Tuesday, May 24, 2016

Luck - V

You can say that successful people are intelligent, hardworking, persevering and driven but the reverse is not true - all intelligent, hardworking, persevering and driven people are not successful. The difference between the smaller set of successful people and the larger set of people with similar qualities to those associated with successful people is luck or what is commonly called 'being in the right place at the right time'.

The reason why only successful people attract attention is because of the survivorship bias - you tend to look at only the survivors of a process, not at the failures. A statement by Walt Disney seems to be popular - 'if you can dream it, you can do it'. Well, the number of people who dreamt something and didn't do it is far greater than those who did. You can't tell the difference between the two groups till you study both groups. But those who failed didn't write autobiographies. As Amitabh Bachchan says in the film Deewar, 'sapne samundar ki lahron ke tarah hoti  hain, woh hakikat ki chattanon se takarah kar toot jati hain.' (Dreams are like the waves on the ocean; they  hit the rocks of reality and break up.)

In the 1982 book In Search of Excellence (more than three million copies sold), Tom Peters and Robert Waterman identified eight common attributes of 43 “excellent” companies. Since then, of the 35 companies with publicly traded stocks, 20 have done worse than the market average. People are reluctant to acknowledge that the world is more messy than their models suggest. It is tempting to think that successful people have the controls in their hands and can tame Lady Luck. Success looks neat and tidy in hindsight.

The evaluation of the strategies and qualities of companies and individuals depends on the perception of their outcomes. As Phil Rosenzweig says in The Halo Effect: . . . and the Eight Other Business Delusions That Deceive Managers (highly recommended), 'if a diversification strategy succeeds,  it will be described as 'deftly maneuvering into new areas'; if it fails, it will be described as ' drifting' or 'straying from its core'. (Perhaps the failure was  due to 'causal ambiguity'. Maybe it was caused by ''idiosymcratic contingency'. The above-mentioned book says that it is the way PhDs say 'I don't know'.)

In The Black Swan, Nassim Taleb tells a story to illustrate survivorship bias, a story that had been related by the Roman orator, Cicero. One Diagoras was shown painted tablets bearing the portraits of some worshippers who prayed, then survived a subsequent shipwreck. The implication was that prayer protects you from drowning. Diagoras asked, “Where are the pictures of those who prayed, then drowned?” Those drowned believers are ignored in the analysis. Taleb writes:
Consider the thousands of writers now completely vanished from consciousness: their record does not enter analysis. We do not see the tons of rejected manuscripts because these writers have never been published...Consider the number of actors who have never passed an audition but would have done very well had they had that lucky break in life.
There is a graph called Socio-economic status (SES) gradient. The poorer you are the greater your chances of suffering from respiratory disorders, ulcers, psychiatric diseases etc.There are obvious possibilities like lack of health-care access, dangerous working conditions, lack of education etc. But the main reason seems to be due to the stress of poverty caused by psychological factors. It is also caused by  being made to feel poor.

The survivorship bias can make people feel poor. Consider a group of millionaires. They will compare themselves to over 99% of the people and feel pleased with themselves. Now put a few billionaires among them. They will start comparing themselves to the minuscule group of survivors and stop feeling so pleased. Your happiness seems to depend on your neighbour's wealth.

Saturday, May 7, 2016

Luck - IV

Nassim Taleb makes a distinction between two types of occupations. Non-scalable occupations are like those of a dentist, baker,cook, etc.  where you need to invest additional time and effort for each unit of production. Scalable occupations are like those of an author, movie star, equity trader etc. where the the amount of work required doesn't increase with production. A writer, for example, has to put in the same amount of work to gain one or a million readers.

In a non-scalable occupation, the element of skill is more easily discernible. A scalable occupation is more dependant on luck and produces huge inequalities where a few can earn a lot leaving others with the crumbs even though there may not be such a wide difference between the two groups. In any individual case, it will be more difficult to decide how much of luck and how much of skill contributed to the success.

Every year, the literary agent John Brockman asks several public intellectuals to answer some question or another, and posts it on the Internet to provoke discussion. One year he asked many scientists to give their favorite equation. Daniel Kahneman gave the following:
success = talent +luck
great success = a little more talent + lot of luck
I will just add that even the skill that one possesses is a matter of luck - it depends on the combination of genes that you are born with and the environment you are born into, both of which you cannot control.

There is also the contingency that  the society that you are born into values the talents that you process.For eg. if Tendulkar had been born in Mali with the same talent for hitting with a wooden implement a leather missile thrown at speed, he would not have become a star. He would also not have become as good as he did because he would not have had the motivation to improve his skills.He worked hard because he knew that the skills that he possessed were honoured and rewarded in the society in which he lived. (A school student said that he needs to study only till Std. X and he will become a crorepati. Why? Tendulkar studied only till Std X! This is is another type of delusion similar to thinking that if you drop out of college and have a garage, you will become a billionaire!)
Michael Sandel writes in Justice:
The successful often overlook this contingent aspect of their success. Many of us are fortunate to process, at least in some measure, the qualities that our society happens to prize. In a capitalist society, it helps to have entrepreneurial drive. In a bureaucratic society, it helps to get on easily and smoothly with superiors. In a mass democratic society, it helps to look good on television, and to speak in short, superficial sound bites. In a litigious society, it helps to go to law school, and to have the logical and reasoning skills that will allow you to score well on the LSATs.
So, while we are entitled to the benefits that the rules of the game promise for the exercise of our talents, it is a mistake and  a conceit to suppose that we deserve in the first place a society that values the qualities we have in abundance.
You may say that life is unfair, that nature distributes talents unequally and the luck of social circumstances cannot be helped. Well, nature is neither fair nor unfair; it just is. In the words of the poet A.E. Housman, it 'neither  knows nor cares'. As the philosopher John Rawls said, 'What is just and unjust is the way that institutions deal with these facts.' You cannot derive values from facts. Making this error is called naturalistic fallacy.

The philosopher John Rawls considered what formal principles of justice rational and mutually disinterested persons would choose in the original position of equality behind the veil of ignorance unaware of the talents and status they will inherit at birth. If you didn't know your own place in society, there is always the chance that once the veil is removed, you might find yourself among the least advantaged economically and/or a persecuted minority.

According to Rawls, two principles of justice would emerge from such a thought experiment. The first would be that the person would choose a society which would provide equal basic liberties for all which would take priority over considerations of social utility and general welfare. The second choice, knowing that you could be dealt a lousy hand, would be to be born in a society where the most disadvantaged are cared for.

Rawls is not suggesting a levelling equality of the type parodied in Harrison Bergerson, a short story by Kurt Vonnegut.The sociologist Andre Beteille makes a distinction between equality and universality. Universality is the idea of providing primary education and health care to all citizens irrespective of merit. It is concerned with providing the basic necessities and not with everything that human beings may desire at any point of time.

All this does not mean that hard-work, determination, punctuality, etc are not important.  What it indicates is that these qualities are not sufficient attributes for ensuring success. Many successful people have an attribution bias - they attribute their success to their skill and their failures to randomness. It is a wonder that many people seem to  be  convinced of the absurd notion that success is a simple function of individual effort. In The Blank Slate, Stephen Pinker writes about the trade-off between freedom and material equity:
The major political philosophies can be defined by how they deal with the trade-off.  The Social Darwinist right places no values on equality; the totalitarian left places no value on freedom. The Rawlsian left sacrifices some freedom for equality; the libertarian right sacrifices some equality for freedom.  While reasonable people may disagree about the best trade-off, it is unreasonable to pretend there is no trade-off.