Lindy Effect 101

With Bitcoin's return to the spotlight, debates on its long-term viability are raging. Its proponents contend @nntaleb's Lindy Effect says the technology is here to stay.

But what is the "Lindy Effect" and how does it work?

Here's Lindy Effect 101!

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Incentives are everything.

Here’s a framework for establishing incentives (that actually create desired outcomes):

Great incentives create great outcomes.

But unfortunately, humans are astonishingly bad at establishing incentives—we consistently invite manipulation and unintended consequences.

This thread shares my framework for a establishing better incentives:

Incentives are anything that drives an individual to act in a specific manner.

Intrinsic incentives are internal—created by self-interest or desire.

Extrinsic incentives are external—created by outside factors (reward, punishment).

Today, we'll focus on extrinsic incentives.

In a very simple model, extrinsic incentives typically involve two key components: the measure and the target.

The measure is the metric that the individual or group will be judged upon.

The target is the level of the measure at which a reward (or punishment) will be initiated.

The problem?

This simple model of incentives—which will feel familiar to many—often leads to undesirable outcomes and unintended consequences.

Goodhart's Law explains why:

When a measure becomes a target, it ceases to be a good measure.

The most powerful paradoxes of life:

The Persuasion Paradox

Have you noticed that the most argumentative people rarely persuade anyone?

The most persuasive people don’t argue—they observe, listen, and ask questions.

Argue less, persuade more.

Persuasion is an art that requires a paintbrush, not a sledgehammer.

The Effort Paradox

You have to put in more effort to make something appear effortless.

Effortless, elegant performances are often the result of a large volume of effortful, gritty practice.

Small things become big things. Simple is not simple.

The Wisdom Paradox

“The more I learn, the more I realize how much I don't know.” — Albert Einstein

The more you learn, the more you are exposed to the immense unknown.

This should be empowering, not frightening.

Embrace your own ignorance. Embrace lifelong learning.

The Growth Paradox

Growth takes a much longer time coming than you think, and then it happens much faster than you ever would have thought.

Growth happens gradually, then suddenly.

When you realize this, you start to do things differently.

Logical fallacies are errors in reasoning that undermine the quality of an argument.

THREAD: 20 common logical fallacies to learn, identify, and avoid:

Ad Hominem

Latin for "to the person" - an attack of the person rather than the argument.

Instead of addressing the argument and its points and merits, the offender attempts to refute the opposition on the basis of personal characteristics.

All-too-common in politics.

The Texas Sharpshooter

A Texan fires a gun at a barn wall and then paints a target around the closest cluster of bullet holes to create the appearance of accuracy.

Selecting and highlighting evidence that supports the conclusion while ignoring evidence that may refute it.

The Bandwagon Fallacy

An assumption of truth on the basis of the majority of people believing it to be true.

"Everyone believes X, so obviously X is true."

Typically offered without regard for the qualifications or ability of the people in question to validate the claim.

Straw Man

The offender ignores the actual argument and replaces it with a flimsy, distorted, easily-refuted argument (a “straw man”).

By replacing a strong argument with a weak one, the offender can create the illusion of an easy, swift victory.

The interview process is never fun.

But it’s a real opportunity to stand out.

Master these 10 common questions to nail your next interview:

Question: “Tell me about yourself.”

This isn’t an invitation to recite your resume.

It's a test of whether you can provide a concise, thoughtful overview of your past, present, and future.

Keep it short.

Focus on key decisions and insights that may not pop off the page.

Question: “Why this company?”

Standard test for for shotgun blast applicants.

A generic answer can derail your process.

Do your research. Write down 2-3 unique points about the company that appeal to you.

You won’t get the job with your answer, but you can definitely lose it.

Question: "What would you do in the first 100 days on the job?"

This is a test of your preparation, research, initiative, and humility.

Have a concrete plan for how you would approach your early days.

Be sure fact-finding and learning is a key part of it (the humility aspect).

Question: “What are your strengths?”

Resist the urge to reel off a long list of broad strengths.

Tailor your response to the role and company.

Provide 1-2 key strengths that make you well-suited for this specific job.

Leverage storytelling—bring them to life with anecdotes!

Powerful concepts everyone should know (to understand the world):

The Paradox of Advice

Taking more advice leaves you less well-equipped.

Most advice sucks.

It's well-intentioned, but it's dangerous to use someone else's map of reality to navigate yours.

Winners learn to filter and selectively implement—take the signal, skip the noise.

The Feynman Technique

To learn anything:

Step 1: Identify a topic
Step 2: Try to explain it to a 5-year-old
Step 3: Study to fill in knowledge gaps
Step 4: Organize, convey, and review

True genius is the ability to simplify, not complicate.

Simple is beautiful.

Fundamental Attribution Error

Humans tend to:

(1) Attribute someone else's actions to their character—and not to their situation or context.

(2) Attribute our actions to our situation and context—and not to our character.

We cut ourselves a break, but hold others accountable.

Time Billionaire

Time is our most precious asset.

When you're young, you are a "time billionaire”—rich with time.

Too many people fail to realize the value of this asset until it is gone.

Treat time as your ultimate currency—it’s all you have and you can never get it back.

stacks are eating the world

business used to be easiest to comprehend via a) market-based logic of horizontal vs. vertical STRUCTURE, b) professionalization/specialization based FUNCTION c) core competencies based BEHAVIORS

this has pretty much collapsed in the last decade

Structure = sclerosis
Functional specialization = bureaucracy
competencies = inertial habits

"Stack" thinking instead lets technology structure (rather than market structure) drive business org logic

Companies seem to do well when they identify an entire stack of technologies they are good at (not just point bits) and organize to conform to its logic. There is a "full-stack" dimension of technical specialization that is the spine of the org

It feels buzzwordy, but it really is getting to be that way. AI stack, decarbonization stack, mobility stack, electrification stack... some end-to-end pathway of turning physics into economics via layers of tech artistically baked together like a cake

Someone tosses a coin ten times; it comes up heads every time. What's the probability it comes up heads on the next toss? (Pretty darn high—part of @nntaleb's work is unprogramming you from your high-school rules of thumb.) Now consider the (related) Gambler's fallacy...

In this case, it's a theory about compensation: the worse one's luck is, the more likely it is to see a reversal. On the surface, it's irrational. The more bad luck you have, the more you accumulate evidence that the system is rigged.

But there's also an anthropic component. If the luck is bad enough, it starts to become inconsistent with your survival. You've accumulated evidence for correlations in the environment, but these correlations (may be) inconsistent with (people like you) being in this environment.

An example. You're in a city where everyone takes public transport. You encounter a string of bad delays. It's reasonable to conclude they'll end—otherwise people wouldn't take public transport. It's unlikely that you happened to show up right when the network collapses.

Of course, that's a bad heuristic in a casino, which relies on a constant influx of losers. But in other environments, particularly with persistent populations and no evidence for sudden changes in the underlying laws, it makes sense.