Adonis Diaries

Posts Tagged ‘risk-management


John Peter shared Nassim Nicholas Taleb link this July 23, 2015
We can look at supersitions as x% useless and 1-x % with survival benefits.

Except that it is hard to know beforehand what is useless and what is not, what is “irrational” and what has a hidden implicit rationality that helps navigate opaque systems.

But it suffices that a tiny proportions, say only .01%, of superstitions protect collective or individual survival for these superstitions to be necessary.

And for the very notion of superstition to be rational.
Beware of the probability-fool scientist a la Pinker judging superstitions with primitive tools

In fact we can show that some of these superstitions are most sophisticated in complex systems.
Clearly superstitions might have calming effects in helping us make sense of uncertainty (I never fight harmless superstitions), allowing us to be rational elsewhere.

But let us ignore these functions, just focus on survival. Recall that rationality is survival.

To prove the point that superstitions are risk management tools, extremely “rational”, all we need is

1) show that superstitions do not increase risk of ruin ,

2) show only a few seemingly “anecdotal” examples (they are not) of risk-mitigating superstitions that we only understood ex post, such as the belief that ghosts haunt coastal areas ending by protecting people against tsunamis and pushing indigenous populations to settle in elevated areas.

Any rigorous way to define rationality? Beyond Good and Evil

NIETZSCHE wrote in  Beyond Good and Evil:

“What prevents you or your species from extinction?”, the foundation of our Precautionary Principle.

Nassim Nicholas Taleb wrote:

I keep saying that there is no rigorous way to define rationality, except a risk-management one:

All other definitions fail under rigorous formalizations and model expansion (for instance, see proofs in Chapter 6 in Silent Risk, most stuff called “irrational” by psychologists shows the psychologists to be Pinker-style verbalistic and ignorant of probability).

” The falseness of an opinion is not for us any objection to it: it is here, perhaps, that our new language sounds most strangely. The question is, how far an opinion is life-furthering, life-preserving, species-preserving, perhaps species-rearing, and we are fundamentally inclined to maintain that the falsest opinions (to which the synthetic judgments a priori belong) …” In Beyond Good and Evil, I, 4.

Continuing on the rationality-as-survival point, there is a confusion when it comes to “rationality” of a decision between the *reduced* and the *structural* form, and the *static* and *dynamic* form:
1. A single decision vs. a RULE generating a sequence of decisions. One decision can be rational while the rule is not.

It would be rational for me to eat tuna today but under repetition it would harm the planet so it is OK to keep switching preferences.

We saw that intransitive preferences or random preferences can be very rational.

2. It may seem irrational to not take the direct route between 2 points, but under convexity of payoffs/nonlinear transformation it becomes so.

You may discover a new direction.

3.  Local vs. global rationality. Mental accounting: say husband would not buy a tie by himself but his wife –with a joint checking account –gives it to him as a gift and he is excited.

It could be irrational for a given instance but as a method it prevents people from splurging.

4.  Ludic vs. ecological environments.

Some actions show biases in a casino and are irrational but real life is not a casino and these can be really rational. Life is ambiguous, laboratory settings are not.

Reine Azzi shared this post from January  2,2014.

“I can’t stand moral absolutism. You know, there’s always that guy who wants to point out that Martin Luther King cheated on his wife– as if he obviously couldn’t have been a great person if he did something like that.

Or someone will bring out an inspirational quote, and get you to agree, and then inform you that Hitler said it.

As if a good thought couldn’t come from Hitler. Moral absolutism keeps us from learning from the past.

It’s easy to say: ‘Hitler was a demon. Nazis were all bad seeds.’ That’s simple. It’s much harder to say: ‘Is that humanity? Is that me?'”

We are  simply, very bad at knowing what “makes sense” ex ante; only time can do.

 So thanks the (survival). This is the pillar behind *SKIN IN THE GAME*.
Excited to see Nietzche got the point!

Why was this burried? Because scholars do believe in such sentence, given the zeitgeist of “rationalization”.
I need to thank an anonymous person on twitter.

The following is a reprint of the Helen Zimmern translation from German into English of “Beyond Good and Evil,” as published in The Complete Works of Friedrich Nietzsche (1909-1913).
Some adaptations from the original text were made to format it into an e-text. Italics in the original book are capit…




September 2020

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