The Skill of Luck

Have you ever heard someone say, “create your own luck”? I believe there is skill in selecting situations where the magnitude of a good outcome far outweighs the magnitude of the distasteful outcome. This is my interpretation of creating your own luck. Probabilistically:

Look for coin flips where heads you win $100, tails you lose $10. Bet on heads for a cost that is less than the payout. Finally, wager a portion of your bankroll relative to the expected net gain. Adjust as you go.

Situations like the above appear all over the place. They’re not always about money and betting. Many times there are life choices. They are small judgement calls. They are the noise of business. It seems to me that most people simply turn down the volume, rather than tuning in. A few dial in to certain situations but are frozen from action. I believe they often assign a cost to distasteful outcomes that is far greater than the real cost. They also under estimate the magnitude of positive outcomes. Perhaps this prevents too much faulty action and preserves our species, but I am confident the drift toward conventionality negates the possibility of optimal outcomes. We should look for what is right not what is normal.

I prefer to go about life anticipating a certain frequency of losses. This frees my emotions to proceed with discipline toward the long term outcome. Additionally, by investing time learning along the way I can become less wrong over time. From that mindset, I course correct my actions on a regular basis. I still make mistakes but I am tuning in on reality.

I am working on it. But I think the skill of luck could also be called wisdom. It is knowledge acted upon according to reality.