On the Edge: The Art of Risking Everything

by Nate Silver

The root words of the term “analysis” mean to break up, loosen, divide, or cut apart—so analysis essentially means to resolve something complex into simpler elements. In regression analysis, for instance—probably the most widely used statistical technique in data science—the goal is to attribute a complex set of observations to relatively simple root causes.

The natural companion to analytic thinking is abstract thinking—that is, trying to derive general rules or principles from the things you observe in the world. Another way to describe this is “model building.”

A steelman argument—a favorite technique of EAs and rationalists—is the opposite of a strawman argument. The idea is to build a robust and well-articulated version of the other side’s position, even if it’s one that you disagree with.

Game theory is the mathematical study of the strategic behavior of two or more agents (“players”) in situations where their actions dynamically impact one another. It seeks to predict the outcome of those interactions, and to model what strategy each player should employ, to maximize their expected value while accounting for the actions of the other players.

If you can compete against people performing at their best, you’re going to be a winner in almost any game you play. But if you build a strategy around exploiting inferior competition, it’s unlikely to be a winning approach outside of a specific, narrow setting.

what was going on under the surface was far more important because their endocrine system was on fire when they were taking risk.”

An experiment conducted by the economist Steven Levitt, for example, found that when people volunteered to put major life decisions such as whether to stay at a job or in a relationship up to the outcome of a coin flip, they were happier on average when they made a change.

The idea that people-reading ability comes from the body rather than the mind—so that when we’re tired, our social skills suffer more than, say, our ability to work out an equation—is something straight out of Coates.

Lucky people “constantly encounter chance opportunities” and try out new things. Lucky people “make good decisions without knowing why.” They listen to their intuition. Lucky people have positive expectations so their “dreams, ambitions and goals have an uncanny knack of coming true.” Lucky people “have an ability to turn their bad luck into good fortune” because of their resilience.

Curve: you know your failures before your successes, so your fund tends to have a negative return early.

‘lemons ripen early,’ which is that the companies that fail fail before the companies that succeed succeed,”

25 percent of investments make zero return. 25 percent produce a return greater than 0 but less than 1x. 25 percent produce a return between 1x and 3x. The next 15 percent produce a return between 3x and 10x. Finally, the top 10 percent produce a return of 10x or greater.