Speaker unverified: belief

Transcript context

…Okay. : Yeah, the concept, it gets to the heart of modern portfolio theory and expected utility theory and the flaws of that. Back to the multiverse, the way this works is, if you had 100 people flipping coins and they did it for enough time, you would actually see a nice steady positive return. That looks like on average the experience of the participant is winning. But that's not really true. What you get is a lot of people going bankrupt and a few massive winners, sort of the Buffetts and the Soroses in the investing world. The average is not average. In one portfolio theory, you're taking an ensemble of all these. But that doesn't really make sense because I don't really care about your outcome, David or Ben, I care about my outcome. I only get to live in this one universe. I don't get to live in yours. I don't get to live in the multiverse. My outcome, on average, is that of loss instead of bankruptcy. When the time average does not equal the ensemble average, that is called a non-ergodic system. You guys put in the show notes, Ole Peters works on this. It's super geeky, but really fascinating. It's so cool. Well, this is so counterintuitive. You would think if you presented that game to me, I would be like, oh, for sure I want to play that game. The odds are stacked in my favor. But most people who play that game will lose, then a few will win really, really, really big. That just blew my mind reading that.…

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