Nassim Taleb introduced the term ‘ludic fallacy’ in Black Swan. You may think that you know the contents of the book from the press coverage even if you haven’t read it, but my suggestion would be to read it even if you think you know what it’s about — the coverage tends to be misleading.
If you have the book, you can flip to chapter nine and review it before you read the rest of this post.
The ludic fallacy is mistaking a model, especially a model of human behavior, for the real world. It’s partly intended as a caution against using game theory, economic theories resting on faulty assumptions of humanity (‘homo economicus’), and other artificial environments.
Taleb contrasts two characters: Fat Tony and Dr. John.
Basically, Fat Tony always looks for an angle and never expects fair competition. Dr. John expects the world to conform to the models that he has picked up through his studies, and anticipates that the world is fair, much like a game of chess in which both sides start out with almost perfect symmetry.
Dr. John thinks that his plan will work. Tony expects to be punched in the face and instead trusts more in his ad hoc assessments and empirical experience.
Taleb writes “A nerd is simply someone who thinks exceedingly inside the box.” America elevates these nerds into high positions because America is a place that produces boxes upon boxes upon boxes upon standardized boxes, and does its best to mold its territory into a series of rationalized, predictable boxes. Yet nature dislikes being confined to such boxes and strains against them, despite the nerd’s attempts to eliminate unpredictability.
Even in highly managed environments, like the casino Taleb uses in this chapter, can be struck by difficult-to-predict catastrophes — the largest loss incurred by the casino in question, of $100 million, happened when Roy of ‘Siegfried & Roy’ was mauled by his white tiger, despite decades of placid behavior by the great cat. The casino was robust against card-counters and cheaters, but vulnerable against a shock from an unforeseen angle.
The desire to make the world predictable can blind people to reality:
It is why we Platonify, liking known schemas and well-organized knowledge — to the point of blindness to reality. It is why we fall for the problem of induction, why we confirm. It is why those who “study” and fare well in school have a tendency to be suckers for the ludic fallacy.
Taleb suggests that you denarrate — disconnect from media, including blogs, in part to train yourself to spot “the difference between the sensational and the empirical.”
He expands on the concept in Antifragile, particularly in Chapter 16, when he compares the ‘ecological and the ludic.’ Football is a game. War is not a game. But people often try to draw lessons from football to apply to domains like war and business. Similarly, business is governed by laws, but war usually operates under an entirely different set of laws which may or may not be enforceable.
From p. 241:
It is not well advertised that there is no evidence that abilities in chess lead to better reasoning off the chessboard— even those who play blind chess games with an entire cohort can’t remember things outside the board better than a regular person.
Provided we have the right type of rigor, we need randomness, mess, adventures, uncertainty, self-discovery, near-traumatic episodes, all these things that make life worth living, compared to the structured, fake, and ineffective life of an empty-suit CEO with a preset schedule and an alarm clock.
The way to gain an advantage over nerds is to just take advantage of their predictability.
If you know the model that they’re operating under, you can generally predict how they will blunder, and then position yourself to gain an advantage as they stumble. They can’t handle volatility because it breaks their mental models, which makes them panic. A sucker punch sends them scrambling to try to make their world predictable, solid, and box-like again.
The progressive project primarily works by conflating their models for the underlying world. Their priests believe that by changing the models, they can change the underlying reality. Because so many of the people who most fervently believe in the writ of progress live almost entirely in a model world rather than the real one (hence the Starbucks full of people staring into screens), they tend to be oblivious to changes in the natural world.
So, the focus ought to be on what can be done to de-Platonify life, rather than launching endless new counter-models against the ones who insist that everything can be rationalized.