It Depends on the Number of Monkeys
The more attempts there are, the more opportunities exist for an impressive result to arise by chance. Evaluating a selected winner requires information about the wider field and the probability of that result under a chance model.
THE IDEA
This concept explains why we must account for the total sample size (the 'number of monkeys') when evaluating the likelihood that a success is due to skill rather than luck.
The initial sample size matters greatly. A result achieved among only five attempts may be harder to explain by chance than one selected from a billion to the power of a billion attempts. But the comparison also depends on the probability of success per attempt. A finite large field does not make success inevitable, and a small field does not by itself prove skill.
This problem enters the business world more viciously than other walks of life due to its high dependence on randomness. The greater the number of businessmen, the greater the likelihood of one of them performing in a stellar manner just by luck. Similarly, very few investors count the total number of market participants to calculate the conditional probability of a successful run given the massive history of players in operation.
When to use it
Evaluating a fund manager’s track record against a chance model that includes the number of comparable managers and attempts.
Assessing a founder’s results in light of comparable attempts, conditions, and reasons a successful outcome might reflect skill.
Hiring decisions: when a candidate has a stellar resume, consider the size of the population they emerged from to gauge how much weight to give their past performance.
Self assessment: recognize that a large 'monkey pool' means your failures don't necessarily represent a lack of ability, just as a single success doesn't prove genius.
FROM THEORY TO EVERYDAY LIFE
In practice
The Iliad and the Monkey Typists
If only 5 monkeys attempt to type the Iliad, an exact match would be striking under a random-typing model. With a vastly larger number of attempts, a chance match becomes more likely. Neither observation alone establishes skill; the model and number of opportunities matter.
Stellar Business Performance
In the business world, the high dependence on randomness and the vast number of entrepreneurs means it is highly likely that some will achieve stellar performance purely by luck. Most observers fail to count the total number of 'monkeys' (failed businesses) operating in the same space.
Investment Fund Performance
When a hedge fund or investment manager has a stellar run, few investors calculate the odds of that run given the total number of managers operating over the history of the market. The lucky winner in a pool of millions is statistically expected.
A MOMENT TO REFLECT
Put it to work.
Identify a famous success story in a high-luck field. How many other 'monkeys' were trying to do the same thing at the same time?
When you are impressed by someone's track record, do you instinctively assume skill, or do you stop to calculate the number of people who tried and failed?
How can the 'number of monkeys' insight protect you from overconfidence in your own past successes or undeserved shame in your failures?
References
- Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets — Nassim Nicholas Taleb (2001)
CONTINUE THE CONVERSATION
Source texts
- Fooled by Randomness The Hidden Role of Chance in the Markets and in Life (Nassim Nicholas Taleb)