Why You Should Fail More Often

Let’s come back to the financial markets as a model of complex system that can be easily measured. What are the strategies that can provide gains with limited risks and significant chance of success?

Investment is more about managing the emotions of failure than it is about being clever

Professionals will tell you that the winning strategies (provided there are winning strategies,as we now can doubt from our post on the superiority of randomness) always involve some dose of failure. The trick is to have less failures than wins, and / or smaller failures than wins. As long as you invest more on stocks that have chances of recovering, over time this strategy will provide interesting returns with a relative certainty – the larger returns being generated by the larger or more frequent number of tries.

What is interesting here is that real professionals that deal with the stock market everyday will never speak of ‘sure win’. They know they have to accept a certain amount of failure. They know there will be bad days as there will be good days – only hopefully slightly less frequently. They know they will have to deal with the emotions of failure and not let themselves be driven by them.

In our real life, that complex system, the lesson holds. We can’t succeed without a certain dose of failure. And the more often we try, the higher will be our overall success. We just need to make sure that any failure will not kill us (that we have a cut-loss soon enough) and that our successes have a bigger upside than our failures’ downside.

In complex systems, frequent failure is the key to success. So, when do you start to fail more often?