The Psychology of Innovation in 4 Books

1.

NUDGE

By Nobel Laureate in Economics Richard Thaler and his colleague Cass Sunstein

February 2020

Just over a decade ago, two professors from the University of Chicago—legal scholar Cass Sunstein and economist Richard Thaler—were growing increasingly frustrated. They believed they possessed revolutionary insights about human behavior that could make the world safer, healthier, and better. Yet outside the walls of academia, no one seemed to care.

So, like many frustrated academics, they wrote a book. Sunstein, an experienced writer who publishes a book almost every year, didn’t find the task too daunting. Still, their optimistic estimate was that perhaps 40 people might read it—mostly fellow researchers in behavioral science. When they pitched the book to a popular publisher, the proposed title, “Libertarian Paternalism”, horrified the editor, who politely declined and urged them to find a more sensible title.

Thus, Nudge was born—published quietly by an academic press. It explored irrational behaviors in the general public and proposed subtle ways to redesign the environment to guide people’s actions in the desired direction, without “educating” the public and without infringing on personal freedoms.

Nudge was released in April 2008 and initially drew little attention. But in September of that year, the venerable investment bank Lehman Brothers collapsed with a bang, triggering a devastating financial crisis—the worst in U.S. history. Tens of millions of Americans lost their jobs, and millions more lost their savings and homes. People were desperate for an explanation: how could the pinnacle of modern finance, Wall Street with its elite talent and massive salaries, fail so catastrophically? And how could the next crisis be prevented?

Nudge was waiting on the shelf with answers. (Another book that rose to prominence at that moment was Dan Ariely’s excellent debut, Predictably Irrational.)

Events moved quickly. Sunstein—a public policy expert—was recruited from academia by his fellow University of Chicago colleague, newly elected President Barack Obama, to head the White House Behavioral Science team. Thaler—the first economist to embrace the groundbreaking work of Israeli psychologists Daniel Kahneman and Amos Tversky—became the founding father of behavioral economics, eventually winning the Nobel Prize in Economics in 2017. Nudge went from obscure publication to pop culture mainstay.

Over the years, “Nudge Units” were established around the world, reshaping daily life through nearly invisible environmental tweaks that influenced automatic behavior. They redesigned electricity bills, changed defaults on pension and organ donation forms, sent SMS reminders to people with unpaid fines or expiring licenses—seemingly minor interventions that produced massive behavioral changes.

The book was finally published in Israel over a decade later, by which time much of our immediate environment had become digital. Today, Nudge is essential reading for anyone interested in the thousands of unconscious decisions we make daily—and how our environment subtly shapes them. Designers, product managers, public sector officials, tax and labor policy experts, and many others now draw inspiration and tools from Nudge in their everyday work.

2.

When? – The Scientific Secrets of Perfect Timing

By Daniel Pink

October 2019

If the question of timing is central to nearly every aspect of our fast-paced 21st-century lives, it is especially crucial in the world of entrepreneurship—and even more so in tech startups.

As technologies and trends shift at dizzying speed, missing the right moment can be costly and unforgiving—as former giants like Nokia, Motorola, and RIM can attest. On the flip side, flagbearers of lofty promises—augmented reality (Google Glass), augmented hearing (Doppler Labs), or electric vehicles (Better Place)—were simply too early. They collapsed due to lack of oxygen, only to leave the stage for scattered successors.

If I had to choose someone to summarize everything we know about timing, I’d pick Daniel Pink without hesitation. His first book, Drive, brilliantly unpacked the complex structure of human motivation while remaining fun, concise, and practical. Here too, Pink masterfully weaves a story about perfect timing from threads pulled across diverse disciplines:

– How can we use the hidden rhythms of the day to build an ideal schedule?

– Why do certain breaks drastically improve students’ test performance?

– Why should we avoid hospital visits in the late afternoon?

As Alain de Botton once said: The success of a book depends largely on whether you read it at the right time.

And clearly, there’s no such thing as bad timing for a great book about timing.

3.

