The transcript from this week’s, MiB: Richard Nisbett on Cognition, is below.

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BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast boy do I have a fascinating guest. Professor Richard Nisbett of the University of Michigan, this could be the most influential academic that the average person has never heard of. His work is touched on everything from psychology to intelligence to childhood and child rearing to pharmaceutical side effects, it’s just endlessly astonishing who he is, the research he’s done, understanding the impact of culture and society on just how we think and how different let’s just use East versus West as examples, is different parts of the world approach problem-solving and societal issues and economics and just endlessly fascinating.

He has written a dozen books, the most recent of which is “Thinking: A Memoir” which was quite fascinating, he is one of those people, I don’t want to say he name dropped because he worked with all these people but he just so casually works in various characters from you know the canon of 20th century psychology and economics and academia because he was really there as all these things were being developed.

I mentioned during the interview Professor David Dunning of Dunning Kruger is the one who said, “Hey I work with Richard Nisbett you should really talk to him” and really what more do you need than that as an introduction? I wish we had another two hours the conversation was actually fascinating, it’s a deep dive into intelligence and thinking and how we get smarter both as individuals and society. Absolutely fascinating. I’m going to stop here and say with no further ado, my conversation with Richard Nisbett.

ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

RITHOLTZ: My extra special guest this week is Professor Richard Nesbitt, he is the codirector of the Culture and Cognition program at the University of Michigan focusing on culture and reasoning and basic cognitive processes. No less than Malcolm Gladwell called him the most influential thinker in my life. And when Professor David Dunning, yes that Dunning, offered to make an introduction, I jumped at the chance.

Professor Richard Nisbett, welcome to Bloomberg.

RICHARD NISBETT, CODIRECTOR OF THE CULTURE AND COGNITION PROGRAM, UNIVERSITY OF MICHIGAN: Thank you.

RITHOLTZ: It’s my pleasure to have you. Before we dive in, I just want to give you a little bit about my background because I have no real psychology background, my bias is the world of behavioral finance and cognitive errors really in the context of investing decisions, especially bad investing decisions, so pardon some of the naïveté that I may exhibit in some of my questions. There’s like the slightest bit of overlap between what I’ve looked at and your whole career and that’s why found it so interesting and let’s start with your career.

There’s nothing really in your background growing up in El Paso and in California that suggests an academic career in psychology, what led you to the study of human reasoning and decision-making?

NISBETT: I think it was just meant to be, I mean, that’s was I was meant to do but I learned it very early, fortunately, I read Calvin Hall’s “A Primer of Freudian Psychology” and it was just that – that’s it, that’s what I’m going to do.

RITHOLTZ: Right, interesting.

I really like the idea that has been talked about and you referenced it in your book, “Thinking: A Memoir” which we will talk about in a few moments that the human propensity for flawed reasoning was advantageous on the savanna but it really doesn’t serve us well in modern society. Tell us a little bit about that.

NISBETT: Right, well there’s a whole enterprise, I’m sure you’re aware of in psychology and economics showing people reasoning is flawed in many respects. And most of the, many people said well, that can’t be, you know, I manage to get through my day pretty well, that’s sometimes self-delusional but by and large, it’s correct to say we’re not terrible at reasoning across the board. It’s just that the Industrial Revolution and then in spades the information revolution just changed the nature of what we need to do in our reasoning in everyday life. It gave us data, it gave us numbers, it gave us graphs, it gave us reports from people we never heard of, we encounter people that we don’t know at all, all of this is just completely unanticipatedly from the life of a hunter-gatherer.

So the problem is the rug has been pulled out from under us so we make errors all the time.

RITHOLTZ: Quite interesting. Some of the research that you’ve done on cognition is really quite fascinating because it’s so challenging to figure out what’s actually going on in people’s minds. I was kind of intrigued by some of the research that was done on birth order and how that impacts people’s career choices and aversion to risk taking or not.

Tell us a little bit or even how they embrace riskier sports, tell us a little bit about birth order and how did you figure out that was significant?

NISBETT: Well, my adviser in graduate school at Columbia, Stanley Schachter studied birth order and one thing he discovered is that firstborn females are more frightened at the prospect of electric shock than later born females, and I thought, hmm, that’s interesting because I’ve always been kind of afraid of getting hurt and my younger brother was getting hurt all the time when he was a kid. So I sort of filed that away and I heard one of these people who looks at primates, and she studied monkeys, and she’s made this offhand observation that when a monkey mother has her first baby she’s all arms and legs and tails keep it in the tree to keep her from falling 30 feet from the forest canopy. By the time her fourth or fifth kid has come along, the kid falls out of the tree, she goes, damn, I’m going to have to pick the thing up, she just, so firstborn’s are protected in a way that later borns aren’t, so I say how can I test this?

And I started looking at sports and the birth order of people who play dangerous sports versus nondangerous sports and it turns out later born is about 50 percent more likely to play a dangerous sport firstborn and that I just found out recently, there have been 20 studies since all supporting that general statistic.

RITHOLTZ: And 50 percent is a giant number, we’re usually looking for a couple of percent here or there to identify some difference of note, this is clearly not only replicable but very significant.

NISBETT: Yes, it’s surprisingly strong. If I’ve been predicting what I’d find, I said hoh maybe a 10 or 15 percent edge, but no, it’s huge.

RITHOLTZ: So another one of your books, “Geography of Thought” you put forth the theory Asians and Westerners have maintained very different systems of thought for thousands of years and these differences are scientifically measurable. Now that’s when it was first introduced was a pretty radical premise but you have the data to back it up. Tell us a bit about that.

NISBETT: Well it is a radical premise and I just happen to have a student a number of years ago from China, a really brilliant guy who’s actually now Dean of Social Sciences at Tsinghua University, which is a top university in China and after we’ve been working together for a while, he said, you know, “Dick, you and I think completely differently about a lot of different kinds of things.” And I said “Well, tell me more” and he gave me a version of the following. He said “You think very analytically, very linearly, when you look at some object or person, you are thinking what are the attributes of that object or person and you come up with rules or you consult your rules about that kind of object or person to figure out how it’s going to react, how it’s going to behave.”

He said “I as Chinese, think much more holistically, I pay much more attention to the context of everything objects and people, I pay attention to relationships, I pay attention to similarities, and this produces all kinds of different conclusions between you and me looking at the same situation.” Now that’s actually, he didn’t quite say all that but he said stuff that were similar to that and what I just said is a summary of our results.

And speaking a big effects, not everything I do get effects, I can assure you, but I didn’t actually believe him exactly although I had read a book by Nakamura called “Ways of Thinking of Eastern People” so I was prepared for some differences certainly not the difference is as large as we found.

