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Are Warren Buffet and Shaolin Kung Fu Just Lucky?

Why we cannot trust the authority of our heroes...

The Vending Machine Problem

· warren buffet,probabilistic thinki,good luck

Problem: Vending machines take more lives than sharks, but nobody’s afraid of a vending machine.

This is a derivative of the Uncertainty Problem.

Statistically speaking, you’re more likely to die from a vending machine falling on you than by shark attack. While this is likely due to the fact that we experience more vending machines than sharks (and spend less time in shark-infested waters than locations with fast-grab food options), I guarantee that if you place an image of a vending machine and a shark side by side in front of someone, that statistic will not match their fear response. Ok, this example is a little facetious, and shouldn’t be taken too seriously, but the line of reasoning should. For humans are crap at bypassing personal bias.

Along similar lines, Americans are three times more likely to die from choking on food than to die in a mass shooting, and four time more likely to die in a mass shooting by an American citizen than by a foreign-born person. Likewise, the perceptions and fears many have don’t match the stats, with many thinking illegal immigration is a leading cause of mass gun violence. You’re far more likely to get shot by the white guy next door than by an immigrant hopping the border.

Last point to hit this home, possibly the hardest to work out at first hearing, is the claim of Nassim Taleb (author of Black Swan and Antifragile) that there isn’t enough evidence to show Warren Buffett’s success is the result of skill, rather than good luck. This doesn’t mean that Warren Buffett doesn’t have skill, it just means that you and I have no way of determining it. And, statistically speaking, there has to be a Warren Buffett – a person who has placed a similar number of bets purely at random – a flip of a coin, a roll of the dice – and realized his success with questionable skill and a whole lotta luck.

This seems at first glance to be completely incoherent. But, again, statistically speaking, to treat Buffet’s advice as gospel truth wouldn’t be prudent. Doing so could be considered flawed thinking stemming from survivorship and outcome biases, to be precise.

We assume Shaolin monks are some of the best warriors on Earth because of their methods. But in reality, not many survive the training process. It’s wholly possible that those who survive are built from different stock and would have risen to the top under any training method. It’s also possible that the best potentials died early in the process and were never given the chance to blossom, due to inferior training methods. We just can’t know. Looking at outcome rarely gives us insight into process unless accompanied by a whole lot of data.

I do qualify this example a bit, however, as Shaolin kung fu does have far more data points than our legendary investor, with well over a thousand years of master-disciple relationship, and tens of thousands of new recruits each year in the Shaolin Temple region, if not the Temple itself. So that can and should add a great deal of credibility to their process, from a statistical standpoint. But, as someone who has trained at the Temple, and with several warrior monks throughout China, I was often left wondering with many methods and tactics in the system, ‘Is there really no other way?’

The desire to look at key exemplars as rational sophisticates smacks of survivorship and outcome biases unless accompanied by thousands of data points – decisions made and methods implemented that resulted in expected, positive outcomes.

And very few people have that many correct calls. We think that their success must be a byproduct of their approaches and methods. But this isn’t necessarily so. Some people just get lucky.

This text is an excerpt from Reflections of a Diceman, the Law of the Die Nonfiction Appendix, which you can get for free by subscribing to my newsletter: Subscribe and Join the Tribe

Law of the Die - A novel about embracing randomness to generate momentum in life. Available at Amazon.com.

Tom Fazio

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