paper meant to influence policy on such a large scale. Politicians typically want to believe something and then adopt academics that prove their view. I’m incredibly suspicious of academics in policy decision-making.”
The duo also recounted what led to their introduction and bestselling books Freakonomics and SuperFreakonomics.
“If I was not a writer, I would have been a money manager,” Dubner began. “It’s not that I want to pander to you; it’s just that I am really trying to understand the psychology of money. Money is equal only to religion and sex in the unpredictability it fosters in behavior.”
As an example, he told of spending a week with Steven Spielberg for an article he wrote for The New York Times Magazine. Spielberg is a major collector of Tiffany lamps. He was bidding on a lamp through Christie’s auction house and had a set price limit of $1.5 million in mind. He was about to win the bidding when he abruptly told the auctioneer he was through and hung up the phone. He pointed to the fine print of the lamp’s description that identified David Geffen as the seller.
“Geffen probably paid $50,000 for the lamp and was not selling it for $1.5 million,” Dubner said. “Spielberg didn’t want to go to business meetings for the rest of his life and hear Geffen brag to him about it. He had the money, wanted the lamp, but because they are so fiercely competitive, he gave up on buying it. This is what money does.”
It was this type of behavior that Dubner claimed led him to behavioral economics and Steven Levitt.
He was asking questions like, “Does a real estate agent really act in your best interest when selling your home? Surprise answer, no.”
Levitt then took the stage and noted he “never wanted to be an economist like me. I set out to be a real economist, but there was too much math involved.”
For reason he says he still doesn’t understand, he was admitted to MIT’s PhD program in economics.
“It was almost immediately apparent to my professors and me that I didn’t belong there. The only reason I didn’t flunk out was because professors are self-interested and they didn’t want to take the time to fill out the paperwork.”
He said he went home to Minneapolis one break to ponder his future. His father sat him down and said, “If you’re not good in a particular field but still want to remain in that field, take on the most humiliating tasks available that no one else will do.”
And that, Levitt claimed, is how he arrived at his current position.
Check out the 2013 SMA Managers of the Year home page to view profiles of the finalists and for additional and ongoing coverage of the winners and the award ceremony.