My favorite examples of these cognitive differences really have to do with perception more than reasoning, although there are plenty of big differences for reasoning. In one of our studies, and this was done with Takahiko Masuda, and we showed underwater scenes to Americans and Japanese for 20 seconds and then we asked them what, tell me what you saw, the Americans will say something like “Well I saw three big fish swimming off to the left, they had one fan on top, they had stipples on their bellies, there were rocks and shells on the bottom and so on.” The Japanese nearly always start with a context, they say” I saw what looked like a stream, the water was green, there were rocks and plants on the bottom, there were three big fish swimming off to the left.”

Now in total we got 60 percent more reports about context from the Japanese from the Americans, than from the Americans, and 100 percent more observations about relationships like the frog was on the lily pad. And so it turns out the difference there between number of observations about the context, there’s a 60 percent increase over what Americans do and that’s done with no loss of information about the central objects.

And so we wanted to see well, what are they doing, what are they looking at this thing differently and the answer is yes, they are. We put a gimbal on their heads with a camera back at their eyes so we know where they’re looking at every moment and this is done with still photos and we show people photos for 10 or 20 seconds and what we find is that the Americans spend almost all their time looking at the object the front of it, the back of it, the top of it, the bottom of it, et cetera.

The Japanese spend much, much more time on the context and they’re actually constantly looking back and forth between the context and the object. So they are not just seeing the object and the context, they are seeing relationships between the object and the context. So the effects are huge for perception, there are some very large effects for cognition as well which I can tell you about if you’re interested.

RITHOLTZ: For sure.

NISBETT: So one thing that we do, we do very simple studies to make our points, we show people a picture of a monkey, give or take a better example, we show people are picture of a cow, grass, and a monkey and we say which two of these pictures go together?

The American say well, the monkey and the cow go together because they’re both animals, the Asians are much more likely to say well the cow and the grass go together because a cow eats the grass. So they are seeing relationships automatically that are not so salient to us and they are paying much more attention to the object.

Some of the more consequential differences have to do with understanding human behavior. There is an error in reasoning that people make. I wonder how many of your guests have heard of this error, it is called the fundamental attribution error.

RITHOLTZ: Sure.

NISBETT: So we tend to attribute all the causes of behavior to a person’s attributes that is his personality, his abilities, his attitudes, and we tend to ignore the context. East Asians are much more likely to pick up on the context and to attribute behavior to the context than we are and an example of this is we do a study were we say we’ve asked this person you’re about to hear from, we’ve asked him to please state the case as if you were in a debate for why marijuana should be legalized or some other topic.

And so – and we say either this person gave this talk in response to a psychology professor’s requested in response to a political science assignment or in response to a debate coach who said I want you to give me the pro arguments are if you are in a debate.

And people then hear this speech and now you ask them, what do you suppose this guy actually thinks? And people are hugely influenced by what he’s said even though they know he was chosen randomly to give this particular talk.

Now Asians, East Asians, when I say Asian, I nearly always means East Asians, Japanese, Chinese, and Koreans but others as well. We tell people, well, they’ve been told that this person was required to get this speech, what do they think they tell us, Americans well, he thinks pretty much what he said, Asians don’t do this. And I don’t really know what he thinks because he was assigned to do this by somebody else and that effect is really huge.

I mean we make the error in that situation, a very big error that they are much less likely to make. They do make the fundamental attribution error also but it just not nearly as frequently and not nearly as strong an effect.

RITHOLTZ: We are going to talk more about the fundamental attribution error in a little bit but I have to ask, what is the societal or cultural basis for this difference between looking at things either with or without context and relationships and how does it manifest itself in each society? Clearly there’s a different structure in both and the behaviors and economies and everything else are so different. Tell us a little bit about what leads to this and then where it goes from there.

NISBETT: Well first of all, to point out you as you did earlier that the differences go back thousands of years and for example, if you look at physics beliefs in the West and in the East, it turns out the Westerners have always tended to have physical beliefs which were a variety of the fundamental attribution error, they try to explain the behavior of objects purely in terms of properties of the object. So you know, the object fell because it’s heavy, the Easterners say well, the object fell because the material supporting it wasn’t sufficient to bear the weight. So they understand the relation between the context and the object.

And 2,500 years ago already, the Chinese were well aware of the concept of action at a distance. So they understood the reason for the tides for example which was not understood even by Galileo. He didn’t get it right. And they also had a good concept of magnetism and of acoustics. So they had very accurate lay intuitive physics as compared to Westerners.

Now, and that in the category and the logic by the way apropos of analytic reasoning, logic was the story goes, invented by Aristotle because he got sick of hearing lousy arguments in the marketplace and the political assembly. So he said “okay, can we agree that if your argument has this structure, it’s a lousy argument?”

So logic was formalized very early in the West, it was never very much of an interest in the East and it was never formalized and it was only a very brief period in the third century BC when there was any concern with logic at all and it basically dropped out of the intellectual armaments on the East.

So why do we get these perceptual differences and these cognitive differences and also as a consequence, the social differences? I believe early on without much evidence that it was because of the type of economy that East Asians had versus Europeans.

East Asians had a great, especially in China, terrific circumstances for mass agriculture, mass agriculture especially rice culture demands lots of cooperation from people so effective action depends on my looking at what you’re doing and understanding the relationship between your action and my action and so on and so looking out there and I’m seeing the reasons for behavior, I’m seeing the context, creates and manages and incidentally if I’m paying attention out there, I have a better understanding of physics.

So and then I had a very sharp Turkish student a while back who, and I should say what was the situation in Greece? Well Greece was mountains descending to the sea mass agriculture is just not in the cards in that situation, people do make a living by trading and fishing and kitchen gardening so on. So it’s that — they don’t have to pay attention to and in herding, sheep herding especially, goats. So they don’t have to pay attention to other people in order to lead an effective life.

So this Turkish students says why, I know an interesting town in Turkey where there are three major occupations, farmers, fishers, and herders. If you guys are right about why people think holistically in the East and analytically in the West, then we ought to find that the farmers and the fishers think more holistically than the herders and that turns out to be true.

So the herder sees the monkey and the cow as being related and the farmers and the fishers see the cow and the grass to be related. And so then the really beautiful study on this was a former student of mine looked at reasoning in China, saying well people ought to be more holistic in South China than in North China because you make your living historically in the South by rice farming which is extremely social dependent, I mean you can’t do anything without lots of people cooperating and it’s wheat farming in the North of China which is much less dependent on other people.

Sure enough, people reason more holistically in the south of China than in the north of China. It’s a very long answer to your question.

