mad anthony

Rants, politics, and thoughts on politics, technology, life,
and stuff from a generally politically conservative Baltimoron.

Friday, July 11, 2008

A random post about randomness...

I know some people who are annoyingly positive. They feel that all the problems of life can be solved through positive thinking - that if you think you can succeed at something, you will.

While I agree that positive thinking is important, I don't think that it alone can overcome circumstances. Life involves a certain amount of luck, of being in the right place at the right time. Having a positive view of life will make it easier for you to take advantage of those situations, and may even help you when interacting with people in those situations, since people can sense positivity.

So I decided to do some reading on randomness.

The first book was The Social Atom. It has some interesting analysis, but I wasn't thrilled with it. The author sees most interaction in life as governed by science, as acting like an atom. It's interesting, but many of his arguments aren't that convincing.

For example, he pretty much dismisses most of economics because much of the theories are based around the idea of a rational person, and he doesn't think people really are rational. That is probably true, but he also dismisses the idea that the rational assumption, while untrue, is a good starting point to build economic theories around.

One of his arguments around the rational against rationality was the dot-com bubble. People bought stocks despite analysts saying they were overvalued, so they must not be rational. This ignores a few things - like the fact that there were plenty of analysts making arguments that stocks weren't overvalued, that the internet economy was different than the traditional economy, that negative earnings in the short term were worth it because they would grant first-mover advantages to those companies that would help them in the long term. These arguments tended to be wrong for most companies, but nobody knew that at the time. There were also a few companies early on where spending money early on led to profits long-term - think or eBay.

Buchanan also rejects the idea that religion can/should exist, because it doesn't fit into his model for the social atom.

The other book on randomness was The Drunkard's Walk, which I enjoyed much more. It looked at the the history of statistics, probability, and randomness. While it got a little too math-y at times, it had a lot of interesting points. One of them ties quite well with the idea of why people make seemingly irrational decisions like poor investments- because they often don't understand that success for a few years in a row can be a coincidence.

It also looks at why people - sports coaches, authors, ceo's, movie studio execs - are often branded sucesses or failures based on luck. He points out that often changes in those things to reward or punish behavior doesn't make a difference. He also points out that many sucessful authors - like the woman who wrote Harry Potter - submitted their manuscripts a ton of times before getting published, and that people have resubmitted pulitzer-prize winning novels - only to have them rejected.

In some ways, this lesson is depressing - your success depends as much, if not more, on being on the right place at the right time than being good at something. But the reverse is also true- if you've failed, that doesn't necessarily mean you will in the future. And if you the more times you try, the more chance you have of succeeding.

So the lesson I got from all this is that luck does play a roll in success. But the way to have the most chance of succeeding is to keep trying. A positive outlook may help in success, but the best you - or I - can do is keep tring.


At 3:08 PM, Blogger Will said...

The best read on risk that I've come across is The Black Swan by Nassim Nicholas Taleb. There's a part of it that gets a little math-y, as you put it, but for the most part, it's excellent.

It changed the way I look at investing.


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