Saturday, October 1, 2005
Randomness
Joseph Nocera has become one of my favorite writers at the NYT. His columns on Saturdays in the business section are always easy to read; they take you interesting places — far beyond mundane commerce.
His article on 10/1/05 considers the idea that randomness is in the eye of the perceiver. The author (Nassim Nicholas Taleb) of the book and theory under discussion says that what we attribute to our cleverness, our analysis and smarts, would more accurately be described as luck.
This is an idea that has occurred to most of us along the way. Sheer chance so often seems a better explanation for occurrences in the human realm than predictive or analytical approaches could offer.
What are Mr. Taleb's central ideas? Here's how he describes them in the first sentence of the prologue: “This book is about luck disguised and perceived as nonluck (that is, skills), and, more generally, randomness disguised and perceived as nonrandomness (that is, determinism).” Here's the Cliff Notes translation: Mr. Taleb believes, first of all, that many of the things that happen to us - career success, or decisions that turn out well, or gains in the stock market - that we attribute to our own skill or hard work, are really a result of plain dumb luck. And secondly, he believes that the kind of rare events that really change the world - be they wars or disasters, inventions or serendipitous discoveries, bubbles or crashes - are things we don't see coming, and aren't prepared for.
Human culture really exists in the realm of chaos theory — seemingly overdetermined after the fact, but far to complex to analyze with confidence when the outcome is still to be determined. Taleb's theory implies that prediction and analysis (forecasting and risk management are the terms of choice in the financial markets) are really activities designed by human beings to reassure ourselves, to give us a feeling of control, to assuage our large egos and our bottomless anxieties.