RITHOLTZ: No, but it’s quite fascinating.

Some of the things I found in the book were really fascinating and curious, and there’s a thread that runs through all of this that is just intriguing. I want to start with something that I thought was an urban legend but you presented very differently.

One of the few factors that predict success as a scientist is the amount of time in childhood that person is sick. So explain that.

NISBETT: Well, my theory about that, is who knows? And it’s a fact, we don’t really know why, but my theory is that if you’re sick, you spend a lot of time in bed by yourself and there’s not much to do, this is pre-TV, there is not much to do but read and think. And this is going to stand you in good stead for certain kinds of occupations. Actually, I think, most occupations.

So I’ve been, the reason that’s in my book other than the fact that it’s sort of an interesting tidbit is that I spent a huge amount of time alone wandering the area of El Paso, Texas which is right across the border from Juarez and it was a wonderful place to wander around, I would go down to the Rio Grande, I would go to the irrigation canals and look at the catfish and crayfish, there was a kind of motel for Mexican farmworkers that I would go down and visit those folks usually taking a bunch of Walt Disney comics which I had paid $0.10 for and I charge them five cents. And I much later I realized this is a Pareto improving exchange.

RITHOLTZ: (LAUGHTER) Right.

NISBETT: I got some money which – for my comics and they got there comics cheaper than they would have to pay for them in the store. So it was, I wander around a lot so I was thinking a lot and something of an islet, there were not other kids in my neighborhood so I did a lot of reading. So these days that wouldn’t happen, you would be doing looking at Instagram or playing videogames.

RITHOLTZ: Right, there’s no downtime and there’s potential negative ramifications for that.

NISBETT: Right.

RITHOLTZ: So let’s talk about some of your other research that that is somewhat intriguing. Telling people about drug side effects has no impact on them and this eventually leads to regulation about all the drug disclosures we see on pharmaceuticals and TV ads for different drugs. You’re credited or blamed or at least your research is credited or blamed for those disclosures.

Tell us how you came to that conclusion.

NISBETT: Well, very early on, I did a study where I asked people to take a series of electric shocks in increasing intensity and I asked them when can you first feel it? When did it first become painful and when is it too painful to bear? By the way, a lot of people say, well, I would never, I would walk out of the room, no you wouldn’t (LAUGHTER) everybody, they try to be cooperative and I presented it as a reasonable thing for them to be doing for science and people will do it.

But for some of these people I say, I want you to take this pill, it’s called Ciproxin (ph), and it will cause your heart to race a bit, it will make your breathing heavier and more irregular you may find that your palms are a little bit sweaty, you may get a tight feeling in your stomach, these are the symptoms people experience when you’re giving them an electric shock, the arousal symptoms that just come with the territory. Other people, we say it will give them a few junk symptoms and will cause headache and some itching.

And sure enough, and for some reason you’re asking some tough things, all the big effect studies that, an enormous effect, the people who have been told that the arousal will accompany the drug take four times the amperage of other people. And by the way, and this gets opens up a line of work which we may want to talk about later. The reasoning is completely unconscious. You ask people you know, tell me what did you think about the drug while you are taking the shock and they go “I wasn’t thinking about the drug at all.”
Yes, they were.

And what they were thinking why they’re getting more and more aroused, and sure enough their heart rate, their breathing patterns and so on are changing just like we said they would, they attribute the arousal which otherwise would be multiplying the pain and the pain experience, they’re treating it as an external thing, it has nothing to do with my thoughts or emotions or anything else, it’s just that drug that cause those symptoms.

And did one other study which showed a therapeutic outcome for this kind of thing, I advertised for insomniacs, this was done at Yale with Yale students for a study on dreams allegedly. I found out how long it took them to get to sleep the previous two nights before they come into the lab and I tell them for the next two nights, I want you to take this pill before you go to sleep and it’s an arousal pill, it’s going to cause, this will become — your breathing may become irregular, your heart rate may become faster etcetera, all the arousal symptoms. Other people we say nothing to about the effects of this pill or we actually say it will reduce their arousal symptoms.

And our anticipation was, I mean this is based on myself as an insomniac, I used to you know, lie in bed thinking about the day and the future and there were things I was concerned about and I start thinking about them and I get kind of worked up and so I’m sitting – getting aroused, damn, that’s a very bad idea.

So we anticipated and found that the people that we had given the arousal instructions to go to sleep more quickly the nights that they took the pill. The people we said the pill will reduce your arousal took longer to get to sleep because we’re thinking the arousal that they experience because they are worried about the situation with their girlfriend or our exam tomorrow whatever, though the arousal that occurs as a result of these scary unpleasant thoughts, they will say, well, it must be particularly bad tonight because I got this pill that’s supposed to calm me down.

And by the way, that was based on a personal experience as well after I had insomnia for quite a while as an undergraduate, I said okay, I’m going to give up, I’m going to take a sleeping drug and I took a Sominex and lay in bed waiting for it to take effect in which it never did and it took me longer to get to sleep because I said well, this ought to get rid of those arousal symptoms that I have and it didn’t.

So years later, somebody said well Sominex is practically useless, so it was never going to have an effect.

RITHOLTZ: So what’s the relationship…

NISBETT: So the people who have taken the pill at that time and think it will reduce arousal it takes them longer to get to sleep because they think, look I got at least as much arousal as usual and even though I got a pill in me. So the general point made by those studies is that are you can have the effects of a pill that aren’t really there, arousal is not being produced by that pill or reduced by that pill but by other experiences.

So this work got picked up by the FDA because drug companies did not want to tell people about the side effects that they might have from the drug because they said well, the power of suggestion, we’re psychologists here and we know that the power of suggestion is such that the people are going to be experiencing these things that do not really have anything to do with the pill but they are going to attribute – they will invent these effects, they will start having these effects if you tell them about it because via the power of suggestion.

RITHOLTZ: So let me jump in here and ask a quick question. What’s the relationship between the expected physiological arousal in this external source and what I think laypeople think of as the placebo effect?

NISBETT: Well the placebo effect is in fact you get certain symptoms, certain experiences, and if you been given our what is actually a placebo and told that it will improve your condition, the pain or your flu symptoms or whatever, people will in fact often experience those things or think that they are experiencing those things. So there is definitely a phenomenon of placebo effect. But in a way, this is the opposite…

RITHOLTZ: Right.

NISBETT: Of the effect, I mean this pill is not causing any symptoms of any kind but they think that the pill is causing symptoms.

