Russian Roulette

I finally understood the Russian Roulette. Or at least I think I do. And it took me a good few years to get it. I hope you appreciate this and use it to eliminate some of the black swans in your life.

Russian Roulette is a game where there are 2 players- A and B. A tells B- ” Here is a gun with 6 chambers with 5 of them being empty and 1 of them having a bullet. I have given the chambers a good whirl, so we don’t know which chamber has the bullet. You need to point the gun at your temple and pull the trigger just once; if you survive, I will give you $ 10 million. Are you up for it?”

Scenario 2: Now, imagine there is a gun with a thousand chambers in it and only one of them has a bullet. You survive, you get $10 M. Would you pull it?

If you are like a younger version of me, you’d probably look at Scenario 2 and say to yourself- “Gee- that looks interesting! I have a 999/1000 chance of winning $ 10 Million”. But if you are Warren Buffett, you wouldn’t even entertain the thought for a second. Even if the stakes were raised to a Billion or a Trillion. Not because he is a billionaire. But because he immensely values his life. And his logic is simple: if something is important to you, why would you risk it? The upside of such a bet is the $10 M (or what have you) which doesn’t do anything for me and the downside is death, which is unacceptable to me. So why risk what I have and what is important to me for what I don’t need and what is not important?

For those that are mathematically inclined, the expected value of Scenario 2 would be:

  • Upside: $10 M
  • Chance of Upside: 0.999
  • Downside: – Infinity
  • Chance of Downside: 0.001
  • Expected value: $ 10 M x 0.999 – Infinity x 0.001 = -Infinity

One of the late realizations that I have had is that you have to value your life as priceless. Yes, life can be a struggle and but it is still an opportunity. Ask Scott Riddle, if you don’t believe me. Once you learn to put a price tag of infinity on life, you will realize no matter what the upsides and what the odds are- the downsides are just not worth it! And this applies to anything and everything that you are unwilling to lose.  Like- Reputation, Health, Safety, Family, Savings of a lifetime etc. If you think this is an easy lesson, remember that in the heat of the moment even Yudishtir with all his wisdom, forgot this important lesson.

Here is a beautiful video of Warren Buffett talking about the downfall of LTCM. Like Yudishtir, they too forgot this lesson: Never risk what you have and what is important for what you don’t need and what is not important; no matter the odds. Watch it from 15:45 to 18:18.

Unfortunately, we play Russian Roulettes everyday. Except that we don’t realize it.  It’s probably a Russian Roulette with a million chambers that gives us an immense kick every time we get away with it. To me, that is like tempting black swans into your life. If your life is lacking excitement, play games where your downsides are limited and stop risking what is important to you.  Below are a few examples of Russian Roulettes that you and I can look to eliminate immediately:

  1. Any form of driving without seat belt or helmet, over speeding, driving while talking, drunken driving
  2. Adventure sports without expert guidance and proper gear
  3. Any form of health abuse
  4. Any form of illegal activities
  5. Unprotected sex

For a healthy, wealthy and a long life, identify the Russian Roulettes in your life and eliminate them before they eliminate you.

Wishing you well.