The more that I think about option luck, the more I realize that I wasn’t fully right about it. I said before that option luck happens when you make a decision, and the consequences of the decision are not something you had any control over. For example, you open a lemonade stand, and there’s enough market demand for your lemonade, even if you didn’t do as much work as you did. In other words: the work that you did wasn’t the decisive cause of your businesses success (you’re turning a profit). It was something else. That’s good option luck. Bad option luck is when you open the lemonade stand, and there’s not enough market demand for your lemonade, despite how much work you did or (practically) could’ve done to make it succeed. In other words: your work (and your capacity to work) wasn’t the decisive cause of your business’s failure (you’re losing money). Something else was. Now, I’m thinking I’m missing the key component to option luck, and that’s rationality (“rationality” in its broadest sense: taking the most effective means to a given end). Rationality is important because: knowing what the work is that you need to do to attain a consequence is a matter of knowing what the most effective means are to attaining it. And that’s rationality in action. For example, a friend of mine mentioned to me that he’s seriously considering opening a flower shop in a neighborhood that I don’t think he’s that familiar with. His reasons for doing so seem to mainly be: he’s got the money to make the investment, and flower shops seem easy enough to succeed. Well….I could’ve asked: what reasons do you have for thinking there’s going to be enough demand for flowers IN THAT LOCATION? Is there a flower shop across the street? Or on the same block? If there is, that would count against the position that it would generate enough demand. There’s some basic research that you need to do about that neighborhood, about that location. And you need to do some basic research about successful flower shops: how far away, on average, are successful competing flower shops? If the average or above average already exists in your general area, then it’s reasonable to think that the market is likely to be glutted by an additional shop. These are just some basic steps to take to maximize the likelihood that the consequence that you want occurs: which is that you’ll be making money off your investment. Plus: do you know anything about flowers or plants? Or about running a small business like a flower shop? This is going to have an impact on the quality of your product, and the efficiency of your business (and therefore your prices), and all of that is going to impact demand. Without enough demand, you’re not going to make enough money. So, what I’m trying to do here is just illustrate the role that rationality, rational considerations, play in figuring out what is the work that you need to do in order to make your business succeed. (Business investments are our model for understanding option luck) So, what’s option luck? Well, bad option luck happens when you take all the rational steps to avoid a bad consequence (you’re losing money on your investment), and the bad consequence happens anyway. What makes bad option luck like bad brute luck is when it happens to you despite the work you did or (practically) could’ve done. Good option luck happens when you FAIL TO take all the rational steps to avoid a bad consequence (you’re losing money), and the bad consequence DOESN’T HAPPEN (you make money, instead). Good option luck is like good brute luck when it happens to you despite how hard you worked (you could’ve worked less). The reason why I think option luck is an important category is: One: I think a lot of business owners thoughts can be illuminated in terms of option luck. This is particularly the case when the option luck is like brute luck in the relevant way (the work you did, or failed to do—given what you could’ve practically done--didn’t decisively matter in causing the failure; or the success was independent of how hard you worked—you could’ve worked less). Specifically: I wouldn’t be surprised if most failed business owners think they’re the victims of bad option luck. And I wouldn’t be surprised if most successful business owners think they’re not beneficiaries of good option luck. (It would be interesting to do a survey!) Why do I think that? Because of the general psychological principle: people who fail like to deny responsibility for their failure; people who succeed like to claim responsibility for their success. Two: I think it’s intuitively plausible to think that you shouldn’t be responsible for the effects of your bad option luck. Why? Because when you take all the rational steps needed to avoid a bad consequence, and the bad consequence happens anyway, then it’s prima facie the case that you’re not responsible for it. For example: suppose I’m in my car, backing out of my driveway. And I take all the rational steps one needs to take to avoid running someone over. I look out the rearview mirror, pay close attention to what’s going on outside—with my eyes and ears--drive very slowly and cautiously. But then, unbeknownst to me, a small child trips on the driveway, while they were on their way chasing a tennis ball. I run them down. But I’m not responsible for running them down—and we’re using “responsible” strictly in the sense of morally responsible; of course, I’m causally responsible. I’m not responsible because I took all the rational steps I needed to take to avoid the bad consequence. Well, when you suffer from bad option luck, you also took all the rational steps to avoid the bad consequence. So, you too aren’t responsible for it. But, if you’re not responsible for it, then you also shouldn’t be responsible for its effects (which is your losing all that money). So, the argument goes.
Posted on: Wed, 12 Mar 2014 09:43:20 +0000
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