So but — it very much depends on the symptoms, if it’s arousal symptoms, they will attribute any naturally occurring arousal to the pill, and if it’s decreasing arousal symptoms, they’ll attribute any arousal to their own state, to their actual state which they assume is worse than they might have thought. So you can read into people’s experiences, arousal that is due to some external source or you can read it out.

So the FDA requires that all possible side effects be reported.

You mentioned David Dunning earlier, you’ve had on your program, and he’s done a fascinating study showing that people who have been – just a second, let me make sure I get the story right about what he’s finding, yes, Dunning has found that people are less likely to pay attention to side effects if you list 27 side effects, you know like TV ads, this may cause blah blah blah blah, the more symptoms you give them, the less attention they pay to any of them and the less likely they are to remember it later.

If you just tell them a few of the very most important ones, they are likely to retain that information. So psychology has a lot to do with what drug effects are and what drug side effects are and what people attribute the side effects to.

RITHOLTZ: So let’s jump to our attribution theory, what is the fundamental attribution error in acting versus observing? I’m kind of intrigued in my field that when someone sees a successful investor or trader, they tend to say well that guy got lucky, but when they themselves are doing pretty good instead of crediting luck, it’s obviously due to their own skill set. How is that related to the attribution theory?

NISBETT: Well, in a way that is almost the opposite of fundamental attribution …

RITHOLTZ: Really?

NISBETT: Attribution error. The fundamental attribution error I attribute behavior to an attribute of the person, a personality trait or an ability that really should be understood in terms of context or situation.

So in showing that this is a — there’s a difference in our likelihood that we make this error for ourselves versus others, if you show people a video of someone behaving in a particular way and asked them why they did it, so they will go for the for the person’s attributes for their traits instead of paying attention to the context, but if it’s they themselves who are doing over this, they are responding to a significant extent to the context of – they attribute the behavior — their own behavior, they are much more likely to attribute it to the context of the situation than they would the same behavior by someone else.

RITHOLTZ: That’s quite interesting. You mention an endless array of different very famous psychologists and sociologists that you worked with over the years, two of the people you discussed really stand out and I have to reference both of them.

There’s an old joke about Amos Tversky that says you know the Amos Tversky IQ test is the smarter a person is, the sooner they figure out that Tversky is smarter than them. Is that your line in the book it seems to suggest you’re the person who coined that.

NISBETT: Yes, I’m the person who claimed that, and it’s become, every psychologist knows that line.

RITHOLTZ: For sure.

NISBETT: I mean it’s interesting that you know, the smarter you are, the quicker you realize you’re not as smart as someone else.

RITHOLTZ: (LAUGHTER)

NISBETT: Actually, this is related to a Dunning finding, right?

I mean the more knowledgeable people are, the more — the better to calibrated they are on forearm for understanding the world. They understand – they know very little about science so that I don’t know, you asked me a question I can’t answer, I don’t know enough. More ignorant people will give you an answer because they don’t realize they don’t have the wherewithal.

RITHOLTZ: Metacognition is a distinct skill set from actual knowledge of the space.

NISBETT: Exactly. So the smarter somebody is, the more likely they are to stand aside and not give you an opinion about something if they don’t have — feel like they have sufficient knowledge.

RITHOLTZ: And we’re going to spend a little more time talking about intelligence and IQ and how malleable and modifiable that is in a moment, but there’s a quote you paraphrase of Hans I’m not sure and pronounce his name right, Hans Selye.

NISBETT: That’s it.

RITHOLTZ: Success in a science is a multiplicative function. It’s intelligence times education times ambition times curiosity times hard work times the ability to get along with people and not just super high IQs. Explain that. It’s quite a fascinating little formula.

NISBETT: Right, well, you have to have all those things to be a successful scientist and my guess is you have to have pretty much all of things to be a successful — to be successful in business.

RITHOLTZ: Period. Right.

NISBETT: And I mean, I have, I know someone who had a tested IQ of 184 and he was incredible, I mean you didn’t have to be with him for very long to realize oh my god, this guy is really super super smart and but he was slightly autistic, I mean he was slightly off, he would make comments that were inappropriate, he would laugh when that wasn’t the right reaction and so on and he had a PhD from a major university and he only managed to get very middling level jobs, academic jobs, and it should have been you know, at a major university and he was on very minor places.

So that’s a case of that — the particular thing that he lacked was the ability to get along with people but ambition is another thing that you often see if somebody he’s got the whole package but it just doesn’t care enough to put it all into play.

There’s a quote that makes this point by the way which I really love from Warren Buffett who says you know investing is not a game where the smartest guy wins, if you got an IQ of 160 you may as well sell 30 of those points because you’re not going to need them.

RITHOLTZ: And there’s a lot to that, you know, it’s not just raw processing power, it’s judgment and decision-making and the ability to see context and a lot of those things aren’t necessarily IQ. They are a different form of intelligence which kind of goes to and I want to want to give the game away because we’ll talk about this in a moment but it kind of goes to the concept that there are a lot of different ways to improve intelligence and improve how successful a person can be.

And you point out in the book that the average IQ score in developed Western economies has risen over the past century. Tell us a little bit about that.

NISBETT: Right, well it actually probably started with the Industrial Revolution, suddenly you have a workforce that needs to be able to read and write and do arithmetic. So you start increasing the amount of schooling introducing it or if it’s already there sort of an embryo you and enhance the education and for the last 200 years, the amount of time that people spend in school has just kept on increasing, and this is hard to believe but right after World War II only about six or eight percent of the population had a college degree.

And college does make you smarter by the way I have data about that if you want to hear about that.

RITHOLTZ: Sure.

NISBETT: To my surprise, I really did the — I just thought, you know, college teaches you stuff, I didn’t realize it actually makes you smarter in lots of very important ways.

RITHOLTZ: Well, it does both, right? It teaches you things but it also gives you a framework to think about things, it’s more than just here’s a list of data points, memorize them, it’s here’s a set of cognitive rules and mental models that you can use to solve problems.

NISBETT: Exactly. So an example that I like is I have lots of my studies and lots of Tversky and Kahneman studies by the way that had to do with showing the errors in reasoning that people make because they don’t think statistically or probabilistically when they should. I mean these habits of thought are not — they are not common, we don’t, we’re not typically taught them in such a way that they can make contact with everyday life events.

For example, their — one of their most famous studies is you say there’s a town where there are two hospitals one has about 15 births per day and the other has about 60 births per day, at which of these hospitals you think it would be more days in the year when 60 percent or more of the births were boys. Most people say it shouldn’t make any difference and about as many say it would be the larger hospital as would be the smaller hospital.

In fact it’s astronomically more likely to happen at the smaller hospital.

RITHOLTZ: In the smaller one, right.

