On Playing to Win
Most people focus on avoiding loss instead of pursuing victory. This is a perfect recipe for becoming a loser.
Human beings suffer from loss aversion, a cognitive bias where the pain of losing feels twice as bad as the pleasure of winning. I.e. most people would rather not lose $20 than win $20.
This funny asymmetry is adaptive in situations where victory and defeat are a matter of life and death. In much of human history this was the case. Losing meant you could never play again (i.e. death) so it made sense to be especially afraid of it.
But life in modern economies and the virtual world is not like this. Most of us now live in relatively open, forgiving environments. Loss rarely means game over.
“First World losses” are not as significant as they appear. If you lose your job you can get another one. If your startup fails, you can pivot. If you get rejected by your crush, you can find another.
These are the kinds of games most of us play most of the time. Low stakes. “Sorry, try again” type games. At most we risk our status, not our lives.
But focusing on avoiding loss brings a much bigger risk: mediocrity.
Mediocrity Risk - the tendency for a given path of action to lead to mediocre outcomes. (i.e. the risk of becoming mid).
This is the risk that remains when you correct for all the other ones. Sure, nothing bad will happen. You won’t lose your money. You won’t feel extreme emotions. But the storyline of your life will atrophy. You’ll forgo all adventure and become a looOOoSeR (paradoxically).
Loss aversion optimizes for mediocrity. It ensures that you keep playing the game without winning it.
What if instead, you played to win?
I play to win, whether during practice or a real game. And I will not let anything get in the way of me and my competitive enthusiasm to win.
Michael Jordan
Playing to win means you’ll take the necessary risks for the things you actually want. You accept that you’ll incur losses along the way. You give yourself permission to make mistakes. They are just part of winning.
And when you do this, something magical happens. You become sensitive to asymmetrical upsides. A.K.A. convexity.
A concept popularized by Nassim Taleb, convexity represents a perfect counterpoint to loss aversion. It refers to situations where the potential for upside is great and the downside is limited.
It gets its name from this pay-off graph with a convex curve:
There’s some complicated math behind it, but the idea is simple. Just notice that the downside (PAIN) flattens out and the upside (GAIN) extends off the chart. In convex situations, losses are small or harmless while benefits are “off the charts.”
Here’s Taleb:
The performance curves outward, hence looks "convex". Anywhere where such asymmetry prevails, we can call it convex, otherwise we are in a concave position. The implication is that you are harmed much less by an error (or a variation) than you can benefit from it. So you would welcome uncertainty in the long run. - Nassim Taleb
Here are some examples of convexity:
Going to a party. The downside is an overpriced Uber. The upside could be meeting a new life-long friend, or your spouse, or a forming memory that you cherish until death.
Posting online. The downside is the effort to post and perhaps the risk of cringe. The upside is you make internet friends, get job opportunities, make money, start a new business, etc.
Talking to the girl at the bar. The downside is she rejects you. The upside is you step into a beautiful love story, have an amazing night, find your wife.
Starting a side-hustle. Perhaps you work a few more hours a week but you’ll never be financially ruined (you keep your job). The upside is a new income stream, financial freedom, etc.
The world is full of convexity if we have the eyes to see it. But our focus on not losing holds us back. By callusing ourselves to minor pains like rejection and non-fatal failure, we’ll ascend mountains.
So play to seize victory, not to dodge defeat. The real risk lies in playing it too safe, and fading into mediocrity. Swing hard, miss, then swing again. This is life.
What if I want to be mid?