Rats created a crisis for science. Many of the researchers were finding that experiments that involved rats were impossible to replicate. They would use the same methodology and yet get different results. Especially when it came to medicine. The same chemicals used on rats were giving out different results.
The conundrum was finally solved in 2014. When a team of researchers from McGill University of Montreal, Canada found a very weird thing. Rats weren’t the problem. Nor were the processes and the methodologies used. The gender of the experimenter was the issue. Because if the experimenter was male, it had a big impact on the stress levels of the rodents. How big an impact? The rat’s stress levels when kept in a room with a shirt a male experimenter wore a day before was the same as its stress levels when it had to swim in water for 3 whole minutes!
Who could have imagined? Minor unpredictable things can change the results completely!
Can butterflies create storms?
Everyones heard of the butterfly effect. A small deviation in the speed at which a butterfly flaps its wings in Brazil can create a hurricane in Japan. It’s the basis of chaos theory. It’s exaggerated, but not by much.
Meteorologist Edward Lorenz – who coined the term butterfly effect – found that out when he began modeling hurricanes on a computer. Extremely extremely minor changes in starting patterns – as minor as a butterfly’s flap – created exponential divergence in the hurricane’s trajectory.
That’s why, even today, it’s possible to track weather patterns accurately only about 10 days out. Because there are only so many minor details a computer can model. Adding more details takes exponentially more computing power. Getting accurate weather details for that 11th day would require 10 times more computing power. Getting it for the 14th day would require 1000 times more computing power!
If the fastest of super computers are not good enough to gather and work with all the information, how do you suppose us humans can fare?
So what do the rats and the butterflies teach us?
- You don’t know what you don’t know. The information can never be complete.
- There are so many unpredictable minor things that affect the results of your attempts. Any small thing can derail you.
So how can you deal with this? If things are never in your complete control, and you can never have complete information, how can you even decide on what to do? How can you take action?
You’ve got to think in terms of bets.
Thinking probabilistically is really difficult. Because it means you have to separate the decision from the outcome. You have to realize that a brilliant decision can lead to a poor outcome, and vice versa.
One of the first things gambling professionals teach their students is to not deviate from their “system” because of the poor outcome of the play.
Outcomes give feedback on your decisions, your systems – but it’s not complete feedback. A hidden element of luck is involved. And so, decision and luck need to be given thought separately.
What does this mean in practical terms?
Separating decisions from their outcomes
1. Improving decision making skills
There are 100 year old centenarians who smoke everyday. But you know that generally smoking will kill you faster. Copy the centenarian and you won’t live a century. And so quitting smoking is a smart decision.
Wannabe CEOs try to model Steve Jobs accurately in all his mannerisms and become brash. You don’t want to copy someone successful to the T. You want to ask what’s worked for them that’s worked for others too. Find the common trends. And improve your skills by replicating what has worked for multiple successful people.
Don’t copy someone successful. Go deep and investigate. Copy common patterns. And then take decisions that have a high probability of success.
2. Doubling down on lucky outcomes
Staying in the game is the most important thing. Don’t bet everything on a sure thing because you don’t know what unforeseen thing can go wrong. Have space to make multiple bets. And then double down on bets that are doing well!
The best performing VC companies are those that allocate 50% of their fund money to re-invest in the companies they’ve already funded – and which are doing well! They make 40 small bets, and then double and treble down on 5 of them doing extremely well!
- Chaos reigns. Small unpredictable things can completely change the game. And so, the first goal should be to stay in the game the longest. Never ever bet the farm on one single thing.
- Separate skill from luck. Don’t be arrogant when you’ve become lucky. Don’t be dismayed when you’ve been unlucky.
- Go deep. Find common success themes to improve your skills and decision making process.
- Do more of what works. Double down on lucky things.