The Education of a Value Investor Luca Dellanna on his book Ergodicity, autism, and decision making in our brains.
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Oct 13, 2023 Luca Dellanna, a management advisor and author from Turin, Italy, discusses ergodicity, decision making, and autism. Topics include the concept of ergodicity, luck vs skill, risk management, diversification, decision making vs action taking, and the perception of the world for individuals with mild autism.
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The Skiing Example
- A skier with a 20% chance of winning and a 20% chance of breaking a leg is expected to win 0.71 races out of 10, not 2.
- This illustrates how irreversible losses compound and significantly reduce expected gains.
Ergodicity and Time Horizons
- Irreversible losses absorb future gains, impacting long-term outcomes.
- Focus on the time horizon you want to optimize for, not just individual events.
Maximize the Worst Outcome
- Maximize the worst-case scenario (maxi-min) instead of the best-case scenario.
- Consider the full distribution of outcomes, not just the average or the best possible outcome.