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Failing Upwards

·3 mins

Survivorship bias often gets discussed as a cautionary tale. For example, someone might point out a person’s or company’s success, and another will retort with, “But that’s just survivorship bias!”.

People don’t often discuss how to internalize survivorship bias in an actionable way. In other words: if you know that most people who win the lottery in some fashion (whether in business, investing, dating, or even the actual lottery) did so mainly out of luck, it doesn’t answer the question of how we can use this information to our advantage.

To generate a return, we need to take risks, and the reward is generally proportional to the risk undertaken and the probability of success. If we also know that success in any endeavor is primarily a matter of luck (as opposed to skill), there are a few strategies we can employ to increase our luckiness:

  • We can follow a variation of the martingale strategy, which (in simple terms) involves placing lots of small bets successively, but adjusting the bet amount either up or down, depending on the odds of winning the next draw.
  • We need to increase the number of opportunities to win. In other words, you should diversify your bets to allow you to take advantage of non-correlation. This idea is one of the core principles of the poorly understood modern portfolio theory.
  • We should try to minimize the maximum loss, also known as Minmax. With any big bet, you should ensure the catastrophic case does not wipe you out. Don’t use up all your life savings by buying lottery tickets.

Failing, but in a good way #

One way to think about these ideas is that you should strive to fail upwards consistently. Failing upward means continuing on your way, like when you trip or fall but get back up and continue on your path like nothing happened. Failing downward is when you trip or fall and lie on the ground feeling sorry for yourself, hoping someone will pick you up and make everything okay.

Upward failure is where you feel refreshed in knowing that while your bet did not pay off, you can move on to the next one and focus on other matters or more exciting opportunities.

Upward failure is the expectation that most things in life will not work out the way you want, but that’s okay because so long as you continue to learn, grow, and place a few bets, you will succeed. Skills and experience compound over time, and so long as you keep failing upward the snowball effect will eventually take hold.

Ultimately, how you choose to frame your failures matters. You will fail far more often than succeed.

Lastly, the best way to fail downward is to give up entirely.