The difference betwen skill and luck.
blogs.hbr.org
blogs.hbr.org
You find 256 people and email them the details of a 50/50 prediction. 128 people should get the right prediction. You then email them another 50/50 prediction. Of course, 64 of them receive the right prediction twice in a row. You then make a third 50/50 prediction to the 64, another to the 32 positive responses and so on until you find a manageable number of people who now believe you have some amazing insight into the future.
As much as we may want to think things are not random, sometimes they really are, sometimes they're just probabilities.
Even in my grandmother's time there would be somebody who would offer to predict the gender of your unborn child - "if I am wrong, I'll give you your money back!".
> Always compare results with a null model that reflects luck.
It's possible to win lots of money based on making exceedingly poor bets and getting very lucky. There's one card left to come, there's a 5% chance an Ace will come, but if it does you'll have an unbeatable hand, if not, you have a hand that beats 66% of the possible hands. Do you bet? What happens if the Ace doesn't fall?
A poor player who gets lucky will attribute his success to his obvious skill.
A skillful player who gets lucky will chide himself for making a poor decision.
In summary, I made a comment about Zuckerberg and the value of Facebook. Someone responded that he was lucky. To which someone else responded with this: (Can't find original HN comment)
"This attitude bugs me a lot. There is probably a path for every single person in this country to make a million dollars in the next year if they were just “savvy enough” to take advantage of it. It seems everyone wants to diminish Zuck’s success by ascribing luck to it, but let me tell you something. Zuck executed the shit out of Facebook. Did the community and mindshare just come out of thin air?
There’s no good reason to believe that Zuckerberg is lucky at all. Saying he was in the right place at the right time has this tacit assumption that if he were somewhere else at the wrong time he would have tried the same thing and fell flat on his face.
It seems because Facebook is an outlier, people feel safe talking about the luck factor, but that’s meaningless because we all exist with individual circumstances, and by that measure everything every one of us does is based on luck. Instead, I prefer to ascribe luck to things that the individual actually had no control over, such as winning the lottery."
Searchyc.com is your friend: http://searchyc.com/This+attitude+bugs+me+a+lot.+There+
Yes. Luck played a big role.
The reason I say luck didn't play a big role, is because not anyone could do what he did.
Can anybody from a 5 year old to a grandmother build Facebook? If not, there must be skill required to accomplish the task.
To build the application behind Facebook alone takes skill (taking out a large percentage of the population). To build the company up to what it is (and make the right decisions) takes another set of skills. I think the luck factor is around 10%.
Of course there is a certain amount of luck with anything that we do. I have always felt that there are lucky situations all around us. Without the proper skills to recognize it, most people will just let it pass by.
Somehow conversation turns to the great generals -- the 4 and 5 star generals.
"How many great generals are there?" asks the physicist.
"No more than about 1 in 20 is a truly great general", they answer.
"How do you decide who is a 4- or 5- star general?" the physicist asks.
The army men decide that you need to have won 5 battles to be a great general.
The physicist then explains how it can easily be luck. Suppose that battle success is randomly determined. A general has a 0.5^5 chance of winning 5/5 battles out of sheer luck -- 3.125% in fact. Therefore the majority of "Great Generals" are just lucky.
The point of the anecdote is that the null hypothesis -- that 5-star generals are there basically because somebody "wins" each battle and that a fixed percentage of these will win 5 in a row -- is difficult to distinguish from genuine tactical skill.
That's the point of the article too. We too often attribute to skill what can just as reasonably be luck. Partly because of survivor bias: Zuckerberg et al are the one group out of the hundreds of contenders who succeeded in getting runaway network effects. But if contenders had non-zero chances of success, somebody was bound to succeed. The null hypothesis is that Zuckerberg was just lucky and it is basically not easy to disprove, given that as I said above there's nothing particularly unusual about him or Facebook going into the fight.
If you win, it is true that not everyone could do what you did (you were the best runner out of a thousand). It also true that luck played a HUGE role (one in a million odds after putting yourself in the right place based on skill).
In comparison to what? For all we know, there were dozens, maybe hundreds of other similar sites being built at the same time. Without being able to compare them, we really can't say how well he executed Facebook. Having used both Friendster and MySpace, I'd say he did better than either of them. But by the time Facebook was big enough to be mentioned in the same breath as those two, success to some large degree was already assured.
Instead, I prefer to ascribe luck to things that the individual actually had no control over, such as winning the lottery.
This is precisely the point: there may very well have been key moments in Facebook's history, over which Zuckerberg had not control whatsoever, yet which ultimately determined the company's fate. We know the economy is a nonlinear dynamical system, and in such systems small perturbations in the input can lead to large changes in the output. There's no reason to suppose that similar effects don't play a role in the life cycle of individuals or businesses.
Yes we can. If there were tons of social networking sites out there at the time, and Facebook came out on top, there must be a reason.
With basketball we have a skill that can easily be measured for nearly anyone: we just have them toss a basketball a few dozen times and we have a good gauge of how skillful they are compared to others. But what about, say, a venture capitalist? The game that they are supposed to be skilled at has so much overhead that very few are ever played, and not all those that want to play can (you've got to have a lot of money to even sit at the table). It's quite possible that success as a VC is entirely attributable to luck, with no contribution from skill at all. For these kinds of activities we have no way to generate a meaningful statistical baseline. We can only engage in a thought experiment: if hypothetically the success in question was actually due solely to chance, would the world we see look any different?
Something tells me this guy did well by not taking math in grade school too seriously.
Need say no more.
So if I toss a coin 10 times and it comes up heads, the next toss is more likely to come up tails? I smell a rat.
I've seen this analysis in sports. In baseball, for example, you generally expect teams to win one-run games as often as they win games in general (that is, there's no "great closer" effect). So if you see a team winning 80% of their one-run games in the first half of the season, you can expect their record to be worse in the second half.
* the final count will be about 50/50
* the remaining part will be about 50/50
are actually the same thing (since we're talking about a limit). That is, we could flip a fair coin a billion times, get all heads, and still, in the long run, expect the total ratio to converge to 1/2 (imagine flipping the coin forever - that initial billion flips won't even be a blip on the graph).
I think his lack of multiplication skills won him the lottery. It was luck indeed.