KEY TAKEAWAYS

QUOTES ❝

"That which came with the help of luck can be taken away by luck and often rapidly and unexpectedly at that"- Solon (Greece)

“Probably is not a mere computation of odds on the dice or more complicated variance. It is the acceptance of the lack of certainty in our knowledge and the development of methods for dealing with our ignorance.” - Nassim Nicholas Taleb (Author)

KEY IDEAS 💡

• Why consider the worst case that took place in our past as the worst possible case. If the past, by bringing surprises, did not resemble the past previous to it (past’s past) then why should our future resemble our current past.
• Clearly risk-taking is necessary for large success but it is also necessary for failure.
• Things that come with little help from luck are more resistant to randomness.
• A mistake is not something to be determined after the fact but in the light of the information until that point. Things are always obvious after the fact.
• The wise man listens to meaning. The fool only gets the noise
• Right probability(risk) = Probability * Magnitude of the Outcome
• It is natural for those who failed to vanish completely. Accordingly, one sees the survivors and only the survivors which imparts such a mistaken perception of the odds. We do not respond to probability but societies assessment of it. Even people with training to probability respond unintelligently to social pressure.
• Social Treadmill - You become rich, move to richer neighborhoods, and feel/become poor again. To add to that the Psychological Treadmill: You get used to wealth and revert to a set point of satisfaction.
• If you do series of coin flips and it is long enough you may get 8 heads or 8 tails in a row. Yet you know despite these wins the conditional odds of getting a head or a tail is still 50%.
• Hindsight Bias (Monday morning quarterbacking) - Things appear to be more predictable after the fact.
• Inductive fallacies - Jumping to general conclusions too quickly.
• Psychologists call emotions "lubricants of reason”. If it were not for emotions, our mind would expense un optimal amount of thinking in optimizing decisions about mere day to day tasks.
• Wax in my Ears - I cannot stop my emotions to run when I read about someone's opinion on something (or any other source of information). All I can do is not get that information in the first place. This could save you plenty of emotional expenditure.
• Conditional Information/Wittgenstein's ruler: (a probabilistic method) "Unless the source of the statement has extremely high qualifications the statement would be more revealing of the Author than the information by him"(this is in respect to the author's me mechanism to not read every unsolicited review/opinion about their writing).
• The superstitions may arise due to responding to our ingrained (also like other animals) statistical machinery that usually has a very small data sample size (just us). But it doesn't know any better.
• Our bias is immediately to establish a causal link between any 2 events.
• Probability is not about the odds but in the belief in the existence of an alternative outcome, cause or motive.
• Attribution bias - You attribute your success to skills but failures to randomness. It is a human heuristic that makes us believe so in order not to kill our self-esteem and keep us going against adversity.
• Sampling Theory (Law of large numbers) - If you bang one million dollars at your next visit to Los Vegas at the roulette table in one single shot you will not be able to ascertain from this single outcome whether the house has the advantage or if you were particularly out of the gods' favor. If you slice your gamble into a series of one 1 million bets of one dollar each the amount you recover will systematically show the casinos advantage.

FOOD FOR THOUGHT 🗯

• Outside of textbooks and casinos probability seldom presents itself as a mathematical problem or brain teaser. Mother nature does not tell you how many holes there are on the roulette table nor does she deliver problems in a textbook way.
• In the real world one has to guess the problem more than the solution.
• Russian Roulette - At a time only one out of 6 possibilities will be realized in reality. What if people start admiring the decision of one who won 10 million in a game of Russian roulette. Only a wise can see attributes of other possibilities that were not realized. If thousands of people played it, few would end up being extremely rich while we will have a lot of dead bodies (this can be extended to stock markets).
• Earning the same 10 million dollars through the artful practice of dentistry is the same as above and buys the same good except one's dependence on randomness is greater than the other. To an accountant though, they would be identical. To your next-door neighbor too. But they are qualitatively different.
• If I am going to be fooled by randomness, it better be of the beautiful and harmless kind (like poetry, etc with aesthetic appeal)(based on a Yiddish saying)
• We do not need to be rational and scientific when it comes to the details of our daily life. Only in those that can harm us and threaten our survival.
• A theory that does not present a set of conditions under which it would be considered wrong would be termed charlatanism. It would be impossible to reject otherwise. Why? Because the astrologist can always find a reason to fit the past event by saying things like Mars was probably inline but not too much so. Things like astrology cannot be disproved owing to the auxiliary hypothesis that comes into play.
• Memory in humans is a large machine to make inductive inferences. What is easier to remember - a collection of random facts glued together or a story, something that offers a series of logical links. Causality is easier to commit to memory. Our brain would have less work to do to retain the information.
• Induction - It is going from plenty of particulars to the generals. It is very helpful as general takes less room in one's memory than the collection of particulars. The effect of such compression is the reduction in the degree of detective randomness.
• A popular belief is that superstition arises from the nurture when it may be from our nature. Something in us has not developed properly over the past thousand years. It's a remnant of our old brain.

