Tag: Nassim Taleb

  • Designed, Not Random

    Designed, Not Random

    I think I’ve mentioned on here at least in passing the calculations Peter Stoner did. He took a group of prophecies about Christ and tried to put some numbers around the probability of one man fulfilling them by chance.

    The numbers he came up with were so long that it’s hard to explain in a way someone can understand clearly. Something about a cloud of electrons with an almost 100 million mile radius. Which obviously sounds like a lot, but I don’t think we can grasp the enormity.

    So he scaled it back to just 8 prophecies and got something you can visualize a little better. Cover the ground of the entire state of Texas with silver dollars. Two feet deep, with one of the coins marked with an X. The chance of someone picking the marked coin on the first try is roughly the probability one man would fulfill the 8 prophecies.

    In other words, Stoner’s point was that at some point “coincidence” becomes a pretty unsatisfying explanation.

    Now let’s do something we are all great at, making it about ourselves. What is the probability that you came to exist at all? You’d have to trace your lineage all the way back, knowing that every one of these people had to be born, in the same order, with the same parents, etc., all the way up the line.

    One of them doesn’t show up where they did, doesn’t meet the person they met, dies a little earlier, or makes any of a thousand different decisions, and everything downstream changes.

    And you’re not here today.

    And that’s just your direct ancestors. Their lives intersected with thousands of other people, any one of whom could have changed what happened next. Wars. Disease. Accidents. Bad decisions. Good decisions. Pure dumb luck, if that’s what you want to call it.

    That probability can’t be calculated, there’s just too many moving parts. But it doesn’t need to be. Sometimes the results tell you all you need to know.

    In his books Nassim Taleb has a couple of recurring characters. Dr. John, a man of science who lives by logic, and Fat Tony, who lives by his wits and experience. In one section they are told to assume a coin is fair, and that it has been flipped 99 times and has come up heads every time. They are asked the probability of a tails on the next throw.

    Dr. John gives the textbook answer. If the coin is fair, what happened before doesn’t affect the next toss. It’s still 50/50.

    Fat Tony doesn’t accept the premise.

    After 99 heads in a row, he’s not betting on tails. He’s betting that you’ve been wrong about the coin.

    At some point the more reasonable conclusion isn’t that you just witnessed another astonishing coincidence. It’s that your assumption about randomness was wrong.

    You’re not random either. And what you do matters.

    So act accordingly.


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  • More Than One Reason? More Like No Reason.

    More Than One Reason? More Like No Reason.

    If you’re trying to convince, you’re already losing.

    Awhile back, one of my clients had a tract under contract he planned to develop. During due diligence, he realized the timing wasn’t right.

    We tried to get a price reduction to reflect the longer hold time but failed (so far).

    So he dropped it.

    It cost me a commission in the short run, but it was the right call. And long term, that’s better for me too. If my clients make bad deals, they can’t come back for more.

    When he backed out, he gave me a long list of reasons to send the seller in hopes of getting a price cut:

    • High construction loan rates
    • High mortgage rates slowing the housing market
    • Oversupply of lots
    • Overestimated job growth
    • Utility capacity issues

    All true. All reasonable. But also too much. I told him it was a bad idea, but he wanted to send it — and at the end of the day, it’s my job to do what you want.

    Nassim Taleb put it well in Antifragile: if you need more than one reason to do something, you’re trying to convince yourself. One solid reason should be enough. The more you pile on, the weaker your case sounds.

    My client wasn’t trying to convince himself — he was trying to convince the seller — but I still think the long list worked against us. Instead of being persuasive, it diluted the point.

    We would have been better off keeping it simple:

    “We think this is a 7–10 year play, not immediate. We’re still interested, but at a lower price. If you’re not ready, we understand. Call us when you are.”

    Would that have changed the seller’s mind? Maybe not. But the odds would’ve been better.

    Fewer words hit harder. “It’s too expensive” carries more weight than a 10-point memo. People fill in their own reasons — and their reasons are always more powerful than yours.

    The lesson: you only need one good reason to act. More than that, and you’re either overselling… or talking yourself into something you shouldn’t.

    And speaking of one good reason — do you need more than “it’s a smart idea” to want the most current market info?

    Click below to get it.