Success Through Randomness | "Fooled By Randomness" By Nassim Taleb | Reading Highlights #3

Today's reading highlights continues on with our story of Nero and it also introduces a lot of interesting concepts.

For one, I'm obsessed with this idea of luck meeting opportunity. There's a lot to be said when it comes to the randomness involved in becoming successful and there are many misconceptions about such ideas.

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Free Time

“This free time has allowed him to carry on a variety of personal interests. As Nero reads voraciously and spends considerable time in the gym and museums, he cannot have a lawyer’s or a doctor’s schedule” - Nassim Taleb

The last reading highlights post left off with a passage talking about proprietary trading. Nero (Trader #1 in our dichotomy) is fond of the proprietary trading business that he has established.

This business structure allows Nero to focus on doing what he loves - investing - and leave the administrative boring stuff to the “umbrella company” that allows him to trade with an allocation under his own rules, so long as he continues to deliver results. This allows Nero a high level of free time, which allows him to improve himself rather than constantly work hard and chase his tail on admin work.

I have no doubt that having this free time is one of the very reasons why Nero is to be considered successful. Success isn’t about how much money you have or how much money you make. It’s about doing what you love to do while still having the breathing room to engage in personal growth.

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To Work Hard or to Be Lucky? Or Both?

“Nero believes that risk-conscious hard work and discipline can lead someone to achieve a comfortable life with a very high probability. Beyond that, it is all randomness: either by taking enormous (and unconscious) risks, or by being extraordinarily lucky. Mild success can be explainable by skills and labor. Wild success is attributable to variance.”- Nassim Taleb

However we may define it, success comes down to a combination of skill, hard work, patience, opportunity and the stars aligning in your favor.

It’s undeniable that luck and randomness play a large part in the road to success. I believe that if you want to be successful, you need to work hard, be consistent, always work on yourself and reach out for every opportunity that you spot. The common saying goes: “luck is when preparation meets opportunity.”

I believe in that wholeheartedly… When you are prepared (i.e. constantly improving yourself and showing up and working on your passions each day), then inevitably, some sort of opportunity will come your way. Because you have worked so hard to be your best self, you now have the ability to both spot the opportunity and take advantage of it.

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Lucky Fools and Social Butterflies

“Lucky fools do not bear the slightest suspicion that they may be lucky fools—by definition, they do not know that they belong to such a category. They will act as if they deserved the money. Their strings of successes will inject them with so much serotonin (or some similar substance) that they will even fool themselves about their ability to outperform markets (our hormonal system does not know whether our successes depend on randomness).”- Nassim Taleb

This one ties closely to the previous passage. As Taleb will show, serotonin plays a larger role in our lives and our success than we think. I consider these lucky fools to be people who reap the benefits of randomness but who do not put in the consistent effort each day to deserve such benefits.

These same fools are typically unaware that they are reaping the benefits of randomness. They don’t realize that they have a really good case of right place, right time. But as with many things, that won’t last forever. These lucky fools will eventually come to realize that luck does run out and if they aren’t constantly cultivating the fire of their skills and their passions, then they will be unable to continue the path to success and they’ll revert to the beginning.

“It sets a positive feedback, the virtuous cycle, but, owing to an external kick from randomness, can start a reverse motion and cause a vicious cycle. It has been shown that monkeys injected with serotonin will rise in the pecking order, which in turn causes an increase of the serotonin level in their blood—until the virtuous cycle breaks and starts a vicious one (during the vicious cycle failure will cause one to slide in the pecking order, causing a behavior that will bring about further drops in the pecking order).”- Nassim Taleb

And so we see this play out in an experiment. We see how a lucky fool (in this above case, the monkey who is injected with serotonin), can rise in the pecking order of society and thus, increase serotonin further by their rise in pecking order.

Then, as the cycle breaks (i.e. luck runs out), the monkey begins to free fall in the pecking order which causes serotonin to drop.

“Likewise, an increase in personal performance (regardless of whether it is caused deterministically or by the agency of Lady Fortuna) induces a rise of serotonin in the subject, itself causing an increase of what is commonly called “leadership” ability. One is “on a roll.” Some imperceptible changes in deportment, like an ability to express oneself with serenity and confidence, make the subject look credible—as if he truly deserved the shekels. Randomness will be ruled out as a possible factor in the performance, until it rears its head once again and delivers the kick that will induce the downward spiral.”- Nassim Taleb

It's really interesting to watch or feel this in action in the real world. When I read this passage I was immediately reminded of something that I learned a few years ago about social events.

A lot of people desire to be the "social butterfly" -- they want people to regard them as being highly likable and highly personable and confident and outgoing. A trick I learned which can help induce this state is by playing the game of momentum. The trick is simple: when you know an event is coming up, let's say the event is on Thursday night and it's currently Tuesday morning, then you immediately start having more conversations than usual.

On Tuesday, your priority should be to engage in as many social encounters as possible. You want to build momentum - social momentum. Saying hi to strangers can be daunting, but saying hi to people you already know is a lot easier. Start with what is easy and continue to move forward and build up the momentum and you will feel that every social encounter becomes far easier. By the time Thursday night rolls around, you'll be the most social of them all!

This spans to far more than just social momentum. This spans to everything. Habits, for example, are built with momentum. If you do something every day, it becomes easy to do it with each passing day. If you break that habit for even 1 day, however, it becomes far harder that next day to pick the habit up again.

This is one of the main reasons why I continue to keep a pretty rigid schedule for myself. I'm highly reliant on my habits and I ensure that I keep the momentum going on them.

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My question to you for today deals with how you encounter randomness in your own life.

Do you work hard consistently to improve yourself and your skills each day so that you may slowly build your way to success and find opportunities along the road or are you more of the lottery ticket variety and are waiting for lady luck to endow you with everything you've ever wanted?