NISBETT: 15 births.

RITHOLTZ: Right, you are more likely to get a random outcome with the smaller data set than you are with a larger data, it’s four times larger data set.

NISBETT: Right. I mean you are going to go far away from 50 percent if there’s three births per day.

RITHOLTZ: Right.

NISBETT: Because it’s going to be either two thirds, zero or…

RITHOLTZ: Or a hundred percent right.

NISBETT: Three-thirds boys. I mean that’s – so that’s a case, we understand the law of large numbers by the way, even hunter gatherers understood the law of large numbers and a lot of important context, but we don’t have it stored away as an abstract rule to anytime there’s a little light that goes on in our heads that says, data, oh yeah, data what’s the end? What’s the number of cases?

My favorite example of somebody not using the law of large numbers and not understanding that more variable all the dimension you’re looking at, the more data it’s important to have to make a judgment.

And this stems from — for the first time to Europe, I spent about a week in London, a week or 10 days and it was absolutely gorgeous weather. I mean blue skies, 70 degrees, every single day, and I can voiceover the lingering feeling that the British are such complainers, they actually have wonderful weather but they are always complaining about the rain.

RITHOLTZ: (LAUGHTER) Right.

NISBETT: Well I got what I deserved, the next time I went to London, it never stopped raining the entire time.

RITHOLTZ: (LAUGHTER)

NISBETT: Now I wasn’t so foolish as to think that weather isn’t as variable in England as it is anywhere else but I just didn’t take the trouble to say wait a minute, how much evidence do I really have about what the weather is?

So at any rate, I studied people’s failure to apply the law of large numbers when they should, they’re attributing causality when the data they have is purely correlational, I studied their inability to apply the regression — statistical regression concept to problems and so on and when I was doing that work, I used to say you know not only are we stupid but you can’t make us smarter with these things. So well you know, I’m going to prove that, I mean I don’t actually know for a fact that you can’t teach people these things. To my astonishment, in 15 or 20 minutes you can teach the law of large numbers, the regression principle, the cost-benefit principles including crucially important ones of the cost principle that I can’t retrieve money I’ve already spent by consuming something.

So I go to a movie and it’s a lousy movie, you know, I may say, well, this thing is hardly worth it, I just assumed me sitting at home but I don’t want to waste the money I paid, you know, which an economist says wrong, you can’t waste that money, you already wasted it, all you can do now is send good money after bad.

RITHOLTZ: You talk about this with books and I had this experience more or less around the same time you did the realization that hey I’m not liking this book, I’m under no obligation to finish, it is not homework, I didn’t sign a contract, if I’m not enjoying it, put aside.

I know people who have a real emotional difficulty in saying no, no, I started it, I have to finish it.

And I don’t know who told me that that’s a good rule, I guess I just invented it myself, but of course, it’s a perfectly terrible rule. When at whatever point you are not enjoying or you are not learning, then you should stop.

People don’t have that principle was logical I mean if I started my are and who told me that that’s a good rule because I just invented it’s a perfectly terrible rule whatever point you’re not enjoying her you’re not learning then you should stop.

People don’t have that principle at such a level of abstraction that it will make contact with all the problems in life that it should.

So you teach them in the laboratory just a very few problems using one of these principles or actually just giving them the abstract principles and either one will help people and if you give them both abstract and concrete cases of course they do even better.

So I decided to see well, what does college do for you on these things? And I gave them a package of problems like the that are solvable by using the sunk cost rule or the law of large numbers or the concept of statistical regression which is that extreme events are not likely to be so extreme the next time they’re encountered, we don’t have that wired into is, I mean it’s a tremendously important principle that we just — it doesn’t come with the with the hardware.

RITHOLTZ: Or the software for that matter.

NISBETT: What’s that?

RITHOLTZ: Or the software, it doesn’t come with the software.

NISBETT: No, not even the software.

RITHOLTZ: When in a few million years of evolution would we have ever experienced things like exponential growth or compounding if it never comes up, it’s just a total blind spot to us until we walk through.

NISBETT: Right exactly.

RITHOLTZ: Although that said I’ve watched people get the money hall problem explained to them, the you know, do you stay with your original choice of the three doors or once the door is revealed, do you switch? Even after you lay out the statistics to people, a lot of people still refuse to accept that the odds have changed and you should switch.

NISBETT: Right. So we looked at all of these kind of things and I mean they were just simple problems like I have just been talking about or you tell people you know at the end of the first couple weeks the baseball season there are usually several batters with averages of 450 or higher but no one ever finishes the season with that high on average, why do you suppose that is?

Now if you ask this question of a U of M freshman before he set foot in the classroom, he will say and I’m making it he because he is more likely to know about baseball, he will say, well you know the pitchers make the necessary adjustments or…

RITHOLTZ: (LAUGHTER).

NISBETT: You know,, they are doing so well they kind of goof off and stop trying as hard. After I think education lasting four years at the University of Michigan, they are likely to say well, wait a minute, well, early on in the season, there haven’t been many, that many bats.

RITHOLTZ: Right.

NISBETT: If you think about it, after your first bat, your average is either zero or one, so when you get more and more — but nobody really has a 450 level of ability and that’s going to show over the long haul.

So it goes from like 10 percent giving you that kind of answer to 60 or 70 percent.

RITHOLTZ: Wow.

NISBETT: Giving you that kind of answer. I mean college is hugely important for making you smarter. Peter Thiel to the contrary notwithstanding.

RITHOLTZ: (LAUGHTER)

NISBETT: So this — I was bowled over by this, I couldn’t, again it’s a tremendously strong effect, I mean people go on average from answering 20 percent of our problems correctly to 70 percent of our problems correctly.

None of these things that statistical rules, probabilistic rules, economic rules, psychological rules, none of these things are taught explicitly nearly as much as they should be.

I went and got, after I did the study, I went and got a couple of economics texts to see what they did with the sunk cost and both of them, faced spoke of it only in business situations, they didn’t say oh, by the way this principle is important to every day in many, many ways or the opportunity cost principle.

They make no effort and statistics courses make no effort to say look, statistics is relevant all the time and probability and so on. So there are opportunities to do — to greatly improve people’s education, it won’t affect their IQ but it sure as heck makes them smarter.

And it’s tragic that these things are rarely taught, certainly not in a way that will make contact with everyday life events in high school.

Instead we make high school students take algebra which they’re not going to use, I mean a tiny fraction are ever going to use algebra and tragically a lot of people drop out of high school because they can’t hack algebra.

Well algebra could go out of the curriculum as far as I’m concerned and put probability economics and statistics in.

RITHOLTZ: Yes. I think that’s a fabulous suggestion.

