Eulogy of an enchanted pupil

It’s official now. ‘Fooled by Randomness’ is my favourite book of all time. There’s something about the way Taleb spins probability theory, financial markets and our very own Weltanschauung into a heady cocktail. And for a change, he remains intelligible for the most part!!

Here is a sample anecdote from his book,

Imagine you were playing Russian roulette with a rich baron. The game goes something like this. You are handed a gun with one bullet in its barrel. You are supposed to fire the gun at your forehead and if you survive, you win a prize of 10 million dollars. Would you play such a game? Would you risk your life (16.667% probability) for an 83.33% probability of becoming a millionaire?

Such is Taleb’s take on numbers and probability theory. What I thought beyond my comprehension and/or interest is fast becoming an obsession, viz., financial markets, thanks to the Master.

Coming back to our Roulette game, if such a game was played every year beginning from the time one was 25 and everyone one on the planet did play such a game for the next ten years, there would be a handful of survivors and a large graveyard. These survivors would then preach the world how Russian roulette should be played!! I bring to your attention at the risk of repeating myself that these “Survivors” did the exact same things as the ‘hapless dead’. They just got lucky!! The gun takes no prisoners (He has a theory about the ‘gun’ as the ‘Generator’ of probability, more on that in the book). It only plays by the ‘law of probability’. It’s as simple as that. Such is the hold of randomness over our lives. Taleb calls this curious phenomenon ‘Survivorship bias’. Encapsulating ‘Survivorship bias’, it is the glorification of the survivors who were likely ‘lucky idiots’ than ‘the brave-all-odds courageous survivors’ that they are touted to be. (Taleb is a veteran of the financial markets and has survived the stock market crashes of 1999 and 2008 so pardon his lingo, he is as much ridiculing himself as his successful colleagues!!)

Wait a second before you sign him off as a misanthrope, he does mention in retrospect that while the whole notion of a Russian roulette is a bit too fantastic to be real, but it helps to display the role of probability in life. He also alludes, no less vividly that not all survivors are ‘Lucky idiots’ and that unlike a gun, the ‘generators’ of probabilities in life are not entirely random. Some understanding of the generator would help one survive better. His motif remains that one should be careful who one reveres as a ‘Survivor’; he might just be a ‘lucky idiot’. (‘Food for thought’ for the media, no?:-))