Tuesday, January 16, 2018

Inversion

Definitions

Inversion can be defined as ”Something that is the opposite of what it was before” or as ”A reversal of position, order, form, or relationship”.

Inversion is a powerful problem-solving tool

When we are confronting a problem, we can many times get an easier answer by inverting the problem. For example, calculating probabilities of certain events are easier by calculating them not happening. Many times we save time too. There are also many other math problems that are easier to solve with inversion.

There are many other problems to take inversion into advantage. One of the best ways to use it is to ask ourselves, what we shouldn´t do? Many strategies focus on what to do and forget maybe even more important aspect of what not to do. Successful people should ask themselves ”What shouldn´t I do to stay successful?” instead of asking ”What I should do to stay successful?” They should also ask ”What I shouldn´t do the same way as before?” instead of asking ”What I should do the same way as before?” in order to become more successful. It is also easier to think about what not to do than what to do. Failures leave more clues. Success can be a consequence of some small change in our daily habits. Basically, we learn more by thinking about what went wrong, instead of thinking what we did right. It is even better to learn from other people´s mistakes.

Successful investing is more about avoiding catastrophical losses than getting this right. Avoiding all the insanities of other investors help us to get better investment returns. When we lose less, we have a possibility to gain more capital. Some of the craziest things investors do can destroy an investing career. Avoiding them is a requirement for investing success. We can also use inversion in investing, by trying to find as much disconfirming evidence as possible about our best investing ideas. By doing this, we will probably not invest too much money to them. And we can even gain an insight that the idea is as good as you think it is.

We should also ask ourselves, ”What we don´t know?” We get more into trouble about the things we don´t know than things we know. We should not focus on the things we don´t understand or we don´t have enough information about. One thing we usually forget is that we cannot predict the future. It is always the thing we don´t really know. We can make predictions, but we should understand that their success is always uncertain. Instead of predicting, we should think about the probabilities and accept the uncertainty.

Thinking about the worse case scenario instead of success

We should also think about what are the consequences of failing. If we are considering some big changes in our life, we should also think about the worst case scenarios for them. For example, trying to do something else than we have done before may not have many bad consequences. This is especially true, when our ordinary life is not very satisfactory. By figuring out what are the worst things that could happen, we may free ourselves from the agony of not taking an action. We can see that failing is not a very bad option, compared to not doing anything.

For example, learning a latticework of mental models with information from most of the biggest scientific disciplines by studying the works of the all time greatest practitioners don´have many bad consequences. It may cost us some money and time. There are always some opportunity costs. We get better understanding of the world and people by developing our latticework of mental models. The worst thing that can happen is learning the wrong things. And this is added to the loss of money and time. When we focus on finding the best sources for learning the mental models, the risk of wrong sources is low. In my opinion, the opportunity costs of learning the new things from other disciplines than our field of expertise are low.

Sources:



-TT

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