Last question in this segment on thinking. You’ve now been at the University of Michigan for quite a long while. Tell us about how you came to leave Yale and end up at Michigan?

NISBETT: Right. Well my story there appalls most people.

RITHOLTZ: (LAUGHTER).

NISBETT: Who hear it.

RITHOLTZ: (LAUGHTER) That’s why I asked.

NISBETT: So I was at Yale, I was with that University and I went to Michigan despite the fact that the day of my interview was in February. Ann Arbor is not a lovely place in February, it may surprise you to know and this was a particularly unlovely day because they were dirty patchy snow lying all around, it’s very cold and I had — was interviewed by the executive committee of the department and most of the time and the discussion was spent with them discussing baseball which I know nothing about and isn’t really relevant to my career.

And I spent the bulk of my time, well not the bulk but the single — the single person I spent most time with is a colossal bore. But I went to the University of Michigan anyway, in fact I made up my mind I would go to the University of Michigan absolutely regardless of what happened when I was there because I had heard only good things about the University, about the psychology department, about the town, et cetera, I’m going to improve my life in all of these ways and I’m not going to pay any attention to the concrete data which I get and that’s a huge bias that we have, you know, if I saw it, it must be real. Well no, it might not be, you have better ways of finding out what an object is like than examining it yourself. That’s what we have speech for and the ability to read and we can get information rather than relying on our own senses. And it was in fact the absolute right decision for me. So I got what I deserved.

RITHOLTZ: Quite interesting.

Let’s talk a little bit about some of the impact of your research on geography of thought. I’m kind of intrigued by the conclusion that we focus way too much on genetics and we really should be paying a whole lot more attention to the environment, the culture and the society. Tell us a little bit about that.

NISBETT: All right. Well, I had studied reasoning for many, many years and if you’re a psychologist, you sort of keep up on the literature on many fields and one of them and most psychologist know something his intelligence. But for some reason, I got to thinking seriously about the intelligence literature and the more I thought and the more I read, the more I realized that psychologists had gotten things desperately wrong with intelligence.

And there’s a book that has all these desperately wrong things and it is called the bell curve and most of your listeners believe what the bell curve tells them, they believe that genetics accounts for 60 to 80 percent of the variation that you find in intelligence, they think that early childhood environment is not all that important unless it’s their own kid, and they’ve got to get, they are desperate to get them in the very best daycare situation which is a mistake.

They underestimate all the lifetime learning opportunities that make us much smarter or not as the case may be, they think that are black and white are separated in their IQ scores on the average by 15 points, they think well probably, maybe some of that is genetic, they think Asians have higher IQs than people of European descent and so on. All of that is wrong and I wrote a book called “Intelligence And How To Get It” which shows what’s wrong with all of that.

The arguments are pretty complicated in the case of – for example, how much of IQ is due to your genes, the most interesting thing I can say about it, first of all, I don’t know what the contribution of genes is, I know it’s less than 60, way less than 80 percent of the variation. And the most interesting and important thing I can say about genes and intelligence is that the contribution to the IQ of a population of upper-middle-class people only is about 80 percent, it is huge, the variation that you see between people who were raised in upper-middle-class environments is largely variation that is produced by their genes.

In this country, the contribution to IQ of genes of the lower class is practically zero. Now, how could that possibly be? Well because upper-middle-class families are all alike. They are like happy families, happy families are all alike, upper-middle-class families are all alike with respect to cognitive skill that they’re very good and there is not that much variation. I mean Lawyer Smiths and Businesswoman Jones, their kids are all getting essentially the same environment with respect to cognitive skill training.

RITHOLTZ: So wait, let me interrupt you here. So when you say the same environment, they read, their parents pay attention to them, they go to even a decent school, and so everybody who has that similar upper-middle-class or even middle-class background is going to take the most advantage of their own genetic background.

But working-class students, you are suggesting get almost none of that.

NISBETT: Yes, because of the chaos that you find in many of those families.

RITHOLTZ: This has nothing to do with race, this has nothing to do with religion, this is really everybody just scrapping really hard to make ends meet and it’s not the ideal circumstance for raising a child.

NISBETT: Right and you know, some environments, obviously lower-class environments are as good as you would ever find in an upper-middle-class but some of the environments are chaotic in the extreme and not much goes on that’s going to facilitate somebody rising to the level of ability.

And when the environment is massively different across individuals as it is in the lower classes, then it’s the environment that’s going to drive the bus and genes are not really much relevant. A little side point that I will make here and this is that this is true only in the US among rich countries.

RITHOLTZ: Really?

NISBETT: In Scandinavia especially, the contribution of genes to IQ is just as great for the lower classes, people with the least money as it is with the most money because they are making sure that the poorest have good things going on in their environment, schooling and so on, so that genes can express themselves in the lower classes in Europe especially Scandinavian.

So that’s the most interesting thing I can say about genes and the environment.

RITHOLTZ: Well let’s stay with this a sec because you really raised two fascinating questions and I’m going to assume you answered it in “Intelligence And How To Get It” what should parents of any economic background be doing to help their children become as intelligent and successful as possible?

And then the bigger question is what should the US as a society be doing?

NISBETT: Yes, right, great questions. There is wonderful anthropological work that’s going on looking at where you just live with the family for a few weeks or months and see what goes on. In the upper-middle-class family, they typically dinner together and dinner table conversation is kind of like a tennis game, I mean dad says something and mom says something and the kid says something and the dad responds to what the kid said and so on, they learn how to think on to a significant extent in family gatherings. These kids get taken to the museum, they get read to often by quite good books.

In the lower-class family and this is intact and we’re not talking about pathological, I mean dad’s a lunch pail dad and mom’s a homemaker, intact family, there isn’t much in the way of conversation with the kid, you tell the kid what to do and the kid asks you for something and it’s just not at all the same thing.

There often is some reading in the lower-class and I mean there may be some Little Golden books, I don’t know if they still have those but most of this research was initially done, that was more common, and the kid may get read to some.

And they don’t tend to go to museums, they don’t have their information, their fiction of the top level most interesting most likely to be food for thought so there is a huge difference between the upper and lower class and cognitive skills.

Some of that is undoubtedly genetic, I have no idea what fraction of but we know most of it is environmental and this comes from studies of adoption. What happens to a kid from a lower-class who gets adopted into a middle-class family as compared to the kid who stays in the family of origin and the answer is that’s worth 12 to 18 points in IQ. I mean that is enormous, that’s the difference between somebody who might or might not graduate from high school versus someone that you would expect with complete college and might well go on to post graduate work.

So that — and that showed how important the environment is and that’s the end of the question. We now know that.

