Certainty and the turkey problem

We all take lessons from the past and apply these to making predictions about the future.

This is both appropriate and necessary in many situations.

The difficulty is that sometimes the lessons we learn aren't the right lessons. 

In The Black Swan, Nassim Taleb describes this memorably as "the turkey problem":

"Consider a turkey that is fed every day. Every single feeding will firm up the bird's belief that it is the general rule of life to be fed every day by friendly members of the human race... On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief." 

What is sobering about this example is that the turkey's "feeling of safety reached its maximum when the risk was at the highest". 

It's not just that the turkey's experience didn't have any value. To the contrary, it had negative value. 

Food for thought.

It's definitely the case that experience brings confidence. But we need to temper our confidence with the knowledge that sometimes we can be wrong, and the very experience that has made us confident can be detrimental to us.

Certainty can be dangerous. We can all be turkeys. 

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Sonnie Bailey

Sonnie is the founder and principal of Fairhaven Wealth.

Before founding Fairhaven Wealth, Sonnie worked in the legal and financial services industries for over a decade.

Sonnie first became involved with financial advice as a specialist financial services lawyer. For many years, he was an “adviser of advisers”, reviewing thousands of advice files prepared by hundreds of financial advisers, and providing feedback in relation to the quality and appropriateness of advice; industry best practice; risk management; and regulatory compliance. He has published work in industry publications and spoken at various financial advice conferences.

Sonnie has also worked with banks, investment management firms, insurers, and derivatives providers.

Sonnie has worked as a private client lawyer, focusing on succession, estate planning and trusts. He ran his own legal firm in Australia before relocating to New Zealand. He has also acted in independent trustee and company director positions.

Sonnie is passionate about helping people achieve their goals and manage the risks to which they are exposed.

He has written extensively on his blog, New Zealand Wealth and Risk, which can be found at www.wealthandrisk.nz.

Sonnie is married to his wonderful wife Chrissy, and has two young children, Ben and Anna.