One-sentence summary: Sometimes failing at things makes it harder to try in future even if you expect things to go well, and sometimes people are so afraid that they give up on trying, but you can break out of this by making small, careful bets with your energy.
Expectation and Variance
Suppose you were offered a bet: a fair coin flip, and if it's heads, you lose £10, but if it's tails, you get £20. This is a fantastic deal. You will, on average, make £5. So if you could make this bet 1000 times you absolutely should, because on average you'll make £5000. Technically speaking, this bet has a positive expected value.
On the other hand, if you were offered a single flip where you bet everything you own against double that, it starts to look like quite a bad idea. The half chance of tripling what you own is not worth the half chance of losing everything. In terms of expected value this is the same as making the £10 vs £20 bet a bunch of times, but it has a much higher variance: the chance of getting an extreme outcome has gone up a lot.
I think the world is actually full of these kinds of bets where, on average, you stand to get a lot more than you put in, it's just that the stakes are so high that people can't afford to make the bets. The expected value is great, but the variance is too high.
I have been very fortunate to have a lot of time over the past year to talk to different people about what they want to achieve and what's holding them back. Surprisingly often, I find that a large part is people having some internal resource that's in short supply, such that they can't take risks with a positive expected value because the variance is too high.
The general theme is, you want to take some big risk, but you're terrified that it will go wrong. And if it went right, you'd get some kind of insulation that made it more ok for similar risks to not pan out in future, but there's no easy way to get to that state from where you are now. Plus, if it goes wrong, it will be harder for you personally to muster up the energy to try again.
It could be about being vulnerable with people and asking for emotional support which you kind of need - suppose you open up and it goes well, you'll feel better and it will be easier for you to be vulnerable, but if it goes wrong then you will feel even worse and it'll be even harder to ask for help. So instead, you just don't open up to people.
It could be about investing energy in working on big projects and trying to see them through to the end - suppose you sink a bunch of time and actually produce something great, well, you'll have made a great thing and you'll know that you can. But if you give up half way through then you'll lose some faith in yourself and it'll be even harder to try next time. So you stick to small projects and don't really get much done.
It could be about getting off the beaten path. You feel like you're stuck in a job you don't like and you could be doing so much more if a few things were different. And if you go pursue your crazy startup and make a bunch of money, you'd be able to try all your other crazy ideas, but if you can't pull it off you'll be broke and unemployed. So you stick with the job you don't like.
What to do
There are, as far as I can tell, three approaches. The first is a bad idea, the second is really hard, and the third is what I'll be advocating for.
Just do it
The first is to just go for the thing. This is usually a terrible idea. It's the natural choice and I think people often do it out of desperation, but I believe that there are two better alternatives.
Break the link
The second is to dodge the problem entirely by breaking the connection between the risk and the payoff, so that you're just not risking whatever resource you're short in:
- find a way of opening up that doesn't tax you emotionally where you'd be ok with other people not caring
- work on big projects in a way that doesn't sap your energy and where you'd be happy for your attention to peter out
- try to work on your startup without quitting your job: keep your cushy place on the beaten path but somehow still go all out on your wacky alternative
This is incredibly difficult, and I struggle to actually find ways of breaking these links, particularly when you're short on the relevant resource. But if you can, you're sorted.
The third is to think very carefully about what kinds of resources you're short on, how much you can afford to lose, and just build up the resources slowly. Open up a little bit, enough that you'll be ok with some of whatever you fear. Work on slightly bigger projects: go from scrappy writing to short stories to an anthology of short stories to a novel. Make a little side project that's just an MVP.
It's not a sure thing. Maybe you finish three short stories and totally stall on the fourth. But now you have three small finished products instead of one half-written novel. And also, now you know you're capable of that.
Organise small gatherings! Write little poems and send them to two people who you kind of respect! Commit to an exercise routine for just a week! Tell someone you kind of admire that you kind of admire them! And then really notice that it tends to go basically fine, and scale up accordingly.
Sometimes you do actually need to start small, but so often it seems like there really are great opportunities out there. And the bigger the variance you can absorb, the higher the expected value seems to be, because there are way fewer people taking high variance bets. You do have to build up to it, but I think you can be systematic about it, and my anecdotal experience is that this is pretty great.
(And if it doesn't work, you won't lose much.)
Thanks to Tommy Noe for catching an error in the first version of this. Cross-posted from my blog.
EV is not measured in money but in utilons.
reminds me of this article
One might benefit from modulating their learning so that their failure rate falls in the above range (assuming the findings are accurate).
Sounds like https://www.lesswrong.com/tag/kelly-criterion might be useful reading!