RITHOLTZ: So what should a country like the United States be doing if we have the goal of hey we want to see more of our kids succeed, we want to level the playing field and make sure everybody has the opportunity to do their best. What is Scandinavia doing that we are not?

NISBETT: Well, first of all, they have day care from practically word go and daycare is important, I mean a good daycare program is important for intelligence for sure if with respect to specifically IQ, the very best daycare programs that we have might may have an early effect that tends to largely fade on IQ but the Nobel prize-winning economist Heckman at University of Chicago is — summarized the evidence of what happens to these kids 30 years after they either have daycare or don’t and the difference is I seem to be only telling you about really big effects today, it’s like a 50 percent increase in likelihood that the kid will graduate from high school, a 50 percent increase in the likelihood that it would go to college, having cutting in half of the likelihood that the kid is going to go to jail or be a public charge.

I mean stuff is being learned in there about dealing with other people and self-control, cooperation, and so on that are tremendously not IQ but their cognitive skills and social skills with a huge payoff. And by the way the economists have shown that good daycare pays back at a ratio of nine to one. That is $9 gain for every $1 spent on daycare.

The gain to the treasury is significant over the lifetime of a kid.

I mean it is just so important that early childhood education and their and to the policy thing, of course in the Democrats 3.5 trillion hope, there is early childhood care for everybody, that’s a huge investment, I mean it’s a hugely valuable investment not to mention the human suffering and human well-being that are involved.

RITHOLTZ: Quite intriguing. I want to talk about some of the things you’ve discussed about the state of psychological research and academic research in general, most importantly with the reproduction problem. Tell us what’s happening in the ability to reproduce academic research.

NISBETT: Right well this is a matter of some passion for me as you might imagine. Several years ago, a psychologist named Brian Nosek and a lot of other psychologists published an article in science claiming that only 50 percent of the psychology experiments that they attempted to replicate actually did replicate, by the way even if that were true which it isn’t, it would be better than what the drug companies do. Their replication rate is significantly lower than 50 percent but the research was deeply flawed in many ways for one thing, a lot of the studies were chosen because someone found the results to be implausible.

So only 50 percent of the on their face of it implausible research got reproduced would be a way to describe what they did but they did lot of things that were astonishingly far from what the original investigators did. Italians were asked of opinions about African-Americans, well they don’t have the same understanding of African-Americans in Italy that we do, people are asked how they would feel about flubbing a question in college class and people who and replicating this by somebody who makes an error in business quite a different kind of thing and if you improve on this situation, you get about 80 percent of people, 80 percent of studies replicating.

This simply asking the investigator of the study to look, this is our understanding of what you did, is that right and they either say yes, go ahead, or no, you are missing something there, just that gets it up to 80 percent.

RITHOLTZ: Wow.

NISBETT: But in fact there was, it’s extremely misleading to talk about the replicability of randomly selected studies, let alone the replicability of implausible seeming studies because I’ve asked, I started asking people after this came out, can you think of any finding in psychology which seemed interesting and important when it came out that then turns out not to be the case and doesn’t replicate. And people have to think for a while. I’ve only got a list of about a half dozen studies like that at this point.

So that’s enough to tell you we don’t have a replicability problem, it’s a certain class, you know run-of-the-mill studies or studies have been vetted appropriately, there is a very low rate of misinformation getting into the system.

RITHOLTZ: And you are talking about actual lab studies not things like Freud’s abstract theory of the id subsequently being replaced by a different thesis of psychology. You are talking about actual experimental psychology.

NISBETT: Right, let me give you an example. It’s the one thing that we haven’t gotten onto is how incredibly much we are affected by small situational contextual things in our lives that weren’t affected unconsciously.

One clever study, you have people hold a pencil in their mouth with the end of the pencil pointing in which gives you kind of a sourpuss look and feel when you do that, or you have them hold it between their teeth horizontal to the floor which makes it — makes you feel like you’re smiling and you have people look at cartoons under one these conditions or the other and sure enough people who have been forced to smile think the cartoons are funnier.

And so then there is like 10 or 20 studies attempting to replicate that effect and they don’t find it so that it just drops out, people stop referring to it, it doesn’t work, it turns out that all of the studies that attempted to replicate this have a video camera on the person, very — the person knows that he is being watched, the whole point about this thing is that you’re unaware in a conscious way of the fact that your facial expression has been manipulated and that’s what allows the effect to occur.

RITHOLTZ: Right.

NISBETT: So sure enough when you do it with the video camera you don’t get the effect when you do it without the video camera, you do get the effect. So the work is really very bad on the other hand, I will say that that article started a movement to look at the practices of psychologist research practices and there have been a number of improvements you’re more likely going back to the law of large numbers, you’re more likely to get a spurious result if you use a small number of subjects.

RITHOLTZ: Sure.

NISBETT: Because you may get something happening that isn’t very likely to happen, you just use a small enough sample that you get it. So I went back and looked at some of the studies early in my career and I was appalled at how few subjects I used, including the studies that I mentioned about externalizing arousal affects, I’m moving at ends of 12 per cell and it is just, it’s inappropriate and over time I like everybody else drifted to much larger numbers of cases than that.

But now no one would ever use ends as low as most of us used at least some of the time decades ago and there are other practices to some good some not so good, but the ones that are good, they are valuable, they have changed people’s behavior.

RITHOLTZ: So speaking of doing experiments, I’m kind of fascinated by things like introspective reports where people are verbally describing what they’re thinking about how their thinking and you can reach the conclusion that these sorts of things at best, people can explain what they think they are thinking about but not really how they actually think. Tell us a bit about that.

NISBETT: Right, well some of my favorite studies here about showing that we don’t know what’s going on in our heads, one beautiful one shows people of matrix of four cells up, down, right, left and it tells us that you — I’m going to put an X on the computer screen in one of those quadrants and I want you to predict where it’s going to appear.

So early on the subject does terribly and he gets better and better as time goes on. That’s because there are rules that are determining where that X appears it never appears in the same quadrant twice, it has to appear in quadrants 2 before it can appear in quadrant four et cetera, complicated rules system.

And we know that people have learned the rules because when you change the rules they fall back down to chance level.

Now you ask the subject, say, tell me you do it — you’re doing so great there and then kind of, I’m going to say you kind of fell apart, what happened, and I say well, I just lost the rhythm…

RITHOLTZ: (LAUGHTER).

NISBETT: And psychology professors and some of the subjects and one of them said well, I think you are showing me distracting symbols subliminally. So here are people learning rules that are quite complicated and no awareness that they’ve learned those rules at all.

