Every personal finance, business and self help shelf in your local book store is filled with books that offer to tell you the secrets of how to become [insert desirable attribute here]. Good to Great offers to unlock the secrets of how to build the next great company; The Millionaire Mind promises to teach you to think like a millionaire, and so on and so on. I would like to direct your attention to another book I recently finished reading, called The Black Swan. I must admit that The Black Swan is written in a rather annoying way, but it contains a number of highly valuable concepts and ideas. One such concept, "looking at the graveyard", does a lot to discredit a vast range of self-help and "instant insight" books.
To understand this concept, let's discuss a non-existent book whose ambition is to teach readers how to become rich by looking at millionaires and identifying the characteristics that all of these individuals share. Let's say the author does a great job of collecting and sorting through information and comes up with a list of three critical attributes shared by all of these individuals: frugality, education and generosity. One of the points Nassim Taleb makes in The Black Swan is that this information is insufficient to draw the conclusion that the way to become a millionaire is to be frugal, educated and generous. Why? Taleb explains that to validate your theory, you would need to look at the population of non-millionaires and make sure that it does not contain a large percentage of individuals who share the exact same attribute, i.e. look at the population of "failed experiments" that does not support your theory. Taleb points out that people rarely do this - for example in trying to identify what made a certain company successful they fail to look at all the companies who did the exact same thing and failed miserably...
That's not to say that in my example above frugality is not a worthwhile pursuit. All I am saying is that in that hypothetical experiment the data collected is not sufficient to draw the conclusion that if you are frugal you will become wealthy. There are plenty of frugal people who never become rich.
So what's Taleb's point? Unfortunately his conclusion is somewhat discouraging. His book is primarily about the role that luck plays in the outcome of the game of life. We all like to think that we control our destiny, but Taleb points out that the real control we exercise is very limited... a sobering thoughts.
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