Chapter 6 - Tails you Win Flashcards
What is the chapter’s summary
Chapter 6, “Tails you Win,” introduces the concept of tail events—occurrences with high impact but low probability. It argues that a small number of such events can significantly influence outcomes. For instance, major companies like Disney, Amazon, and Apple owe their success to a few products or services despite a long list of failures. The chapter illustrates this through examples from various domains, including the entertainment industry and investment sector. It emphasizes the value of perseverance and learning from failure, while acknowledging that the predominance of successful “tail events” often overshadows the numerous trials and errors along the way. This phenomenon is likened to our own existence in a universe with billions of stars, where Earth stands as the ultimate “tail event” capable of sustaining intelligent life.
What is the lesson from this chapter
The key lesson from this chapter is the significant impact of tail events—occurrences that are infrequent yet yield substantial outcomes. Despite their rarity, these events often define the trajectory of various endeavors, from business ventures to personal achievements.
In the business world, companies like Amazon, Disney, and Apple have experienced incredible success thanks to a few standout products or services, despite many failures along the way. This shows the importance of perseverance and innovation, as one major success can offset numerous failures.
In investing, the lesson is that getting it right a few times can outweigh a larger number of poor investment choices. The objective isn’t to always be right but to ensure that when you are, the returns are significant enough to offset the losses from wrong decisions.
The lesson also extends to life itself. It underscores the idea that failure is an integral part of the journey to success. One should not be disheartened by failures but view them as stepping stones towards eventual success.
Finally, it illustrates that we often overlook the many unsuccessful attempts that lead to a major success, focusing instead on the successful end product. This is a reminder to appreciate the process of trial and error, and the lessons that come with it.
Q1: What is a tail event?
A1: A tail event is a phenomenon with high impact but low probability. These events may not occur frequently, but when they do, they significantly influence outcomes.
Q2: How is the concept of tail events exemplified in the business world?
A2: Successful businesses often owe their fortunes to a few products or services, despite numerous failures. Examples include Disney’s success with “Snow White,” Amazon’s revenue from AWS and Prime, and Apple’s success with the iPhone.
Q3: How do tail events relate to the strategy of successful individuals and companies?
A3: Individuals and companies frequently engage in trial-and-error, accepting the likelihood of failure. The key is to learn from these failures and persevere, as major successes often emerge from this process.
Q4: How does the concept of tail events apply to the investment sector?
A4: Investment success is often driven by a small number of highly profitable decisions, even amid numerous failures. Successful investors aim to get it right more often than not, ensuring they don’t get wiped out by a single risky investment.
Q5: What does the comparison of Earth to other stars in the universe illustrate about tail events?
A5: Earth is likened to the ultimate “tail event” in the universe. Among billions of stars, it is the only one known to sustain intelligent life, exemplifying the profound impact of rare but significant events.
