Notes on Randomness
..Continuing the thread of making decisions under uncertainty (how judges think), we now look at the role of randomness in life.
How do you assess outcomes in life, based on what? Track records? Wealth? position in the corporate hierarchy? The reason one asks themselves these questions is because they'd wanna hedge their bets against illusions of success and skill (medium, short-term) and maximize their long-term success.
So given that frame, when we look at outcomes, we gotta think of the unrealized outcomes and the initial sample size we started with. Thinking about the unrealized outcomes gives us an idea of how probable this outcome we see is, and whether it is due to skill or luck. we can’t take someone who is worth 10 million dollars as a role model if their wealth came from winning a game of Russian roulette.
Now, that's a good analogy, how about we think of life as a revolver with infinite chambers, now the importance of hedging against complete ruin becomes paramount, because ergodicity (time's effects on outcomes) will catch up with you sooner or later(risk ruin).
Skewness is another factor to think of, where winning ≠ losing and outcomes in life are not equal. You can win by a steady amount but the loss can be far larger than the win. So what makes outcomes less random? Repetition over time. A dentist or a pianist might get their job right once due to chance but not repeatedly over time otherwise they'd be doing something else like gambling.
Nonlinearity adds another layer of complexity, effort does not equal result(not linear) and that applies to all areas of life, you can expend an incredible amount of effort doing something and think this is not going anywhere but in fact you were one step away from striking it big. that applies in network effects, compounding effects and all. One more grain of sand can topple the sand castle you've been building since dawn.
In my life, I should recognize that randomness plays a large role in consequences, and it’s always best to be lucky than not. Since people are not rational, it pays to acknowledge that when you make decisions, and think of the non-obvious,the abstract: I should choose a process that minimizes the role of chance and puts on display everything that’s pending. How do you know how much a manager is responsible for outcomes if the process is hidden, but you only focus on his results? how do you know that he's making the right decisions and that the results are sustainable and won't lead to ruin eventually? I should ask myself: do I wanna win long-term or short-term? Do I wanna give the illusion of success to others, while my chance of going to ruin is bound to catch up with me?
Do I wanna be an optimizer or a satisficer? (satisfied enough) There are ways to get very rich but that would cost me my freedom and increases my chances of going back to zero.
Or, do I wanna live comfortably enough and retain my freedom to roam the world and explore on my own terms?