What luck. With one quick search I found a couple of interviews with Taleb online. Here’s a very abbreviated copied-and-pasted discussion of what he spends a great deal of time on in his book:
“There are two technical problems in randomness — what I call the soft problem and the hard problem. The soft problem in randomness is what practitioners hate me for, but academics have a no-brainer solution for it — it’s just hard to implement. It’s what we call in some circles the observation bias, or the related data mining and survivorship bias problems. When you look at anything — say the stock market — you see the survivors, the winners; you don’t see the losers because you don’t observe the cemetery and you will be likely to misattribute the causes that led to the winning.
There is a silly book called A Millionaire Next Door, and one of the authors wrote an even sillier book called The Millionaire’s Mind. They interviewed a bunch of millionaires to figure out how these people got rich. Visibly they came up with bunch of traits. You need a little bit of intelligence, a lot of hard work, and a fair amount of risk-taking. And they derived that, hey, taking risk is good for you if you want to become a millionaire. What these people forgot to do is to go take a look at the less visible cemetery — in other words, bankrupt people, failures, people who went out of business — and look at their traits. They would have discovered that many of the same traits are shared by many of these people, like intelligence, hard work, risk taking and even frugality. This tells me that the ‘unique’ trait that the millionaires had in common was mostly luck. But the author and most of his readers are not mathematicians or statistical researchers so this obvious and substantial methodological flaw is almost never discussed.
This bias makes us miscompute the odds and wrongly ascribe skills. If you funded 1,000,000 unemployed people endowed with no more than the ability to say “buy” or “sell”, odds are that you will break-even in the aggregate, minus transaction costs, but a few will hit the jackpot, simply because the base cohort is very large. It will be almost impossible not to have small Warren Buffets by luck alone. After the fact they will be very visible and will derive precise and well-sounding explanations about why they made it. It is difficult to argue with them; ‘nothing succeeds like success.’ All these retrospective explanations are pervasive, but there are scientific methods to correct for the bias. This has not filtered through to the business world or the news media; researchers have evidence that professional fund managers are just no better than random and cost money to society (the total revenues from these transaction costs is in the hundreds of billion of dollars) but the public will remain convinced that “some” of these investors have skills…”
Again, I’d read the book – this is a sub-cliff notes version. But to answer your question, “You expect me to spend more time on validating your point than you do?” My answer is no. I don’t expect you to spend any time validating my point. If you want to live your life in ignorance, that’s your problem, not mine. I was giving you some free worthwhile advice. Whether you decide to benefit from taking it is up to you.
