Title: The Drunkard’s Walk: How Randomness Rules Our Lives Authors: Leonard Mlodinow Published: May 2008 Length: 272 pages
After taking two quarters of statistics and two of probability, I wasn’t sure that I would learn much by reading The Drunkard’s Walk. Fortunately, the history of the evolution of thought regarding chance and the ramifications of randomness on everyday life were explained to the point where I gained new insights into this area. It reinforced and clarified existing views that I had as well.
The most important point that was made is that there are a large class of things that humans typically see as being based on skill but are more likely based a great deal on luck. While CEOs and Hollywood film producers are paid top dollar for their skills, there seems to be little correlation with actual skill for their positions. Many events that involve human decision are unpredictable to the point that they can be considered random. I enjoyed the discussion of reversion to the mean presented throughout the book. Essentially, we tend to praise someone and see them as smart or skilled when they succeed, and then tend to disparage the same person when they do not appear to succeed. Mlodinow explains that our approval or disapproval often has little to do with someone’s next attempt because often the performance in the event is somewhat random. When I yell at someone, it is likely that they will do better than before. When I praise someone, it is likely that they will do poorer than before. Likewise, a mutual fund manager is likely to be lauded when she does well, and given the boot when she does poorly, even though picking stocks is a mostly random process.
The book discusses famous probability paradoxes such as the Birthday Paradox, Boy or Girl Paradox, and the famous Monty Hall Problem. These examples highlight how our intuitive grasp of probabilities does not necessarily accord with the actual probabilities. Understanding these better allows us to use reason instead of trying to us intuition, which is ultimately inferior in this realm.
In my opinion, this is similar to how people in economic experiments behave “irrationally”, or out of line with predicted economic theory. Examples of economic paradoxes can be found in books like Thaler’s The Winner’s Curse: Paradoxes and Anomalies of Economic Life. One of the tenets of traditional economics is that people are rational agents attempting to maximize their happiness. However, I feel that this assumption is flawed because that people do not always act rationally even when given perfect information.
I appreciated hearing about the history of thinking about probability because it was a perspective that I had not encountered in prior learning. The mathematics were nice as a refresher of probability and statistics.
One thing that the author talks about considerably is cognitive biases. Brains are essentially pattern-finding mechanisms, so they are bad at determining when something has been produced by a random process. People tend to spot clusters in dots that are sprinkled randomly because that is their instinct. Patterns may appear from stochastic processes, and conversely, we may not be able to detect patterns in deterministic processes. We also continually suffer from the myopia of confirmation bias.
The most profound implication for my life is that the best way to ensure that you succeed is to keep trying. Although I had a general idea that it is important to be persistent, this book reinforced the idea that trying multiple times is the only reliable way to boost your chance of success. Mlodinow states randomness is “why successful people in every field are almost universally members of a certain set-the set of people who don’t give up.”
A huge caveat of this view is that it assumes that the event that you are trying to have success at is random or that you do not learn from past experiences. It seems like in certain cases there is not an accurate model for agents to determine what will cause success or failure (stock market, predicting blockbusters from scripts.) I had some problems accepting that people are not successful based on their ability, but almost solely on luck. But if the results starting a company or creating a new product are somewhat random, why not try doing it many times? It should work out in the long run.
Overall, was an interesting read.