Evolution Fooled by Randomness
Taleb argues that surviving a favorable sequence of events does not prove a strategy is robust. A business or organism may appear well adapted while remaining exposed to a rare event that the observed record has not tested.
THE IDEA
Can Evolution Be Fooled by Randomness?
Someone with only casual knowledge about the problems of randomness would believe that an animal is at the maximum fitness for the conditions of its time. This is not what evolution means; on average, animals will be fit, but not every single one of them, and not at all times. Just as an animal could have survived because its sample path was lucky, the “best” operators in a given business can come from a subset of operators who survived because of overfitness to a sample path—a sample path that was free of the evolutionary rare event. One vicious attribute is that the longer these animals can go without encountering the rare event, the more vulnerable they will be to it. We said that should one extend time to infinity, then, by ergodicity, that event will happen with certainty—the species will be wiped out! For evolution means fitness to one and only one time series, not the average of all the possible environments.
By some viciousness of the structure of randomness, a profitable person like John, someone who is a pure loser in the long run and correspondingly unfit for survival, presents a high degree of eligibility in the short run and has the propensity to multiply his genes. Recall the hormonal effect on posture and its signaling effect to other potential mates. His success (or pseudosuccess owing to its fragility) will show in his features as a beacon. An innocent potential mate will be fooled into thinking (unconditionally) that he has a superior genetic makeup, until the following rare event. Solon seems to have gotten the point; but try to explain the problem to a naive business Darwinist—or your rich neighbor across the street.
When to use it
Evaluating the long-term survival prospects of a business that has been successful only in a stable environment without major disruptions.
Understanding why some individuals who appear successful may actually be fragile and likely to fail when a rare event occurs.
In evolutionary biology, assessing the true fitness of a species by considering all possible environments, not just the current one.
In personal finance, recognizing that a trader with consistent short-term gains may be taking hidden risks that could lead to catastrophic loss.
FROM THEORY TO EVERYDAY LIFE
In practice
Lucky Animal Survival
An animal may survive a favorable sequence of conditions while remaining vulnerable to an unencountered hazard. Taleb uses this analogy to question whether observed survival alone demonstrates robustness.
John's Pseudosuccess
Taleb portrays John as someone whose profitable record conceals a risk of ruin. The passage speculates about the social and mating signals of apparent success; the practical example concerns judging a strategy without seeing its hidden exposure.
A MOMENT TO REFLECT
Put it to work.
Can you think of a situation where an individual or organization succeeded due to luck rather than skill, and how might this make them vulnerable to future rare events?
How does the concept of ergodicity apply to evaluating fitness in evolutionary biology or business?
Why is it dangerous to judge the fitness of a strategy based on a short sample path without rare events?
CONTINUE THE CONVERSATION
Source texts
- Fooled by Randomness The Hidden Role of Chance in the Markets and in Life (Nassim Nicholas Taleb)