Professor Sendhil Mullainathan of economics, who uses insights from psychology and sociology to better understand economic behavior and the functioning of markets, has received a five-year $500,000 MacArthur Fellowship, known as the "genius grant."
The John D. and Catherine T. MacArthur Foundation in Chicago have awarded the fellowships since 1981 to persons and groups that "foster lasting improvement in the human condition." Recipients may use the awards as they please, with no papers or reports required by the foundation. Twenty-four grants were awarded this year.
Mullainathan, 29, who joined the MIT faculty in 1998 after he received the Ph.D. in economics from Harvard University, celebrated by treating himself to a new pair of $49.95 Alan Iverson basketball sneakers.
"I'm not really a splurging type of guy," said Mullainathan, who expected to pay more than $100 for the sneakers. "I was pleased to get a bargain."
He plans to use the grant money to do "something good," perhaps through a nonprofit organization in his native India. "The money is big enough so you can do something substantive," he said.
Mullainathan came to the United States at age 7 and was raised in Los Angeles. He graduated magna cum laude from Cornell University in 1993 with a B.A. in computer science, economics and mathematics.
He has been the Mark Hyman Jr. Career Development Assistant Professor since 2000. He has received the Sloan and Olin fellowships for his research. He is on leave this semester.
Since 1998, Mullainathan has been a faculty research fellow in labor and corporate finance at the National Bureau of Economic Research.
During the 2000 Independent Activities Period, Mullainathan delivered a Spark Forum talk titled "The Psychology of Financial Markets."
"People are remarkably overconfident," he said in that talk. "They trust their own judgment way too much. They get overly excited about recent good performance. They have loss aversion and will even take risks to avoid selling. Not wanting to face the pain of realizing a loss, people hold onto losers too long and sell winners too quickly."
His advice to a friend with plenty of money to invest? "Whatever you do, don't trade. Individuals trading on their own actively underperform," he said, advising investment through a fund manager. "How do we make money in the market?" he asked. His answer: be less vulnerable to human psychology.
Other MIT faculty members who have won MacArthur Fellowships include Institute Professors Noam Chomsky of linguistics and John H. Harbison of music; Professors Evelyn Fox Keller of the Program in Science, Technology and Society; Eric S. Lander of biology; Heather N. Lechtman of archaeology; David C. Page of biology; Michael J. Piore of economics; Alar Toomre of mathematics; and Jack Wisdom of earth, atmospheric and planetary sciences. Timothy Berners-Lee, director of the World Wide Web consortium at the Laboratory for Computer Science, Visiting Professor Charles F. Sabel of political science, and research affiliate Richard M. Stallman of the Artificial Intelligence Laboratory have also won.
The MacArthur Foundation invites up to 125 people to serve anonymously as nominators, or "talent scouts," each year. Individuals cannot apply for MacArthur Fellowships. Nominations are evaluated by a 12-member selection committee, which also serves anonymously and makes recommendations to the foundation's board of directors.
A version of this article appeared in MIT Tech Talk on September 25, 2002.