RITHOLTZ: That’s quite interesting.

NISBETT: What’s that?

RITHOLTZ: That’s quite interesting.

NISBETT: Yes, so the Nobel prize winner, economist, organizational psychologist, cognitive psychologist Herbert Simon won the Nobel prize and for a while was going around saying I do think aloud protocols, I have people solve problems and they think aloud and that tells me the process that they’re using to solve the problem.

And my reaction was no, it just says that they can tell you how their theory of how they would have solved the problem which happens to correspond to your theory but that isn’t necessarily what going on and these studies establish that.

And it was a controversy that went back and forth between Simon and me and he actually gave me a beautiful example of this, he says you know when people play their first chess game, it’s they play, they make several moves and then you ask them why you did that, and they can’t tell you, I don’t know, I’m just moving things randomly, I don’t know why I was doing that. And Simon says, no l actually they were following rules, it’s called duffers rules, everybody plays the same way before they really have gotten any expertise at all.

He says then if they continue to play and they read books and they talk to other chess players, they are now beautifully cognizant of what’s going on and they can tell you exactly why they moved the rook to this position instead of the bishop and so on and they are quite accurate.

Then if you look at chess masters, I mean world-class players, they are no longer accurate about what they’re doing because they forgotten some of the stuff they learned in books in a conscious way and it’s precisely because they are Masters is that they’ve invented, these induced certain rules that they’re following, but they are hopeless. I think an even simpler example is language, we don’t know what grammar is, if you try to have people explain English grammar, they are hopeless. (LAUGHTER).

They can’t say a single correct thing but nevertheless we rarely violate those rules, we just don’t have a conscious grasp on what they are. So we’re constantly learning things, inducing things that we’re not aware of in a conscious way, solving problems in an unconscious way and one of my very favorite studies you have people in the lab, there’s two ropes hanging down from the ceiling, there’s a bunch of objects lying around in the tables in there and the experimenter says I want you to tie the two ropes together, but the problem is they are too short to do that so you have to find a way.

And one way is very obvious, you tie an extension cord to one and you go over and grab the other and you can now tie them together and there are a lot of things like that and after the subject has been stumped for a while, the experimenter says “okay, so do it another way and still can do nothing” so then he goes he’s been wandering around the lab while this is going on handling around, he casually puts one of the ropes into motion.

Then typically within 45 seconds, the subject grabs a rope, ties a heavy object like a pair of pliers to it, sets it moving like a pendulum, goes to the other rope, grabs a pendulum rope and ties them together. And the investigator says that’s very clever, how did you happen to think of that? Again, this is another one of those studies that use psychology professors as subjects and one says, well I thought of monkeys swinging through trees across the river, the imagery occurred simultaneously with the solution. And he said do you think it could’ve influenced you to the fact that I put the rope into motion? No, no, no, it is all about monkeys and rivers and swinging and so on.

People have no idea why they were able to solve that problem.

Now this is not just a curio, it turns out that the unconscious mind is going on solving problems all the time for free, we’re not aware what going on but it is happening and that’s great and most of the stuff that goes on is accurate.

RITHOLTZ: So that reminds me a little bit of some of the split brain experiments where people who had their I guess it’s the corpus callosum severed, so what they see in the right eye goes to the left side of the brain the left eye goes to the right side but they’re not communicating and if they are showing, shown two different things, two different images in each eye, they’re unaware of why they’re actually engaging in the sort of behavior they do based on whether something was shown to one side of their brain or the other. Is that related to this?

NISBETT: It’s the perfect example to bring to this. Those people are confabulating, they don’t – the investigator has shown them something to the left eye and that gets incorporated in the person’s thinking about what’s going on, but it’s not conscious, it has not been presented to the verbal hemisphere. So you know, it’s exactly that, it’s confabulation, we’re confabulating all the time.

So when somebody ask me why I did something, if it’s a psychologist, I say well, bear in mind who I am. I wrote you know, all those articles about unconscious reasoning, so I don’t really know why I did what I did but I will give you a story which sounds acceptable to me and will to you.

RITHOLTZ: (LAUGHTER).

NISBETT: Now you can only do this with psychologists (LAUGHTER).

RITHOLTZ: Right.

NISBETT: You can’t just do this with Aunt Maude who will think you’ve finally lost it. So but, we can put the unconscious to doing more work than it does and if you — but you have to give it some material to work over. So I use, and my teaching technique my seminar teaching technique is I handout thought questions one week for an that’ll be the what we will focus on in the seminar next week and my joke about that this is this simple — somewhat like the thought questions you may have seen in other classes with the difference being that I expect you to have thought about these questions.

Now if I sit down just before class and write the thought questions out, they are not going to be very good and the class is not going to be great.

RITHOLTZ: Right.

NISBETT: But if I just sit down for 10 minutes and say well, what are the main points I want this material to make and what would I do f somebody raises a particular point, how would I deflect the discussion in that direction and so on.

I don’t have to think for long but then you know, several days later without having consciously thought about the thought questions at all I sit down and start taking the thought questions by dictation. So they just — they start flowing out of my bin.

RITHOLTZ: Right.

NISBETT: And it turns out that if you are highly creative people, I mean great people, Poincare, the mathematician, Amy Lowell, the great poet, if you ask them how did you come up with that, they say, well Poincare says well I put my foot on – I was on vacation, I wasn’t thinking about work at all and at the moment I put my foot on the step of the bus, it occurred to me that the functions I needed to solve this problem were the very fuxium (ph) functions that I had used to solve another problem years ago.

Amy Lowell says I was in an Art Museum and I saw a sculpture of bronze horses and thought, that might be an interesting topic for poem someday. Months later she sits down and as she says the poem was there without having thought about it consciously in that period of time.

The point being if you prime the unconscious with something, it will go up doing work including at night, I have a friend who said you know, working on calculus homework problems you know and get to problem three and it’s not — I can’t figure it out and work for 30 minutes, nothing’s happening so just goes to sleep and often enough, he wakes up and says oh, that’s a bathtub problem, that’s all that is.

RITHOLTZ: Amazing.

NISBETT: So a lot of the unconscious work conveniently enough gets done while we’re asleep.

RITHOLTZ: That’s absolutely fascinating. We’ve been speaking with Professor Richard Nisbett of the University of Michigan. If you enjoy this conversation, well be sure to check out any of the previous 400 interviews we’ve conducted, you can find those at iTunes or Spotify or your favorite podcasts source.

We love you comments feedback and suggestions, write to us at [email protected], sign up for my daily reads at Ritholtz.com, check out my regular column at bloomberg.com/opinion, follow me on Twitter @ritholtz.

 

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