Congratulations! You’ve Won Russian Roulette: Alternative Paths
You arrange to meet with a Russian oligarch in a forest just outside your city. He arrives shortly after you, carrying a suitcase and a gun. Placing the suitcase on the hood of his car, he opens it so you can see it is filled to the brim with stacks of money—$10 million in total. “Want to play Russian roulette?” he asks. “Pull the trigger once, and all this is yours.” The revolver contains a single bullet; the other five chambers are empty. You consider your options. Ten million dollars would change your life. You would never have to work again. You could finally move from collecting stamps to collecting sports cars!
You accept the challenge. You put the revolver to your temple and squeeze the trigger. You hear a faint click and feel adrenaline flood your body. Nothing happens. The chamber was empty! You have survived. You take the money, move to the most beautiful city you know, and upset the locals by building a luxurious villa there.
One of these neighbors, whose home now stands in the shadow of yours, is a prominent lawyer. He works twelve hours a day, three hundred days a year. His rates are impressive, but not unusual: $500 per hour. Each year he can put aside half a million dollars net after taxes and living expenses. From time to time, you wave to him from your driveway, laughing on the inside: He will have to work for twenty years to catch up with you.
Suppose that, after twenty years, your hardworking neighbor has saved up $10 million. A journalist comes along one day and puts together a piece on the more affluent residents in the area—complete with photos of the magnificent buildings and the beautiful second wives that you and your neighbor have accrued. He comments on the interior design and the exquisite landscaping. However, the crucial difference between the two of you remains hidden from view: the risk that lurks behind each of the $10 million. For this he would need to recognize the alternative paths.
But not only journalists are underachievers at this skill. We all are, as Nassim Taleb makes clear with the Russian roulette vignette.
Alternative paths are all the outcomes that could have happened but did not. With the game of Russian roulette, four alternative paths would have led to the same result (winning the $10 million) and the fifth alternative to your death. A huge difference. In the case of the lawyer, the possible paths lie much more closely together. In a village, he would have earned perhaps just $200 per hour. In the heart of New York, working for one of the major investment banks, maybe it would have been $600 per hour. But, unlike you, he risked no alternative path that would have cost him his fortune—or his life.
Alternative paths are invisible, so we contemplate them very rarely. Those who speculate on junk bonds, options, and credit default swaps, thus making millions, should never forget that they flirt with many alternative paths that lead straight to ruin. To a rational mind, $10 million that comes about through a huge risk is worth less than the same sum earned by years of drudgery. (An accountant might disagree, though.)
In Fooled by Randomness, Taleb recounts how he had dinner with a friend in a bar in New York. “We flipped a coin to see who was going to pay for the meal. I lost and paid. He was about to thank me when he abruptly stopped and said that he paid for half of it probabilistically.” The friend was considering alternative paths.
In conclusion: Risk is not directly visible. Therefore, always consider what the alternatives paths are. Success that comes about through risky dealings is, to a rational mind, of less worth than success achieved the “boring” way (for example, with laborious work as a lawyer, a dentist, a ski instructor, a pilot, a hairdresser, or a consultant). Yes, looking at alternative paths from the outside is a difficult task, looking at them from the inside an almost impossible task. Your brain will do everything to convince you that your success is warranted—no matter how risky your dealings are—and will obscure any thought of paths other than the one you are on.
* Source: The Art of Thinking Clearly by Rolf Dobelli