Daily Insider: ‘Beginner’s luck’ often a curse in gambling – and stock speculation

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START YOUR MORNING WITH TODAY’S BIZNEWS BULLETIN – Overnight markets move sharply; Piet Viljoen; Mike Appel; FT.  

Beginner’s Luck is a real thing – know about it and you won’t be fooled.  

Author and thinker Nassim Taleb reckons the value of any book is determined by the times you re-read it. His work scores well in that test. They are chock-full with gems, often drawing me back in. Here’s an appropriate one from The Black Swan in the context of the many newbies refusing take their losses during the recent stock market meltdown.

In chapter eight of the book Taleb explains that there’s a common belief among gamblers that beginners are always lucky, but that luck turns in time. Researchers, he adds, confirm this, and “the same applies to stock market speculators.” But it’s an optical illusion.

As almost half of all gamblers win, a good chunk of all newcomers will be fortunate. Having enjoyed success, these ones tend to stick  around and, once the odds eventually catch up with them, bemoan the loss of their early good fortune.

The half of new gamblers who don’t win, quickly get discouraged and give it up as a bad job. As Taleb explains: “The dropouts, by definition, will no longer be part of the surviving gamblers’ community. This explains beginner’s luck.” So it’s a very real thing. But beginner’s luck can also be a curse that keeps players at the table long after they should have left it.

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