Chinese Businessmen: Superstition Doesn't Count

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  • But if rationality matters so much, how is it that an entire generation of Chinese businessmen could remain so superstitious yet achieve so much success?
  • To explain this, it helps to understand that there are two commonly understood forms of rationality, and LessWrong is mostly concerned with only one of them. The two forms are:
    • Epistemic rationality — how do you know that your beliefs are true?
    • Instrumental rationality — how do you make better decisions to achieve your goals?
    • Jonathan Baron calls the first form — epistemic rationality — “thinking about beliefs”. He calls the second “thinking about decisions”.
  • If you’re instrumentally rational, you don’t need to optimise for correct and true beliefs to succeed. You merely need a small set of true beliefs, related to your field; these beliefs can be determined from trial and error itself.
  • Keith Stanovich laments that almost all societies are focused on intelligence when the costs of irrational behavior are so high. But you can pick out the signatures of rational thinking if you are alert to them. According to Stanovich, they include adaptive behavioral acts, efficient behavioral regulation, sensible goal prioritization, reflectivity, and the proper treatment of evidence.
  • If I were to summarise the rough thrust of these books:
    • Don’t do trial and error where error is catastrophic.
    • Don’t repeat the same trials over and over again (aka don’t repeat the same mistakes over and over again).
    • Increase the number of trials you can do in your life. Decrease the length and cost of each trial.
    • In fields with optionality (i.e. your downside is capped but your upside is large) the more trials you take, and the more cheap each trial costs, the more likely you’ll eventually win. Or, as Taleb says: “randomness is good when you have optionality.”
    • Write down your lessons and approaches from your previous successful trials, so you may generalise them to more situations (Principles, chapter 5)
    • Systematically identify the factor that gives positive evidence, and vary that to maximise the expected size of the impact (Thinking and Deciding, chapter 7)
    • Actively look for disconfirming evidence when you’ve found an approach that seems to work. (Thinking and Deciding, chapter 7, Principles, chapter 3).
  • It doesn’t seem like the sorts of rationality that LessWrong prizes, or even the sort of rationality explored by Kahneman and Tversky’s research matter that much when it comes to success in business or in life. I suspect that instrumental rationality, deployed in the service of trial and error, is ultimately what matters.