Fooled by Certainty: Embracing Uncertainty in a Random and Noisy World
We live in a world governed by random events, yet humans are terrible at thinking probabilistically. We vastly prefer certainty over probability, narratives of skill and design over luck, and we find all manner of patterns within noise.
We listen to the “experts” who talk confidently about the future and make concrete projections about what’s coming next. Can you imagine an economist who states, “There is a 60% chance of a recession next year” getting any air time? We much prefer the certainty of the broken clock, even if it’s only right twice a day.
Survivor bias: we only see the winners
Many successes, especially in fields like finance and business, are often attributed to skill when they are largely the result of luck. Survivorship bias leads us to study the winners (who may have benefited from random success) while ignoring the many losers. We read books about the habits of titans of industry and entrepreneurial unicorns who have achieved mind-boggling feats as if there is a formula for achieving their success. Yet we discount the role that luck and happenstance played in their stratospheric rise (not to mention the personal and relational costs). We’ve never even heard of the thousands of equally talented and driven founders who failed or didn’t make it quite so big. Survivorship bias leads us to study the winners (who may have benefited from random success) while ignoring the many losers.
The lessons of history
Humans have a natural tendency to find patterns, even in random noise. After the fact, it’s not difficult to craft narratives and draw logical conclusions for this or that phenomenon, but this leads us to overconfidence in our ability to predict the future.
As Morgan Housel put it in The Psychology of Money, “History is mostly the study of surprising events. But it is often used by investors and economists as an unassailable guide to the future.” If history has taught us anything, it’s that rare events that nearly no one saw coming happen all the time.
Therefore, these oft-ignored “black swans” are not exceptions to the rule. And yet, it is almost an unassailable rule that you will likely not see the next one coming. Those lucky enough to predict and profit from these events will all start billion-dollar hedge funds to capitalize upon their success, but they’re unlikely to catch lightning again.
Fooled by Randomness
I’ve been reading Nasim Taleb’s seminal, yet approachable, treatise, Fooled by Randomness. Taleb's central argument is that much of what we perceive as success, causality, or expertise is the product of randomness. This book should be required reading for any thinking person, as it challenges deeply ingrained biases and forces readers to confront uncomfortable truths about the role of luck in their lives.
Taleb's insights extend way beyond finance and markets, touching on how randomness influences what we think we know about ourselves and others, science, history, and even knowledge itself.
Strange Comfort of Uncertainty
While unsettling, viewing the world through the lens of randomness can also be strangely comforting. It shifts the focus from striving for control over the uncontrollable to embracing the unpredictable nature of life.
It means we can tune out the noise and turn off the news. Instead of being paralyzed by uncertainty, we can focus on what can be influenced—preparing for risks and being adaptable.
Moreover, recognizing the role of randomness relieves the pressure to control or predict every outcome and helps to alleviate feelings of inadequacy or unfairness when things go wrong.
Susceptibility to randomness and a lack of control are universal experiences. Embracing uncertainty with humility can deepen our understanding of ourselves and inspire charity toward our neighbors.
