Warren Buffett's amazing record
- Thread starter MadJack
- Start date
Hes Smiling because he knows what's going on inside your head. That's how smart he is.
Can't be lucky for this long. Everything in life has outliers, people who excel, the best of the best. That's him.
Survivorship Bias as explained by Taleb in 'Fooled by randomness..."
Chapter 8: Too Many Millionaires Next Door
The survivorship bias, as discussed earlier is the failure to consider those that followed the same path as the people we are analyzing, but failed to reach the same success (or be successful at all). It is extremely difficult to view these people, since history does not record them. To correct for this bias, we may want to adjust the success of those we are considering to take into account the effect of those that failed to survive.
We tend to mistake one realization among all possible random histories as the most representative one, forgetting that there may be others? The survivorship bias implies that the highest performing realization will be the most visible. Why? Because the losers do not show up.
Conclusion: Taleb?s point is that survivorship bias is a chronic syndrome affecting most people. We naturally ignore the data we do not see, so we must work hard to counter survivorship bias.
Chapter 9: It is Easier to Buy and Sell than Fry an Egg
Taleb uses this chapter to illustrate the Survivorship Bias in several different common situations.
Two important things come from the examples in this chapter:
1. A large group of poor performers will eventually yield a few performers that appear to be quite skillful due to their success. This is simply volatility from the norm, but is often confused for skill.
2. Success is more greatly correlated with the number of people in the original pool than the skill of the players (since, the larger the pool, the longer the survivors had to survive, and the more successful they will appear as a result.)
Chapter 10: Loser Takes All ? On the Nonlinearities of Life
Life is unfair in a nonlinear way. Small advantages often translate into disproportionately large payoffs, or simple randomness can lead to the same thing without any advantage at all.
Nonlinearity is the disproportionate result resulting from a proportionate increase in force. Adding sand to a sandcastle tower, growing at a linear rate, until suddenly one extra grain of sand causes it to all come crumbling down ? that is the nonlinear result.
The reason life is nonlinear is that past success increases the probability of future success, due to a multitude of reasons (network externalities being one). Each step on our path is not independent
The nonlinearities of life cause us to confuse sucess with skill. Nonlinearities allow tiny amounts of randomness to build ever greater success (or failure), confusing us into thinking that the tiny amount of randomness was ineffectual.
Jord that is exactly where I was going. Survivorship bias. And yes I too have read that book. :lol:
It's a fascinating concept, I am not sure I believe everything he wrote lock stock and barrel, but it definitely creeps into my mind when I think about this stuff.
Nice. Did you enjoy it as much as I did?
I am reading Antifragile by him now. I'm loving this one too.
- Feb 26, 2001
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I'll have to check it out, interesting post/read.
I don't disagree with jords post but I do think in WB's case skill/intellect was most definitely involved.
Jord and Fek...you dangle just enough.. to hook me on this author 
Spent an hour or so reading reviews on the book and now I guess I'm going to have to but it. This guys summary along with yours.. set the hook.
http://mmoorejones.com/2011/01/16/five-lessons-from-nassim-taleb/
Bottom line ..how easilty people are led/fooled by non objective reasoning.
Heres another thought provoking issue..
Common Misconceptions About Intelligence V: Education Increases Intelligence.
http://bigthink.com/e-pur-si-muove/...telligence-v-education-increases-intelligence
On Buffett....at age 83 I doubt he has had much input in last decade other than the people he hired to take over years back. IMO His best investment phlosophy is on what he doesn't invest in (intagible things he can not understand) saved him in dot.com era where almost everyone else got hammered.
On flip side..
I certainly don't understand his interest in purchasing all the newspapers..especially in past few years. I would be of opinion that is like buying a horse and buggy 50 years ago.
Spent an hour or so reading reviews on the book and now I guess I'm going to have to but it. This guys summary along with yours.. set the hook.http://mmoorejones.com/2011/01/16/five-lessons-from-nassim-taleb/
Bottom line ..how easilty people are led/fooled by non objective reasoning.
Heres another thought provoking issue..
Common Misconceptions About Intelligence V: Education Increases Intelligence.
http://bigthink.com/e-pur-si-muove/...telligence-v-education-increases-intelligence
On Buffett....at age 83 I doubt he has had much input in last decade other than the people he hired to take over years back. IMO His best investment phlosophy is on what he doesn't invest in (intagible things he can not understand) saved him in dot.com era where almost everyone else got hammered.
On flip side..
I certainly don't understand his interest in purchasing all the newspapers..especially in past few years. I would be of opinion that is like buying a horse and buggy 50 years ago.
