Fooled by Randomness

Author:Nassim Nicholas Taleb
Format: epub
ISBN: 9781588367679
Publisher: Random House Group
Published: 2006-03-25T16:00:00+00:00

Nine

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IT IS EASIER TO BUY AND SELL THAN FRY AN EGG

Some technical extensions of the survivorship bias. On the distribution of “coincidences” in life. It is preferable to be lucky than competent (but you can be caught). The birthday paradox. More charlatans (and more journalists). How the researcher with work ethics can find just about anything in data. On dogs not barking.

This afternoon I have an appointment with my dentist (it will mostly consist in the dentist picking my brain on Brazilian bonds). I can state with a certain level of comfort that he knows something about teeth, particularly if I enter his office with a toothache and exit it with some form of relief. It will be difficult for someone who knows literally nothing about teeth to provide me with such relief, except if he is particularly lucky on that day—or has been very lucky in his life to become a dentist while not knowing anything about teeth. Looking at his diploma on the wall, I determine that the odds that he repeatedly gave correct answers to the exam questions and performed satisfactorily on a few thousand cavities before his graduation—out of plain randomness—are remarkably small.

Later in the evening, I go to Carnegie Hall. I can say little about the pianist; I even forgot her unfamiliar foreign-sounding name. All I know is that she studied in some Muscovite conservatory. But I can expect to get some music out of the piano. It will be rare to have someone who performed brilliantly enough in the past to get to Carnegie Hall and now turns out to have benefited from luck alone. The expectation of having a fraud who will bang on the piano, producing only cacophonous sounds, is indeed low enough for me to rule it out completely.

I was in London last Saturday. Saturdays in London are magical; bustling but without the mechanical industry of a weekday or the sad resignation of a Sunday. Without a wristwatch or a plan I found myself in front of my favorite carvings by Canova at the Victoria and Albert Museum. My professional bent immediately made me question whether randomness played a large role in the carving of these marble statues. The bodies were realistic reproductions of human figures, except that they were more harmonious and finely balanced than anything I have seen mother nature produce on its own (Ovid’s materiam superabat opus comes to mind). Could such finesse be a product of luck?

I can practically make the same statement about anyone operating in the physical world, or in a business in which the degree of randomness is low. But there is a problem in anything related to the business world. I am bothered because tomorrow, unfortunately, I have an appointment with a fund manager seeking my help, and that of my friends, in finding investors. He has what he claims is a good track record. All I can infer is that he has learned to buy and sell. And it is harder to fry an egg than buy and sell.

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