Dance with Chance by Makridakis Hogarth Gaba
Making Luck Work For You - Spyros Makridakis Robin Hogarth Anil Gaba
Mar 17, 2009
These three professors start by asking the reader what are their three wishes for the future? And typically get answers focused on happiness, long life [and healthy], wealth and success [rich, famous, published author, top sports person and so on]. The authors use this to then explore the role of chance in medicine, investments and business management and what the individual can do to "dance with chance".
Illusion of Control
The authors wish to help people make better decisions in situations where accurate forecasting is not possible. The key insight being to recognise uncertainty and what can and cannot be predicted or the limits to predictability. The illusion of control assumes predictability, ignores uncertainty and minimises the role of luck, that our own ability and actions can overcome the effects of chance.
Paradox of Control
The paradox of control is that by being realistic and giving up the illusion of control one actually increases the genuine control we have over our lives. The authors explore this paradox by using real and imagined storied examples along with empirical evidence for each of the three key areas: medicine, investment and business. In the process they arrive at various conclusions such as
- Consulting doctors, taking precautionary tests, or having regular check-ups does not increase life expectancy
- Experts in economics and finance can explain the past but they are no better at predicting which securities will bring the best returns than a monkey with a dartboard
- It is not clear that management gurus can explain the past let alone predict the future
- Expert judgment is typically inferior to simple statistical models [such as credit-worthiness]
- Averaging independent predictions usually improves forecasting accuracy
Making Luck Work For You
The authors devote a number of chapters to showing the reader the process for making luck work for you:
- Be aware of the two types of uncertainty [read the book!]
- Use accept-assess-augment to fully understand the uncertainty
- Support intuitive decisions with thinking wherever possible
- Exploit simple modeling for decision-making
Chance and Happiness
According to the authors the role of chance plays a significant role in happiness and they note that there are experts to fend off "positive psychologists" with "empirical evidence proves the self-styled experts wrong. Golf seems to work just as well as their recipes for happiness".
Dance with Chance
Dance with Chance is an easy to read book that couples empirical evidence and illustrative stories to show both the illusion of control and the paradox of control. The text focuses on areas of the most interest to the most people: medicine, investment and business. It also explains techniques for identifying and working with types of uncertainty for better decision-making. In short, interesting and informative.
Dance with Chance by Spyros Makridakis, Robin Hogarth, Anil Gaba. Oneworld 2009. ISBN: 978-1-85168-653-7
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