"Fooled By Randomness" By Nassim Taleb | Reading Highlights #5

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Reality Can Be Vicious

"Reality is far more vicious than Russian roulette. First, it delivers the fatal bullet rather infrequently, like a revolver that would have hundreds, even thousands, of chambers instead of six. After a few dozen tries, one forgets about the existence of a bullet, under a numbing false sense of security." - Nassim Taleb, Fooled By Randomness

Russian roulette has been mentioned frequently throughout the book so far. The ideas of randomness apply well to the game.

This is very profound. Especially to those of us who are paying attention to the crypto markets as of late. Cryptocurrency has been in a rather steady downtrend which began at the beginning of 2018 and has lasted all year.

I’ve heard from many close friends and family that they regret investing in crypto and they wonder whether they should just cut and run before this all goes to 0.

Reality is harsh. There are so many billions of chambers in the revolver and only a handful of bullets. When things go wrong for this long, people forget the days that were good. The days when crypto was steadily on the rise and then when it boomed significantly at the end of 2017.

People are shortsighted. It is in our nature to be most concerned with recent and closely upcoming events rather than the distant past and the distant future. When markets begin their turnaround at some point in the next few months/years, people will forget about this bear market quickly and believe crypto will be going to the moon.

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The Barrel of Reality

"Second, unlike a well-defined, precise game like Russian roulette, where the risks are visible to anyone capable of multiplying and dividing by six, one does not observe the barrel of reality.”- Nassim Taleb, Fooled By Randomness

Reality is not only vicious in that it can deal out the harsh blows in such a random order that we forget that the blows happened and that they will continue to happen in the future, it is also vicious in the sense that we will never see the barrel.

The risks of reality are so varied and so wide-ranging. There is risk in every direction you look. We are drowning in risk. It is impossible for us to perceive all of the risks that lie ahead and thus, we will never fully see the barrel of reality.

"While we do not see the roulette barrel of reality, some people give it a try; it takes a special mindset to do so. Having seen hundreds of people enter and exit my profession (characterized by extreme dependence on randomness), I have to say that those who have had a modicum of scientific training tend to go the extra mile. For many, such thinking is second nature. This might not necessarily come from their scientific training per se (beware of causality), but possibly from the fact that people who have decided at some point in their lives to devote themselves to scientific research tend to have an ingrained intellectual curiosity and a natural tendency for such introspection."- Nassim Taleb, Fooled By Randomness

Some will try, regardless of the fact that we will never see the full barrel of reality. As Taleb says, it takes a special kind of person to desire this path.

Intellectual curiosity has long been one of my coveted characteristics. I love that my mind is so curious in that it just seeks to understand everything going on around me. There are many such examples where my curiosity rears its head. It happens on a daily basis and with high frequency.

Many others are also interested in the idea of intellectual curiosity. Many people are interested in trying to cultivate their own sense of curiosity about the world.

The way to be intellectually curious is to be intellectually curious. It’s something that you build as a habit. The habit of questioning things and trying to understand them. Questioning the most random things can lead you down this path, like those who devote themselves to some sort of scientific research. Many of these same people are intensely curious about the world.

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Warning of the Abstract

"Finally, there is an ingratitude factor in warning people about something abstract (by definition anything that did not happen is abstract). Say you engage in a business of protecting investors from rare events by constructing packages that shield them from their sting (something I have done on occasion). Say that nothing happens during the period. Some investors will complain about your spending their money; some will even try to make you feel sorry: “You wasted my money on insurance last year; the factory did not burn, it was a stupid expense. You should only insure for events that happen.” One investor came to see me fully expecting me to be apologetic (it did not work). But the world is not that homogeneous: There are some (though very few) who will call you to express their gratitude and thank you for having protected them from the events that did not take place.”- Nassim Taleb, Fooled By Randomness

Something that I’ve long been interested in is the idea of alternative histories and alternative paths. Many people are mostly only aware and only really care about what actually happens.

These people don’t care to think what could have happened had they taken a left instead of a right. They aren’t concerned with such abstraction as randomness.

Bringing this back to crypto, I discussed with many close friends and family about the risk of cryptocurrency. It’s so volatile and so young. Nobody really knows where its headed for sure.

The only thing that I’m truly sure about is that the technology is a game changer. Beyond that, everything else is just speculation.

Many heeded my warnings and slowly began to understand what I was saying. There are many roads that lie ahead for crypto. Many different possibilities. We don’t know for sure which road is going to be taken. A combination of many roads can also be taken.

Thus, we must plan for the unforeseen possibilities. If you had asked me in 2017 whether I thought 2018 was going to be a horrible year for crypto prices or not, I would have opted to say the ladder. But as you can see, I’ve been proven wrong in that alternative history.

No matter how much we can warn people of such abstract consequences, we will never fully break through. It is hard to value things which you cannot clearly see with your own two eyes!

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QOTD:

Are you intellectually curious? How do you satisfy your curiosity on a daily basis?