From Russian Roulette to Overcautious Decision-making

Ariane Chapelle

In one of the opening statements of his 2001 book, Fooled by Randomness, Nassim Nicholas Taleb highlights the necessity of judging decision-making by the risk taken rather than by its outcome. His illustration is Russian roulette: just because you survive the game doesn’t mean it was clever to play.

As a mother, my equivalent example would be your kids crossing a road without looking: you may be happy to find them alive on the opposite side of the road, but rather than celebrate their success, you would probably give them the lecture of their life on the dangers they faced due to their carelessness.

A parallel is sometimes drawn between careless actions and excessive risk-taking in financial institutions: if a proprietary trader exceeds his limits and turns a profit, the right reaction is not to congratulate them for their success, but rather to blame them for the inconsiderate risk they took.

However, Russian roulette and excessively risky trading are not exactly comparable decisions: in the first instance, there is only downside (you can die) and no upside (unless you play for a large sum of money, perhaps); in other words, you can only lose.


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