Seek Upside Risk

post by Neel Nanda (neel-nanda-1) · 2020-09-29T16:47:14.033Z · LW · GW · 6 comments

This is a link post for https://www.neelnanda.io/blog/33-upside-risk

Contents

  Upside Risk
  Becoming emotionally OK with it
  Implementing
  Conclusion
None
6 comments

When I meet somebody new, there are two interesting things that could happen. We could get on super well, become great friends, and be part of each other’s lives for year to come. Or we don’t. Maybe we like each other, maybe we don’t, but we likely just go our separate ways. But the upside in the first case massively outweighs the downside in the second case. Yet, we all spend far less time meeting new people than we could. Why?

Upside Risk

I call this general phenomena of a small chance of a massive win, vs a reasonable chance of a tiny loss, upside risk. And when I think about some of the really awesome things in my life, a lot of it came from sources of upside risk:

In general, I think there are a lot of sources of upside risk in life, and that they’re extremely positive in expectation. And if you do enough of them, this pays out well. So I think it’s extremely valuable to actively seek out upside risk, and to shape your life to welcome it.

There’s even a fairly solid mathematical justification for this! This is known as the explore/exploit problem in reinforcement learning - do I exploit and do what I currently think is the best idea, or do I explore and try something new, something that might give me information that I can use to inform future actions. The problem is essentially pricing the value of information.

And a pretty decent (and easy-to-compute) strategy is to take the Upper Confidence Bound. We have uncertainty over each strategy, and pick the strategy with the highest 95% confidence bound. Essentially, it pays to be an optimist, to always take the action with the best chance of being awesome.

This post is going to be about why we don’t seek upside risk as much as we could, and how we can change this.

Becoming emotionally OK with it

So, this is a pretty simple argument. Yet, I do this far less than I could. Why?

The root cause, is that my mind sucks at thinking about expected values. When I try something new, the cost is clear, concrete and salient. The benefit is fuzzy, distant and unclear. And so if I try it and only get the cost, it feels like I failed. Hindsight bias kicks in, and it feels obvious that it wasn’t worth trying. The subtle, insidious voice of insecurity in my head pushes me to play it safe, not stick my neck out, to not risk it. That it’s not worth the effort, and things will never work out well. I’m a loss averse person, and I can’t see a guaranteed story for how this upside will pay out, so it feels not worth reaching for.

I think this is one of the most poisonous and damaging bugs currently in my life. I think this significantly cuts off a lot of awesome potential in my life. So fuck that. I don’t need a precise story for how to get this upside, I just need to expose myself to as much as possible. So how can I reframe this and do something about it?

Some of my favourite strategies:

Implementing

So, say you now agree that upside risk is extremely valuable, and you’ve somewhat overcome the aversion. How can we make this actionable?

There are a few different ways of framing the core lesson:

I find seeking novelty to be particularly fruitful. A few ways to do this:

Another mindset is to optimise for the best-case scenario, which I like to think of as fishing for white swans. Some strategies:

Some generic examples of things worth doing:

And these are just my examples! Upside risk is a function of your life, your values, and your circumstances. What are some examples of this in your life?

Exercise: Set a 5 minute timer, and think about the ideas in this post. What are sources of upside risk you could seek out?

Conclusion

Obviously, I’m making an overly strong case in this post. We have finite time, and there are trade-offs. If you always chase upside risk, you’re Pascal’s Mugging yourself out of any free time. Sometimes there are hidden big downside risks. But I see a lot of instances of safe, moderate actions with upside risk that aren’t taken. And, at least in my social circles, I think on the margin people should seek upside risk way more!

So if the ideas in this post resonated with you, live it! Keep score in terms of EV. Seek novelty. Try new things. Go outside your comfort zone. Ask for things. Notice the massive pile of potential wins in your life, and ask whether you’re OK with leaving all of that on the table.

What’s a source of upside risk you could seek right now?

6 comments

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comment by PatrickDFarley · 2020-09-29T22:01:22.691Z · LW(p) · GW(p)

I love the spirit of this post, but all the focus on expected value raised some alarms in my head. 

Maximizing the expected value in ordinary (financial) betting leads to bad decisions (St. Petersburg paradox), and it can do the same in other areas of life. I can see you know this intuitively, because you mentioned Pascal's Mugging. Just letting you know that there's math that accounts for this, too:

To avoid wasting life on Pascal's Mugging (or going broke on bad bets), we maximize the expected logarithm of value (Kelly Criterion), because we get diminishing utility from higher amounts of the same thing.

comment by Neel Nanda (neel-nanda-1) · 2020-09-30T06:32:35.417Z · LW(p) · GW(p)

Thanks! Yeah, I definitely agree that literally maximising for EV can be bad. The reason I heavily emphasised that is to convey the key point that you're trying to make decisions under uncertainty, uncertainty is an inherent fact of life, and that, at least for me, thinking about EV leads to systematically better decisions. Because I'm sufficiently bad by default at accounting for uncertainty, that a focus on EV pushes me in the right direction.

In practice, the decision theory would be along the lines of "try estimating EV. If the answer is obviously, massively positive then do it, otherwise think harder". (In which case maximise E(log(X)) and E(X) should give the same answer). And the post was similarly aimed at people who have such a strong bias, that thinking about EV is a nudge in the right direction.

Would you have preferred the post if framed around E(log(X))?

comment by PatrickDFarley · 2020-10-01T04:16:21.768Z · LW(p) · GW(p)

Would you have preferred the post if framed around E(log(X))?

Technically yes, but I know it'd be harder to use as a mental model in everyday life. And anyway, I have the same initial bias as you

comment by crl826 · 2020-10-04T16:45:49.490Z · LW(p) · GW(p)

Isn't there a bit of a contradiction when you say choice and uncertainty make you uncomfortable but when you ask other people to make choices you should frame it as giving them opportunity?

I'm not saying either is wrong but it does seem a little off to say "bad for me, good for you". Or at least a bit of a paradox.

comment by Neel Nanda (neel-nanda-1) · 2020-10-04T20:25:26.170Z · LW(p) · GW(p)

Fair point that that's somewhat hypocritical, and undercuts my point. I think the point still often stands though - this is a bug I have, but it's far from universal; and even for me, the answer to a choice is often obvious. But in those cases it's uninteresting and scarcely feels like a choice.

comment by wunan · 2020-09-29T21:33:09.741Z · LW(p) · GW(p)

I agree that this is a really important concept. Two related ideas are asymmetric risk and Barbell strategies, both of which are things that Nassim Nicholas Taleb writes about a lot.