OBSERVATIONS 👀

• Mild success can be explainable by skills and labor. Wild success is attributable to variance.
• The quality of a decision cannot be judged solely based on its outcomes.
• People do not like to insure against something abstract. The risk that merits their attention is always something vivid.
• What is easy to conceive is clear to express, words to say it comes effortlessly.
• Borrowed wisdom can be vicious.
• Any reading of the history of science will show that almost all things that have been proven by science appeared like lunacies at the time they were first discovered. Even the Nobel committee never granted Einstein the prize on account of his insights on special relativity. Or to someone with no exposure to physics that in some parts of the universe the time doesn't exist. Try to explain a Kenny that although his star trader proved to be extremely successful I have enough arguments to convince him that he has a dangerous idiot.
• (People are not good at learning from history) People are extremely lax in the area of detection and prevention i.e. they refuse to derive their risks from the probability computed on others, feeling that they are somewhat special. Yet extremely aggressive in the treatment of medical conditions. People overreact when choosing medical treatment but not when taking preventive measures. This congenital denigration of the experience of others is not limited to children or people like the author. It affects business decision-makers and investors on a grand scale.
• Things are always obvious after the fact. It has to do with the way our mind handles historical information. When you look at the past the past will always be deterministic since only one single observation took place. Our mind will interpret most events not with the preceding ones in mind but the following ones.
• If there is anything better than noise in the mass of urgent news pounding us, it will be like a needle in a haystack. People do not realize that the media is paid to get your attention. For a journalist, silence rarely surpasses any word.
• It is better to read "New Yorkers" on Mondays than the Wall Street Journal every morning from the standpoint of frequency aside from the massive gap in intellectual class between the two publications.
• People who look too closely at randomness burn out. Their emotions drained by the series of pangs they experience. Regardless of what people claim a negative pang is not offset by a positive one.
• Cross-Sectional Problem - At any given time in the market, the most successful traders are likely to be those that are the best fit for the latest cycle. This does not happen to dentists or pianists because these professions are more immune to randomness.
• One cannot infer much from a single experiment in a random environment. An experiment needs repeatability showing some causal component.
• Science is mere speculation, mere formulation of conjectures.
• Mathematics is a tool to meditate not compute.
• Some degree of unpredictability or lack of knowledge can be beneficial to our defective species. A slightly random schedule prevents us from optimizing and being exceedingly efficient, particularly in the wrong things.
• Research on happiness shows that those who live under self-imposed pressure to be optimal in their enjoyment of things suffer a measure of distress.

CONCEPTS 🧪

• The scientific name for conscious and sub-conscious is declarative and non-declarative.
• Historical Determinism- A belief that historical processes have a certain inevitability, based on some fundamental factor.
• Recursive Grammar
• Peso Problem(finance) - The problem that an infrequent event has not yet been observed in data. Since it is not observed, it will not show up in any of the results of investors’ research. Author call’s it mother of all deceptions.
• Demarcation Problem.
• Regression to the Mean- Consider that two average-sized parent dogs 🐕 produce a large litter. The largest dogs (if they diverge too much from the average) will tend to produce offspring of a smaller size than themselves than vice versa. This reversion for the large outliers is what has been observed in history and is explained as regression to the mean. Remember the larger the deviation the more important its effect. Word of warning - All deviations do not come from this effect but a disproportionately large proportion of them do.
• Chaos Theory- Chaos theory is a branch of mathematics focusing on the study of chaos—states of dynamical systems whose apparently-random states of disorder and irregularities are often governed by deterministic laws that are highly sensitive to initial conditions.

RECOMMENDATIONS 💁‍♂️

• Book - Fashionable Nonsense (Postmodernism)

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