https://retiari.us/tags/risk/ Recent content in Risk on Alex Maestretti Hugo -- gohugo.io en-us Sat, 22 Jun 2019 14:37:03 -0700 https://retiari.us/books/fooled_by_random/ Sat, 22 Jun 2019 14:37:03 -0700 https://retiari.us/books/fooled_by_random/ While focused on investment banking there are many generally applicable concepts from Fooled by Random. The basic idea is that far more of our lives, our successes and failures, are dominated by chance than we care to admit, or are even able to perceive. Survivorship bias plays an outsized role in how society celebrates success. The hero worship around the rich and famous incorrectly ascribes the majority of their success to skill or intelligence or hard work or other traits that we claim to hold worthy; while the reality is they likely have some of those traits but no more so than the many others who did not get that pivotal first role, or whose company did not time their product market fit as fortuitously. While the societal implications of this survivor bias are interesting, especially in the age of social media and widespread feelings of inadequacy, more relevant to security is the trading strategy he proposes, wherein one seeks to make small gains during normal events while protecting yourself from going bust on unexpected events, or better yet capitalize on ‘impossible’ events to make large returns. He is highly critical of the value of historical data in predicting future performance.