91. Invert, Always Invert

Below is a summary of the core idea in Visakan Veerasamy's podcast with Dinesh Raju.

Summary

Imagine life as a game where some people win big and others don't, but the outcomes are not evenly distributed. Instead, in some areas—like starting a successful business, creating art, or investing—the results are dominated by a few who get massive success while the majority see little to no gains. Nassim Taleb calls these areas "Extremistan," where a small number of extreme events (like a bestseller book or a winning startup) matter far more than the average result.

To succeed in this kind of environment, you need to understand two key things about yourself:

1. Your Edge: What makes you special? What are you really good at that others aren’t? This could be a skill, knowledge, or even a personality trait like being able to handle uncertainty well. Your edge is your advantage in this game.
2. Your Handicap: What are your weaknesses or blind spots? Knowing where you might fail or struggle is just as important so that you don’t bet big in areas where you’re more likely to lose.

Once you know your edge and handicap, you can figure out where to play the game. You want to focus on areas (Extremistan domains) where making small bets can lead to big wins if they work out, without costing you much if they don’t. For example, writing a book, building an app, or starting a side business can have low upfront costs, but if they take off, they can change your life. These are what we call "convex bets"—low downside, high upside.

The trick is to keep making these small bets. Since life in Extremistan is unpredictable, you don’t know which attempt will be the big one that pays off. But the more bets you make that align with your edge, the more likely you are to hit something huge over time.

So, in simple terms:

• Find what you’re really good at (your edge).
• Know your limits so you avoid risks that could wipe you out.
• Choose opportunities where you can make small, smart bets that could pay off big.
• Keep trying over and over again. With enough time and persistence, you increase your chances of landing that big win.

In this approach, the goal isn’t to predict the future perfectly but to keep putting yourself in situations where, if something goes right, it can go really right—while keeping your losses small when things don’t pan out.

My Comments

My main problem with this strategy is there is no error correction mechanism. How would you know if your understanding of your strengths and weaknesses is good enough? How would you know if you are playing in the appropriate domain? I suggest we do something else. Let us invert the suggestions into a diagnostic tool that explains failure. Below is more about inversion as a mental model that the late great Charlie Munger used to solve problems.

Charlie Munger, the business partner of Warren Buffett and Vice Chairman of Berkshire Hathaway, is famous for his quote “All I want to know is where I’m going to die, so I’ll never go there.” That thinking was inspired by the German mathematician Carl Gustav Jacob Jacobi, famous for some work on elliptic functions that I’ll never understand. Jacobi often solved difficult problems by following a simple strategy: “man muss immer umkehren” (or loosely translated, “invert, always invert.”)

“[Jacobi] knew that it is in the nature of things that many hard problems are best solved when they are addressed backward,” Munger counsels.

- Shane parish, Inversion and The Power of Avoiding Stupidity

So how would Dinesh's strategy look if we inverted it? If you are playing in an Extremistan domain and you are not winning it could be because:

1. You are missing knowledge about your edge.
2. You misunderstood your handicap.
3. The domain is not suitable.
4. The size of the bets is too large.
5. The frequency of bets is not high enough.
6. You will win eventually. It is a matter of time.

Viewing Dinesh's strategy this way is an improvement and still may not be enough to win, but thinking about these things: your edge, handicap, bet size, bet frequency, and the domain you are best suited for is useful anyway in case a bit of luck comes your way.