Hidden Evidence

There are two quotes from Fooled by Randomness that are worth discussing:

Beyond that it is all randomness: either by taking enormous (and unconscious) risks, or by being extraordinarily lucky.  Mild success can be explainable by skills and labor.  Wild success is attributable to variance.

and

Clearly the quality of a decision cannot be solely judged based on its outcome, but such a point seems to be voiced only by people who fail (those who succeed attribute their success to the quality of their decision).

The first will frustrate many, but is worth highlighting because it challenges our basic assumptions.  Remember, as humans we are prone to cognitive failures that don’t permit us to recognize this as reality: hindsight bias, hidden evidence bias, and more (future blog post to come detailing these and other failings).

The second is more interesting, and also challenges our basic assumptions.  Just because somebody presided over a decision that worked out, doesn’t mean they made the right decision.  If they had to play that decision out a thousand times, what would the mean outcome have been?  This is how decisions should be judged.

Combine these thoughts: wild success is due to enormous risks (which if played out a thousand times would average in failure), and those who succeed don’t recognize the risks they took but think they did something right.

What does this mean?  We should take more enormous risks prone to failure!  Why?  Because the returns from a successful (though unexpected outcome) are non-linear vs. the losses from failure.  So the world benefits when we take insane risks and randomly succeed.  We should remember in doing so, that if 999 other people took these same risks and failed, they are a part of that success as well.

The failure outcomes are part of the process that enables the success outcomes.  But they aren’t lauded in the same way.  Why not?

This entry was posted on Tuesday, May 6th, 2008 at 4:23 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.