judgement
Alternative Histories
The rule
Judge a choice by all the outcomes it could have led to, not the one that happened. Crossing a busy road blindfolded is still foolish, even if you reach the other side.
Where it flips
Push this too far and you may never act, or you may call every win luck and every loss unavoidable. So grade the thinking, do not erase the result. A good bet that lost and a bad bet that won can both teach you, if you keep the reasoning apart from the roll of the dice.
A choice that turned out well can still have been reckless. Reality only played one of the many outcomes that were possible. If a friend crossed a busy highway with his eyes shut and reached the other side, the safe arrival does not make it wise. In investing you must picture all the versions of the story that could have happened. Then ask if the bet was sound across most of them, not whether this one time it paid off.
A worked example
Rohan puts his whole ₹8,00,000 into one small company. It doubles in a year. The win looks like skill. But in most versions of that year, one bad result would have halved him, with no cushion at all. [illustrative]
How to spot it
- ·'it worked, so it was the right call'
- ·no thought given to what nearly happened
- ·one lucky escape treated as proof of skill
Nassim Nicholas Taleb · Fooled by Randomness