The following summary was written by Frank Voisin, who regularly writes for Frankly Speaking. Recently, Frank sold four restaurants and returned to school to complete a combined LLB/MBA.Taleb introduces the concept of Alternative Histories. When considering success, you must also consider the likelihood of success given the probability of a negative result having occurred. Failure to consider the potential for negative results and judging based only on the success witnessed is the survivorship bias, which my friends over at Barel Karsan have explored.
Consider Russian Roulette. If a wealthy man offered you $10 million to play Russian Roulette, you have one of six possible histories - one of which renders you dead, the other five render you $10 million wealthier. Only one of these histories actually occurs. If you live, and win the $10 million, you are more successful. Though you are successful only by dumb luck. If offered another $10 million to try again, you may again win, or you may die. The fact is, the success has nothing to do with you. Though external observers would see you getting $10 million richer until you are dead. Taleb argues that $10 million earned through Russian Roulette is not worth the same as $10 million earned through the diligent practice of dentistry. The first is devalued due to its dependence on randomness.
Now, in reality, there are thousands of chambers, and after we succeed past a few, we forget about the bullet, thinking we are protected by our skill (Taleb calls this the Black Swan Problem). We also tend to denigrate history by thinking the things that happen to others won’t happen to us. Additionally, most of us carry on without knowing the real odds of our demise, unlike in Russian Roulette.
Conclusion: Consider the probabilities associated with you arriving at your current post in life. Are you happy with where you are? If so, does the course you took have a high probability of leading you to where you are (considering the alternative histories!)? If you aren’t happy, then what are the probabilities things will change in the future? What are you doing to improve those odds?
Also, important for all people is the notion of embracing randomness. Consider all of the potential risks. When assessing your own success, always consider what would have resulted had things gone differently. Only when considering things in this light can you truly assess your own skills and the quality of your strategies.