Skin in the Game

By Nassim Nicholas Taleb

September 2019

For the past two decades, Nassim Nicholas Taleb has been the enfant terrible of Western economics. Every few years, he releases a book that immediately sparks controversy. Taleb spares no one—mainstream media, top economists, respected thinkers—all are fair game if they don’t share his singular view on risk.

With a proven track record as a brilliant trader, acclaimed academic publications in math and statistics, and a sweeping intellectual background, Taleb occupies a rare and powerful position as a scathing critic of the global financial system.

This latest book is the fifth and final volume in Taleb’s philosophical series Incerto (Latin for “uncertainty”). Since his first book, Fooled by Randomness (2001), Taleb has consistently developed a central idea: humans struggle to perceive reality without bias, especially when randomness is involved. Despite this, society tries relentlessly to tame uncertainty, assign causes to every effect, quantify risk, and produce educated forecasts.

But these efforts are doomed. Self-organizing systems—companies, markets, nations, ecosystems, even the human body—do not behave according to our neat statistical models. Inevitably, they will face unpredictable, extreme crises—what Taleb calls Black Swans.

Taleb is more reminiscent of old-school intellectuals (albeit a brash version). He’s at home quoting Nietzsche and Hegel and refuses to wear a tie, calling it “a blood flow restriction device for the brain.” Yet he also publishes deeply technical papers on non-Gaussian distributions and financial models in the age of global markets. He relishes public intellectual duels and frequently releases collections of his own aphorisms.

His ideas are almost meta. Taleb himself emerged from a major crisis—he spent his childhood in the basement of his Beirut home during Lebanon’s bloody civil war. His Greek Orthodox family lost its status, and Taleb was educated in exile. Perhaps that’s why he insists the only way to operate in an uncertain world is to become Antifragile—not merely resistant to shocks, but able to grow stronger because of them. Staying true to his philosophy, he bet against the market before each of the 21st century’s major financial crises—and made a fortune.

You can love him or hate him—but you can’t ignore him. Taleb’s books regularly appear on lists of the century’s most influential works. Nobel Laureate Daniel Kahneman has openly acknowledged the profound impact of The Black Swan on his own research.

For entrepreneurs—and especially for investors—risk management is mission-critical. That delicate balance between smart investment and ignoring distracting noise. In this context, Taleb’s insights are priceless.

4.

Talking to Strangers

By Malcolm Gladwell

January 2020

Malcolm Gladwell—known for his iconic hair and razor-sharp storytelling—is arguably the most influential popular writer in the social sciences. All his books have become bestsellers, he’s a highly sought-after speaker, a senior writer at The New Yorker, and now also hosts a massively successful podcast.

Gladwell has a unique approach. He doesn’t focus on a central character or “hero” (like Michael Lewis), nor does he simply popularize a pre-existing academic idea (like most science journalists, including Daniel Pink). Instead, he offers original stories woven from scratch—not to convince, but to expand your mental horizons.

In Outliers, he made the “10,000-hour rule” famous. In David and Goliath, he explored the unexpected strengths of underdogs. The Tipping Point changed how we think about viral change, and Blink pioneered interest in intuition and snap judgment.

His latest book, Talking to Strangers, was born from a story that rocked the U.S. but remained relatively unknown abroad. On July 13, 2015, in Texas, a police officer pulled over an African American woman named Sandra Bland for a minor traffic infraction. A tragic and controversial series of events followed, and three days later she was found hanged in her jail cell.

Avoiding obvious political minefields, Gladwell explores the deeper question:

– What really happens when we interact with someone from a different background?

– How do we assess the character of a stranger?

– Are we doomed to stereotype and misjudge because of cognitive limits?

As always, he builds his theory through gripping, high-profile stories:

– Bernie Madoff, who duped New York’s elite in one of history’s biggest Ponzi schemes.

– Amanda Knox, the American student wrongly imprisoned in Italy for murder.

– Brock Turner, whose sexual assault case became a precursor to the #MeToo movement.

Startup teams, by definition, are small groups facing huge waves of users, customers, investors, and competitors. In today’s global climate, these interactions will inevitably involve cultural and mental diversity. The ability to approach such encounters with openness and curiosity is essential for any innovation hoping to change the world.