Michel Pireu Columnist

Room for error is underappreciated and misunderstood. It’s usually viewed as a conservative hedge, used by those who don’t want to take much risk. But when used appropriately it’s the opposite. Room for error lets you stick around long enough to let the odds of benefiting from a low-probability outcome fall in your favour. Since the biggest gains occur the most infrequently – either because they don’t happen often or because they take time to compound – the person with enough room for error in their strategy has an edge over the person who gets wiped out, game over, insert more tokens, at the first hiccup. – Morgan Housel. Where skill dominates, performance is a dependable barometer of progress. But where luck is a stronger force, the link between process and outcome is broken. A good process can lead to a bad outcome some percentage of the time, and a bad process can lead to a good outcome. Since a good process offers the highest probability of a good outcome over time, the emphasi...

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