Summary of the approach continue September 27th, 2022
here the payoffs in mediocristan can also be complex (but predictable). So I need to change the naming. and adjust my thinking about it. September 27th, 2022 because in mine I'm omitting complex outcomes in Mediocristan and assuming that low predictability is identical with extreme outcome but it isn't (take insurance) Get back to it. So I should rather write how to thrive in the fourth quadrant—avoid negative Black Swans and invite positive Black Swans. Or change my approach to that I omitted complexity of outcome. I omitted simple outcomes in Extremistan and complex outcomes in Mediocristan
So Extremistan is about physical vs abstract; thin vs fat tail not also complexity of outcome. There can be a simple payoff in Extremistan (like epidemics, earthquakes, income) I don't get it tbh.
[THIS QUADRANT THINKING IS WRONG. I MUST REEVALUATE MY THINKING AND CHANGE HOW I WRITE ABOUT THE QUADRANTS. Payoff simple (we know what extreme thing will happen—epidemics) versus complex (we don't know what extreme thing will happen—new )] So an earthquake is not a Black Swan (it's just Extremistan)! So Extremistan isn't equal to Black Swan—THIS IS WHERE I WAS WRONG. GET BACK HERE September 27th, 2022 It isn't a Black Swan because we can predict how it will look because they're physical. Black Swans we can't even know what they'll be because they're abstract. So, my thinking that we should invite the third quadrant is partly true, for income for example. Ooooooooooooo. I discovered the question I had an hour ago—compounding versus network. Compounding works in the third. We can guess the outcome quite well. Like, regular investing into SP500 will result in extreme but feasible gains in the future. However, when it comes to serendipity or luck, like with revolutionary inventions (we can't grasp their nature since they're so abstract [not from nature]), we can only do it through exposure. To expose ourselves properly we need to apply the barbell strategy to discern between negative and positive Black Swans. Develop that!!!!
Fuuuuuck! That was one great discovery. Something clicked. I must get back to it once I'm cooled down tomorrow.