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Luck, Accidents, and the (Mistaken) Sense of Control
What in your life can you control?
Not much, as it happens. In fact, most of the areas we feel most in control of are riddled with uncertainty and unpredictability: business, health, parenting, finances. In a lot of cases – like picking which stocks to invest in – the average person actually underperforms random selection. That is, when it comes to picking stocks, a monkey with a dart board and a copy of the stock page can do a better job picking winning stocks than most ostensibly informed humans.
Why is that? In the case of selecting stocks, it’s because while a random selection has a 50/50 chance of going up or down, we humans tend to invest our choices with emotional weight that keeps us in markets too long or too short – unlike randomness, we act on hunches, fears, and hopes. More generally, we tend to be poor judges of risk and uncertainty, yet we have brains that are more than willing to impose patterns and meaning that cover up rather than address such unknowns. So we act as if we knew what we were doing, and as if we had some level of control over the situation, when really we’re at the mercy of luck – and the more uncertain the situation, the more likely we are to act as if we were in control.
The (Mistaken) Sense of Control
Consider this situation: Let’s pretend you have an infant girl, and one night you get a call at 1 am from a friend across town who desperately needs your help. As you prepare to drive across town to meet your friend, you have a choice – leave the child sleeping in her crib, or bundle her into a car seat and take her with you.
For most parents, this is a no-brainer – of course you’re going to take her with you. What if something happens in the house while you weren’t there, like an electrical fire? What if someone broke into the house and kidnapped her? What if she stopped breathing?
The reality, though, is that the single riskiest thing you could do to an infant at 1:00 am is to take her driving in a car. Far more people die every year in car accidents than in all the potential risks to your child alone at home combined. In your car, she’ll be exposed to danger from poor road conditions, mechanical failure, and worst of all, other drivers – who at 1:00 am are likely to either have been drinking or be exhausted, neither of which makes them safe to be sharing the road with.
But with our child with us, we feel in greater control than if she was left at home, unattended. There’s no rational basis to this feeling – it’s entirely grounded in emotion, a poor comprehension of risk, and an over-assessment of the degree to which our own presence has any significance.
Our failure to understand risk and the role chance plays in our lives is profound and cuts across a wide swath of our lives. Consider the efforts we make to assure our children grow up with decent values – and how often parents raise kids that completely reject their values. Or consider how many businesses go under every year, and how many of them were headed up by people with strong qualifications, solid training, and a clear sense that they knew what they were doing. Or, in the financial sector, consider how many stock brokers, financial analysts, and others are caught entirely by surprise by massive shifts in the financial sector, like the recent collapse of the credit system – if there were really a pattern, and people really understood it, they all should have seen it coming.
Dealing with uncertainty
If we’re really bad at understanding risk, and if we’re led astray by a mistaken sense of control, then what should we do? Should we just throw up our hands and accept whatever Fate throws at us? Should we lock ourselves in our homes, wrap ourselves in padding, and huddle in a corner until our lives mercifully end?
Fatalism and despair are, thankfully, over-reactions to the uncertainty of life. As it happens, there are quite a few things we do control, even in the midst of uncertainty. For instance, while even the best poker players are largely at the mercy of luck as to what cards they hold, good players can control enough of the situation – their facial gestures, how much they bet, when to fold, etc. – to come out of even several lousy hands in a row ahead (at least sometimes).
While we can’t eliminate uncertainty, there are ways we can act to minimize its effects – at least in some instances. If the Moon spins out of its orbit and collides with the Earth tomorrow, all bets are off. But for more everyday sorts of uncertainly, it pays to:
- Be prepared. Good planning leaves enough “slack” to adapt readily to unforeseen circumstances. For example, many people keep a “rainy day fund” to make sure they’re prepared for an illness, loss of a job, accident, or other emergency.
- Diversify. Balancing high-risk options with low-risk ones can help make sure that a sudden freak occurrence wreck everything. It’s the classic “don’t put all your eggs in one basket” theory – balance your investment portfolio, hedge your bets, pursue multiple medical treatments (where possible), and so on.
- Get a second opinion. Or a 100th. James Surowiecki’s The Wisdom of Crowds shows how the cumulative voice of the many can be more accurate than any one individual, even an expert. Whenever undertaking a risky endeavor, make sure to consult as many people as possible – and find a way to split the difference. Get another doctor’s opinion before embarking on a course of treatment, Discuss investment options with more than one financial advisor. Get feedback from a range of employees before instituting a radical new policy or process. By sampling a variety of people, you’ll have an opportunity to “cancel out” conflicting worldviews that, in most cases, have little to do with the reality at hand.
- Create habits. Uncertainty often leads us astray most when we respond directly to fluctuating and random events. For instance, maybe you go to Vegas with a $300 budget to spend on slot machines, but when you see a particular jackpot is up to $12 million you throw caution to the winds and drop $800 into the machine. Creating habits that you stick to religiously can help minimize the desire to act based on emotional factors that have little to do with the actual level of certainty or uncertainty involved.
- Recognize risk. There is a far higher injury rate for softball players than for base jumpers. Why? Because softball is seen as a safe sport and so players take few precautions, while base jumpers train heavily, invest in solid equipment, and approach the risk inherent in their sport seriously. When you recognize risk and respect it, you act smarter – which helps you to stay more in control when that’s possible, and to minimize harm when control isn’t possible.
Life itself is inherently uncertain – and that’s a good part of its beauty. That uncertainty shouldn’t paralyze us, it should energize us – it should make us doubly aware of our surroundings and doubly appreciative of our successes. By ignoring risk – or pretending it doesn’t exist – we make ourselves stupider, which ironically leads us to act in riskier ways. By respecting and even embracing uncertainty, we can often come out even further ahead than if we tried – usually in vain – to control inherently uncontrollable situations.
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