It's
possible to be doing everything right and still have a bad day. Not every
effect you experience is related to something you caused. While it can be
comforting on some level to assign a cause & effect judgment the day to day
happenings in our lives, it seems to me there are so many variables, so many
causes and effects flying around at once, that people can get caught in each
other's crossfire or other external events.
There is a
great difference between short-term and long-term trends. Over time, the
correct causes and effects can be correlated , but the short term is effected
by noise. It's kind of like flipping a coin. You know that heads or tails are
each likely to come up 50% of the time …
after an infinite number of flips.
In the short-term though, you won't see 50-50 results.
I grabbed a penny and
flipped it 10 times. Here's what happened (where H = Heads; T = Tails) :
T H H H T H
T H H H
Result:
Heads 70% of the time; Tails 30% of the time.
So, is the
50-50 thesis a total failure? Should you have predicted three heads in a row - twice?
Fortunately, the penny example is a simplified model that can be easily sanity
checked. The odds on each unique toss
are indeed 50-50. (For people concerned about physical weighting discrepancies and
air currents and such, you could do the test using just numbers a computer
model.) Anyway, I hope this is a useful example to see that a completely viable
long term strategy might not produce consistent results in the short term.
When you are
attempting to do something at all
creative or independent, as soon as something
doesn't go quite right, it is so tempting to see that as proof of some innate
problem with your brilliant plan. Whenever you are trying something new, doubt
inevitably follows at the hiccups along the way. And I for one, learn by trial
and error, so am quite used to running into problems and trying to fix or
optimize a situation when I see something go amiss. I definitely see there is a point though where you are
just reacting to noise. Finding that fine line between what feedback is related
to your innate plan, and what was just tough luck is up to each individual
person.
I have found though that our society seems very easily to jump to a
simplistic moralizing - ie: misfortune is caused by bad deeds; fortune is caused
by good deeds. While this may be the case some of the time, I do not think it
is always the case.
From day
one, we learn the reward/punishment system. You walk into a wall, it hurts,
don't do that. You walk in a straight line, you pick up your toy, you win. It's
a decent system, and it works a lot of the time. In some sense though, it is
essentially a dependency. A kind of slave mentality. I say a more optimal
approach is becoming adept at picking not from two options (bad=punishment vs good=reward), but from
four possibilities:
| Bad Result | Good Result |
Punishment
vs
Reward | Bad Strategy | Good Strategy |
Short Term
vs
Long Term | Good Strategy | Bad Strategy |
That is:
- When you have a bad result, it could be due to either:
- a bad strategy OR
- despite a good strategy.
- When you
have a good result, it could be due to either:
- a good strategy OR
- despite a
bad strategy.
The top line
of the table, we are all familiar with. It was pretty much a staple through
childhood & academia, and is ingrained in the very fibers of our nervous
system. It is indeed a useful and reliable feedback mechanism, but I'm
highlighting the bottom row of this table for this post.
When short term
results are out of sync with the long term results, it can cause great
confusion, and essentially
introduces noise into our feedback from the
world.
Punishing Good Ideas :(
A good
strategy can appear to produce a bad result. Even though a good strategy badly
implemented could produce a bad result, I think it is especially interesting to
focus on where both a good strategy AND a good implementation can STILL appear
to show a bad result. Take the stock market, for instance. (I actually think
there are many cases where thinking about stock market behavior is an
interesting model for various aspects of life; it removes a lot of variables,
and can help clarify an underlying structure.) If you look at the history of
just about any stock (I mainly use
Yahoo Finance), you will notice when you
zoom out to the max time range, that there are general up or down trends over
the course of the years. Some can be quite dramatic. Now, zoom in on a
particular month, week, or day. In the middle of some glorious up trend, you
can have bad days; maybe really bad days. Similar story for the long-term
downward trends.
 |
| Figure 1: Short Term Trend |
Here are two
random stocks (I've never owned either) to show as an example. The first figure
shows the two day trend for these stocks (using the adjusted close). If you had
bought the blue colored stock (based on whatever research you though was
compelling) and then saw this two day decline, should you interpret that as a
universal signal to sell? Maybe that two day downward trend was indicative of
some underlying problem, an early warning sign … or maybe it was just noise. This is where your
judgment, your logic, your gut feeling, whatever it is you use should come in
to play when investing resources in your strategy.
 |
| Figure 2: Longer Trend |
In the
particular example, the blue colored stock made a huge comeback over the next
several months, while the green colored stock took a tumble. The short term was
NOT indicative of the long term.
It is a case where something beyond a
primal punishment vs reward strategy would be needed to produce optimal results.
Of course, timelines are essential to consider when you are labeling something
as either a good or bad result ... these particular two stocks have subsequently
switched places again. Timing is everything. ;p
In some
sense, reacting as if all feedback follows a punishment/reward model can be
like kicking someone when they are down. It's interesting to watch the Olympics
or other competitions with this in mind. When a sure winner ends up loosing,
the shift seems to be almost immediate. As soon as results are announced,
commentators, spectators, and competitors alike all seem to switch mindsets
immediately as if this outcome was inevitable. Really? Seems like redefining
reality in a way that removes the uncomfortable thought that the truly
better player did not win. There is something so primal, so final, so
comforting about tangible results. After all, they are undeniable. But it would
be a tragedy for temporary or random noise to destroy what is a glorious
long-term potential.
Certainly,
I've experienced many times where I thought I had a good strategy and held my
ground only to realize that whatever negative results I kept getting really
were the universe trying to tell me something ;p I think balancing boldness and
humility is a key to picking the optimal strategy a higher percentage of the
time.
Rewards for
Bad Behavior
Just as a
good idea can have a bad day, it is also possible in the short-term, for a bad
idea to be rewarded (or appear to be rewarded). Using stocks as an example
again, you could randomly close your eyes and pick a stock from a list and
invest in it. You may make a lot of money with that stock over a period of
time. But once you realize that you are essentially running blind through a
mine field (bad strategy), seems to me the wise course of action is to count
your lucky stars and get out of there while you still can. Sometimes what
appears to be a reward might have nothing to do with your strategy. By being
vigilant and continually checking your strategy, even if you think it is
producing good results, you could similarly benefit by realizing that the short
term results may not be indicative of the long term. In that way, you could get
out early instead of waiting for your actually bad idea to finally produce a
bad result.
Stop Loss
One more
stock analogy. (What can I say, looking at numbers can be good way to
disassociate from an emotional attachment to an outcome to see an underlying
pattern.) When a stock is losing too much value, selling that stock is referred
to a 'stop loss'. It's painful (you intended all investments to do well), but
if you decide the future prospects for return on investment on that stock are
not worthwhile, cashing out can be a very wise move. Optimizing your resources
is the key, after all. Extending this kind of strategy to other aspects of life: it's the
difference between giving up and moving on.
- 'Giving up'
would be when your gut is telling you the long term prospects are good, but
short term downside leads to doubt (and maybe even a social pile on), so you
abandon your idea.
- 'Moving on'
would be that your gut is telling you this is a bad long term strategy, so you
abandon your idea.
Conclusion
I'm not
saying there is an easy way to know if feedback is based on a punishment/reward situation or the effect of short term noise, but I at least wanted to show that some negative feedback may be producing false doubts which are based on an ingrained punishment/reward model without
enough consideration for the long term. False doubts can cause
independently minded people to throw away a really good idea … and turning good ideas into
tangible results is difficult enough. Hope this post encourages more people to give
their ideas a fair shake!
by Laura A Knauth
