1. “There’s a quick and easy way to test whether an activity involves skill: ask whether you can lose on purpose. In games of skill, it’s clear that you can lose intentionally, but when playing roulette or the lottery you can’t lose on purpose.”
2. “Much of what we experience in life results from a combination of skill and luck.”
3. “Great success combines skill with a lot of luck. You can’t get there by relying on either skill or luck alone. You need both.”
4. “So here’s the distinction between activities in which luck plays a small role and activities in which luck plays a large role: when luck has little influence, a good process will always have a good outcome. When a measure of luck is involved, a good process will have a good outcome but only over time.”
5. “When everyone in business, sports, and investing copies the best practices of others, luck plays a greater role in how well they do.” “It’s not that investors lack skill. As investors have become more sophisticated and the dissemination of information has gotten cheaper and quicker over time, the variation in skill has narrowed, and luck has become more important.”
6. “If you take concrete steps toward attempting to measure [the contributions of skill and luck to any success or failure], you will make better decisions than people who think improperly about those issues or who don’t think about them at all. That will give you an enormous advantage over them.”
7.“Not everything that matters can be measured, and not everything that can be measured matters.”
8. “Even if we acknowledge ahead of time that an event will combine skill and luck in some measure, once we know how things turned out, we have a tendency to forget about luck.”
9. “One of the main reasons we are poor at untangling skill and luck is that we have a natural tendency to assume that success and failure are caused by skill on the one hand and a lack of skill on the other. But in activities where luck plays a role, such thinking is deeply misguided and leads to faulty conclusions.”
10. “The trouble is that the performance of a company always depends on both skill and luck, which means that a given strategy will succeed only part of the time. So attributing success to any strategy may be wrong simply because you’re sampling only the winners. The more important question is: How many of the companies that tried that strategy actually succeeded?
11. “The process of social influence and cumulative advantage frequently generates a distribution that is best described by a power law. … One of the key features of distributions that follow a power law is that there are very few large values and lots of small values. As a result, the idea of an “average” has no meaning.”
12. “Knowing what you can know and knowing what you can’t know are both essential ingredients of deciding well.”
Interesting – more here – 25iq
