markets
Path Dependence
The rule
The order of events matters. A small lucky break early can snowball into a huge lead, while an unlucky start digs a hole that is hard to climb out of.
Where it flips
Over-applied, this excuses every gap as pure luck and denies any lasting edge exists. So ask whether the early break was backed up by real, repeatable strength. Sometimes the snowball keeps rolling because there is a genuine advantage under the luck.
Two people can start with the same skill and the same odds. But a lucky break early can snowball, while an unlucky start digs a hole that is hard to climb out of. It is not that the winner was far better. A small edge at the right moment fed on itself and grew. In markets this is why a stock or a fund manager who caught one big early wave can look untouchable. The real story is often timing, not being better.
A worked example
Aarohi and Aman invest the same amount with the same skill. But Aarohi happens to start just before a strong three-year run and ends far ahead. The gap is the path, not the person. [illustrative]
How to spot it
- ·an early break credited as pure genius
- ·a runaway lead explained only by timing
- ·'they got in at the right moment' as the whole story
Nassim Nicholas Taleb · Fooled by Randomness