Michael Lewis’ latest book, “The Undoing Project,” weaves together the biographies of Amos Tversky and Daniel Kahneman, two Israeli psychologists whose work in the 1970s–1990s launched a new way of combining behavioral academics with practical applications. Their specialty was exploring the ways the human mind makes systematic errors when forced to judge uncertain situations.

At first, you may not think that sounds like gripping entertainment. But in typical Michael Lewis fashion, these pair of academics become a fascinating read.

I and my Hill Investment Group colleagues had the privilege of meeting Lewis and hearing him speak shortly after he published his 2003 book, “Moneyball.” In it, he showed how Major League Baseball teams were making poor decisions on valuing players based on human judgment. Defying convention, Oakland A’s General Manager Billy Beane evaluated players using data rather than “expert” judgments to successfully compete against teams boasting much higher payrolls.

When Lewis wrote “Moneyball,” he wasn’t aware how powerful his book would become. He was simply intrigued by a real-life illustration of objective evidence beating the pants off of conventional so-called wisdom.

In some respects, “The Undoing Project,” is a prequel to “Moneyball.” Lewis admits, he didn’t realize it at the time how much of what he explored in “Moneyball” came directly from professors Tversky and Kahneman and their earlier work. Once he connected the dots, he decided to write a book about them too. Their story is about how they used their understanding of systematic errors in people’s judgment to improve that judgment, and thus improve their decision-making.

I believe one of their most important findings is this: Knowing you or others have biases (such as relying on overly small samples, anchoring on past assumptions, and mistaking hindsight as being predictive) isn’t sufficient to overcome them. Even when we know we’re being influenced, we often let it happen anyway!

Here’s one example from Lewis’ book:  In 2016, basketball player Jeremy Lin signed a $38 million contract with the Brooklyn Nets – clearly a coveted hire. But back in 2010, no NBA team would draft him. “He lit up our models,” one team manager said … but as a Chinese-American Harvard grad, Lin didn’t fit the stereotype. Even though they had the evidence (the models) in hand, they were unable to overcome their biases and recruit him when he could have been had for far less money.

Back to professors Kahneman and Tversky. In 2002, Daniel Kahneman won a Nobel Prize for the work that continues to shape our lives today. Amos Tversky likely would have received the award as well but, sadly, he passed away in 1996, and Nobel prizes are not awarded posthumously. In any case, their work has contributed to untold advances in medical diagnosis, military decisions, professional sports and – last but hardly least – financial economics.

Across all of these disciplines and more, the takeaway is that human bias is ever-present, which is why we must remain ever on guard against it. Hint: One of the best ways I know to combat your own biases is to recruit someone who is aware of how prevalent they are, to let you know when it’s happening to you.

Even though we at Hill Investment Group do our best to always Take the Long View, I have a confession to make: When it comes to investment performance, I still have days and even years that I like more than others. 2016 is one of them.

It’s not just because the annual performance numbers across many of our global markets were remarkably strong. That’s nice, but I’m more interested in the tale these numbers tell us – or, actually, re-tell us – about investing in good times and bad.

Asset allocation (still) makes sense.

After a few years of underdog performance that tested many investors’ discipline, small-cap and value stocks proved their mettle this year, globally and especially in the U.S. As Dimensional Fund Advisors observed in its recently released 2016 Market Review (emphasis ours): “Over 2016, the US small cap premium marked the seventh highest annual return difference since 1979 when measured by the Russell 2000 Index minus Russell 1000 Index.”

Market-timing (still) does NOT make sense.

2016 also was a text-book example of how investors who may have been tempted to try to capture the market’s crests and avoid its chasms would likely have missed out on the year’s ultimately rewarding returns. To share Wes Wellington’s comments from his “Look Back at 2016“:

“Every year brings its share of surprises. But how many of us could have imagined that 2016 would see the Chicago Cubs win the World Series, Bob Dylan receive the Nobel Prize in Literature, Donald Trump elected president, and the Dow Jones Industrial Average close out the year a whisker away from 20,000? The answer is very few—a lesson that investors would be wise to remember.”

Dimensional’s report further notes (emphasis ours): “Most of the performance for small caps came in the last two months of the year, after the US election on November 8.” This represents another outcome that would have been difficult if not impossible to predict without a great deal of luck on your side.

Diversification remains your best bet.

Almost two years ago to the day, following a year in which U.S. large-cap stocks had continued to outperform most other asset classes, I posted this reminder about the importance of remaining diversified: “Clearly, the tables can turn abruptly and destructively for the nondiversified investor.”

With small-cap and value stocks’ strong resurgence, 2016 reemphasized this same lesson in a fresh way. It tells us that diversification remains as important as ever in a world in which near-term prognostications remain a matter of luck, not skill.

As Oaktree Capital’s Howard Marks expressed in his “opinion of opinions” in a recent post:

“There are no facts about the future, just opinions. Anyone who asserts with conviction what he thinks will happen in the macro future is overstating his foresight, whether out of ignorance, hubris or dishonesty.”

What does 2017 have in store for us as investors? In all honesty, I don’t have the hubris to guess.

While nostalgia can be an effective way to market beer, in my opinion, it’s no way to manage a brewery’s 401(k) plan. At least not if it hearkens back to a time when it was routine for plan sponsors to load up a 401(k) plan with high-cost investment selections and expect participants to sort it out for themselves.

This is what I fear has happened when InBev Anheuser-Busch (A-B) proudly announced nine additions to its 401(k) plan investment current lineup of low-cost, passively managed index funds. Much to my disappointment, the additions represent a confusing mix of mostly active funds.

When I was assistant treasurer at A-B in the mid-80s, I was proud to help the company become one of the first in the nation to replace all active funds with index funds in both its 401(k) plan lineup and pension plan investments. Our early leadership has since become common practice, buttressed by the empirical evidence on how to advance retirement plan participants’ successful outcomes.

There is a glimmer of hope in the mix. Dimensional Fund Advisors appears to be among the firms A-B announced in its new “active management” lineup. While Dimensional offers a different strategy from traditional indexing – something we refer to as “evidence-based investing” – it’s not traditionally active either. Dimensional is itself a leading advocate of avoiding largely fruitless attempts to beat the market through stock-picking or market-timing.

Even with this positive exception, I feel the new lineup still represents an unfortunate shift, sacrificing better choices on the altar of more choices.

Maybe I’m being nostalgic, but the A-B I knew, knew better.