4 Lessons from Nassim Nicholas Taleb on Studying History

Dear friends,

When learning from history, a crucial question to ask is if we can become great leaders by studying and emulating the characters and qualities of great leaders? Nassim Nicholas Taleb, a former trader and an expert on risk, offers some great tips on thinking about history in his book Fooled by Randomness, which is perhaps the most famous treatise on the problem of randomness. So I decided to share some notes with you because they might help us judge historical figures better.

1. Survivorship Bias

Survivorship bias means that for every person who possessed a certain quality and became a great leader, there are many people who possessed the same quality but are forgotten by history. By studying only a small sample of successful leaders, we might confuse sufficient qualities as necessary factors of success when, in fact, most people with these same qualities failed to be recognised as great leaders.

According to Taleb, two factors are crucial in viewing a person’s performance through the lens of survivorship bias: the randomness content of his profession and the number of monkeys in operation. If a profession involves a lot of randomness, such as that of a trader or an investor, and there are hundreds of thousands of people involved in this trade, then it is almost certain by chance that someone will emerge to be highly successful. Survivorship bias is highly useful in combination with the next concept, alternative histories.

2. Alternative Histories

Taleb writes the following sentence on the problem of judging the quality of a leader’s decision based solely on its outcome:

[One] cannot judge a performance in any given field (war, politics, medicine, investments) by the results, but by the costs of the alternative (i.e., if history played out in a different way). Such substitute courses of events are called alternative histories.

Alternative histories are invisible histories that could have taken place but did not because of pure chance. While these possible-yet-never-realized histories are invisible, Taleb uses Monte Carlo simulations to play out the possible histories in the financial market. It might be impossible to do Monte Carlo for the case of our leadership studies, but alternative histories as a mental model is valuable.

Now, let’s apply survivorship bias and alternative histories to my previous post on leaders and writing skills. My friend Moritz asked if I could prove causality between writing and great leadership. I can’t. Using survivorship bias, I cannot help but imagine the possibility that for every young Winston Churchill who dodged all the bullets passing by his ears as a battlefield journalist, many other brilliant writers became casualties amid their adrenaline rush. Thinking in alternative histories, one can only imagine that had young Churchill repeated his risky military adventures more frequently, he might have died from a bullet. No matter how older Churchill proved his leadership and literary skills, young Churchill exhibited the traits of a risk-loving “gambler”.

In his book, Taleb praises Homer for not judging the historical figures in his epics by their military results. The Homeric heroes are heroes because of their heroic behaviours, not because they won or lost the war. Yet heroes aren’t necessarily great leaders. The criteria for great leadership is hard to meet and, often, one must live long enough to prove his or her resilience and antifragility. Which leads us to the next point.

3. Ergodicity

Despite thinking that the histories of certain men and women contain too much randomness to be taken seriously, Taleb brings up another interesting mathematical concept with a fancy name—ergodicity—that gives us some remedy. In plain English, ergodicity means that under certain conditions, different alternative histories, a.k.a. sample paths, that are very long would end up resembling each other.

Unlike many “hard” sciences, history cannot lend itself to experimentation. But somehow, overall, history is potent enough to deliver, on time, in the medium to long run, most of the possible scenarios, and to eventually bury the bad guy.

Over a short time increment, we observe the variability of the portfolio, not the returns. So those who were unlucky in life in spite of their skills would eventually rise. Those lucky fools who have benefited from some luck in life would slowly converge back to the state of their true idiocy.

Lincoln, despite only served one two-year term in the House of Representatives in his fifty-one years of life, rose up to the national level by winning the presidential election. He was assassinated at age 56 but had proved his extraordinary leadership skills. Hitler, playing with fire for his entire political career, ended up losing his Third Reich and committing suicide at age 56. He proved himself to be a fool who did not learn from history.

4. History vs. Historicism

For Taleb, history is of use at the level of his desired sensibility, affecting the way he wishes to think by reference to historical events, by stealing ideas from other great minds and leveraging them better, and by correcting the mental defect that blocks his ability to learn from others.

By history I refer to the anecdotes, not the historical theorizing, the grand-scale historicism that aims to interpret events with theories based on uncovering some laws in the evolution of history—the sort of Hegelianism and pseudoscientific historicism leading to such calls as the end of history (it is pseudoscientific because it draws theories from past events might have arisen from randomness; there is no way to verify the claims in a controlled experiment).

After all, history is full of randomness. Therefore, learning from history requires not just reading the stories of past humans, but also a probabilistic mind that can discern randomness from signals. So how does Talbe learn from history? He loves learning from history in two ways: from the past by reading the elders; from the future by playing his Monte Carlo toy.

Thanks for Reading!

You’re welcome to comment or email me about your thoughts. Please help me out by recommending Plutarch to your friends as well.