# Nobody Is Dead In The Long Run

December 19, 2012 7:02 amThere is no long-term without the short-term. More importantly, in the long run we are all dead. So the short-term is all that matters.

That sums up a solid argument, to focus on the short-term.

But here is the real problem: our ideas, concepts and beliefs, are all picked up from long-term examples. By definition, we should only expect to see them work in the long run.

Let us take an example. The “gambler’s fallacy” claims that people expect rapid reversion to the mean. For example, upon observing three outcomes of “red” in roulette, gamblers tend to think that “black” is now due and tend to bet more on “black” (Croson and Sundali 2005).

The biggest learning for us is this: the number of times Red turns up or Black turns up will become approximately equal **only when the number of turns on the Roulette wheel is very high, running into Millions of turns**.. For any of us to expect that over a small number of turns this probability will work is just being stupid. But in the long run – you can be reasonably sure that the probability will play out. Precisely at what point, we would not know – It might be blurry at this moment – if you think about it, this is just another way to state what PG says –

“.. think the way to use these big ideas is not to try to identify a precise point in the future and then ask yourself how to get from here to there, like the popular image of a visionary. You’ll be better off if you operate like Columbus and just head in a general westerly direction. Don’t try to construct the future like a building, because your current blueprint is almost certainly mistaken. Start with something you know works, and when you expand, expand westward.

The popular image of the visionary is someone with a clear view of the future, but empirically it may be better to have a blurry one.” (Source)

Optimize for the long-run. Always. In the long run, nobody is dead.

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The “gambler’s fallacy” isn’t about expecting reversion to trend in short term. It’s about not understanding independence of random variables.

Assuming fair coin, no matter how many times you throw heads in row, the chance for another head is still 0.5