The Quality of Your Decision Is Equal to the Cost of Alternative Outcomes
Or, if your only source of income is playing Russian Roulette, chance are you won’t live to see your 50th birthday
👋 Hey there! My name is Abhishek. Welcome to a new edition of The Sunday Wisdom! This is the best way to learn new things with the least amount of effort.
It’s a collection of weekly explorations and inquiries into many curiosities, such as business, human nature, society, and life’s big questions. My primary goal is to give you some new perspective to think about things.
As a leader, friend, or colleague, I go out of my way to make sure people are honest with me. I make them comfortable enough to give me both positive and negative feedback.
All creative work have their fair share of criticism. Therefore I don’t get defensive when I receive negative feedback. I deal with smart people. They are allowed to have their point of view. I’m not foolish enough to believe that I’m always correct.
Surround yourself with people who would cheer for your success, but wouldn’t shy away from pointing out holes in your plans. They are the secret to your growth.
Should you buy insurance for your health, or your car, or your house? What if you don’t fall ill, or the car doesn’t get stolen, or the house doesn’t burn down in the next 10 years? Is the money wasted?
We see only the visible. Often this is nothing more than randomness. Yet we build narratives to explain what happened. Characterising outcomes as random events is hard to comprehend. It suggests that our efforts and quality of our decisions had nothing to do with the outcome. It’s also a conversation killer as it encourages no further analysis of the matter.
In the real world, it’s very hard to know if a decision is correct even if the outcome is positive. The positive outcome might be a random fluke. For example, if you flip a coin to make an investment decision, not matter how much money you make, it’s still a bad decision.
When decisions are made under uncertainty, the best judge of a decision is not its outcome, but the cost of alternatives i.e. Alternative Histories.
Russian Roulette is a lethal game of chance in which a player places a single round in a revolver, spins the cylinder, places the muzzle against their head, and pulls the trigger in hopes that the gun won’t fire.
The six chambers act as six possible outcomes — six alternative histories — out of which one will come to be. If you were offered $1Mn to play Russian Roulette, how would you measure your decision? Nassim Nicholas Taleb does this interesting thought experiment in Fooled by Randomness.
A revolver has 6 chambers. You’ve got 5 out of 6 chances of becoming a millionaire, and 1 out of 6 chances of ending up dead. The odds are in your favour. If you decide not to play the game, what are you saving yourself from?
Suppose your naive and dumb friend takes the bet and is now rich and famous. How would that make you feel? Would you consider taking the bet now?
Clearly $1Mn won through Russian Roulette is not the same as $1Mn won through years of hard work. Why? Because of the cost of the alternatives.
No matter how good the upside is, the downside is too high — so high that it prevents you from playing any further. Therefore, no matter how many friends win the bet, it’s never a good decision to play Russian Roulette (unless the alternatives are far worse).
If you are in your 20s and your only source of income is playing Russian Roulette, chance are you won’t live to see your 50th birthday. The alternative histories will eventually catch up.
Expected returns don’t matter when repeated exposure gets you out of the game—permanently. As Taleb remarks:
“Assume a collection of people play Russian Roulette a single time for a million dollars. About five out of six will make money. If someone used a standard cost-benefit analysis, he would have claimed that one has 83.33% chance of gains, for an “expected” average return per shot of $833,333. But if you played Russian roulette more than once, you are deemed to end up in the cemetery. Your expected return is … not computable.”
The quality of a decision must not be judged based on the outcome, but by the cost of alternative outcomes.
In the movie The Deer Hunter, Mike (played by Robert De Niro) played Russian Roulette with 3 bullets instead of one. The alternative was sure death, so in that context, playing with more bullets so that he had better chances of shooting the captors made sense.
You buy insurance to protect yourself from the alternative histories of falling sick, getting your car stolen, and seeing your house burn down. It’s wise to protect yourself from the events that do not take place.
Interesting Finds
1.
“Eight years earlier I had begun living without money in what was originally intended to be a one year experiment into what anthropologists call ‘gift culture’. I wanted to see if it were possible and, if it were, what it looked and felt like.”
— Not So Simple: Notes from a Tech-Free Life
2.
“Turner’s late creations are now widely recognised as works of incomparable brilliance. The same could be said of art from Cézanne, Titian, Michelangelo, and Rembrandt.”
— How Creativity Changes as We Age
3.
“We have so many medical devices, so of course we’d need, and have, machines that help us to breathe. But there’s a strange, and deeply human, story behind how we learned to breathe for each other.“
4.
“The original Aladdin is one of the greatest animated films of all time and a lot of this is due to the genie. Sure the songs are great, but what’s most memorable is Robin Williams’ performance.”
— Why You Still Remember The Genie So Well
5.
“Pixar’s Wall-E is a masterpiece of animated film-making about two adorable robots falling in love, though I’d argue it also serves as an excellent example of sociological storytelling.”
— Wall-E as Sociological Storytelling
What I’m Reading
If you are a Feynman fan—there’s no reason you shouldn’t be—you gots to read this book once you are done with Surely You’re Joking, Mr. Feynman.
Unlike the previous book, Feynman talks about his wife Arlene and her early death in great details. Warning: it would make you cry. You also get the first-hand information about the investigation of the space shuttle Challenger’s explosion as he narrates it in his characteristic Feynman tone with a lot of fun and drama.
You can know the name of that bird in all the languages of the world, but when you’re finished, you’ll know absolutely nothing whatever about the bird. You’ll only know about humans in different places, and what they call the bird. So let’s look at the bird and see what it’s doing—that’s what counts. (I learned very early the difference between knowing the name of something and knowing something.)
Feynman was always very good at asking tough questions and at describing things as they are, not as they are supposed to be. He famously revealed the space shuttle disaster’s cause by an elegant experiment: dropping a ring of rubber into a glass of cold water and pulling it out, misshapen. This book is full of such nuggets, mostly about how not to fool yourself—because you are the easiest to fool.
— Richard P. Feynman, What do you care what other people think?
Quote to Note
The Utopian attempt to realise an ideal state, using a blueprint of society as a whole, is one which demands a strong centralised rule of a few, and which is therefore likely to lead to a dictatorship.
— Karl Popper, The Open Society and Its Enemies
Before You Go…
Thanks so much for reading! Send me ideas, questions, reading recs. You can write to abhishek@coffeeandjunk.com, reply to this email, or use the comments.
Until next Sunday,
Abhishek 👋