On the dangers of tinkering:
Munger on Making Decisions within Our “Strikezone”: We all have a strike zone, this is our circle of competence. This is an area in which we are capable of understanding with a high degree of probability the relevant variables and likely outcome. Making decisions within our circle improves the odds we’ll do well. This is our sweet spot and it’s different for all of us. The problem is everyone wants to have a large circle. We think bigger is better. But the size of the circle is not really what’s most important. Knowing the boundaries of our circle of competence is more important than its size. Familiarity with something is different than competence. Charlie Munger says “It’s not a competency if you don’t know the edge of it.” In some decisions, such as investing, we can choose to do the same thing. We can sit around, read, and wait for the right opportunity. Most decisions, however, are not of that nature. We simply don’t have the option to wait for the perfect pitch. We have to make decisions in an uncertain world with imperfect information. Knowing the boundary of our aptitude, where we bat above average and where we don’t, can help guide those decisions and how we make them. Making decisions outside of our circle of competence (i.e., we don’t know what we’re doing) is riskier than making decisions inside our circle (i.e., where we do know what we’re doing.) Baseball great Ted Williams batting average dropped off when he swung outside his core, and so to will ours. If we have to decide something and we know we’re not in our sweet spot, we can take steps to improve the odds of making the a better decision. Or, at the very least, acknowledge that the decision we’re making is risky--we know we’re the patsy. Whatever decision you’re making, know where it falls in your strike zone. To the extent possible you should attempt to deal with things that you are capable of understanding.
Playing “Not to Lose” in Investing (and Life): Avoiding Stupidity is Easier than Seeking Brilliance. In tennis, there is a Winner’s Game and a Loser’s Game. Tennis (like investing) can be subdivided into two games: the professionals and the rest of us. Players in both games play by the same rules and scoring. They play on the same court. Sometimes they share the same equipment. In short the basic elements of the game are the same. Sometimes amateurs believe they are professionals but professionals never believe they are amateurs. But the games are fundamentally different. Professionals win points whereas amateurs lose them. The amateur duffer seldom beats his opponent, but he beats himself all the time. The victor in this game of tennis gets a higher score than the opponent, but he gets that higher score because his opponent is losing even more points. In expert tennis, about 80 per cent of the points are won; in amateur tennis, about 80 per cent of the points are lost. In other words, professional tennis is a Winner’s Game – the final outcome is determined by the activities of the winner – and amateur tennis is a Loser’s Game – the final outcome is determined by the activities of the loser. The two games are, in their fundamental characteristic, not at all the same. They are opposites. Ordinary players can win by losing less and letting the opponent defeat themselves…the strategy for winning is to avoid mistakes. The way to avoid mistakes is to be conservative and keep the ball in play, letting the other fellow have plenty of room in which to blunder his way to defeat, because he, being an amateur will play a losing game and not know it. If you’re an amateur your focus should be on avoiding stupidity.
Avoiding Stupidity: Most of us are amateurs but we refuse to believe it. This is a problem because we’re often playing the game of the professionals. What we should do in this case, when we’re the amateur, is play not to lose. Munger – “...try more to profit from always remembering the obvious than from grasping the esoteric. … It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent. There must be some wisdom in the folk saying, `It’s the strong swimmers who drown.’”
via Negativa: It is the negative that’s used by the pros, those selected by evolution - chess grandmasters usually win by not losing; people become rich by not going bust (particularly when others do); religions are mostly about interdicts; the learning of life is about what to avoid. You reduce most of your personal risks of accident thanks to a small number of measures. The greatest— and most robust— contribution to knowledge consists in removing what we think is wrong— subtractive epistemology. In life, antifragility is reached by not being a sucker. We know a lot more of what is wrong than what is right, or, phrased according to the fragile/robust classification, negative knowledge (what is wrong, what does not work) is more robust to error than positive knowledge (what is right, what works). So knowledge grows by subtraction much more than by addition— given that what we know today might turn out to be wrong but what we know to be wrong cannot turn out to be right, at least not easily. This is a subtractive strategy.
Via Negativia Is Superior To Via Positivia: Iatrogenics comes from intervention bias, via Positiva, the propensity to want to do something, causing more problems than existed before the intervention. On the other hand ,via negativa, the removing of things, can be quite a potent (and, empirically, a more rigorous) action. If true wealth consists in worriless sleeping, clear conscience, reciprocal gratitude, absence of envy, good appetite, muscle strength, physical energy, frequent laughs, no meals alone, some physical labor (or hobby), good bowel movements, no meeting rooms, and periodic surprises, then it is largely subtractive (elimination of iatrogenics).
Naive Intervention And Iatrogenics: Iatrogenics is Greek for “caused by the healer.” We have predisposition to do something instead of nothing even when nothing may be the better option. We create fragile systems in our attempt to reduce volatility in the short term. (for example, iatrogenics is not linear. We should not take risks with near-healthy people; but we should take a lot, a lot more risks with those deemed in danger). Causes are lack of clear feedback loops between action and outcome, and the treacherous condition in which the benefits are small, and visible— and the costs very large, delayed, and hidden, and are much worse than the cumulative gains (e.g., Kenye West’s plastic surgery opertion to improve her appearance resulted in her death). Combat by seeking disconfirming evidence to our actions, by thinking through unintended consequences, and by realizing sometimes no action is better than any action. “First evaluate the risks, then evaluate the gain.”