Ludic fallacy


The ludic fallacy, proposed by Nassim Nicholas Taleb in his book The Black Swan, is "the misuse of games to model real-life situations". Taleb explains the fallacy as "basing studies of chance on the narrow world of games and dice". The adjective ludic originates from the Latin noun , meaning "play, game, sport, pastime".

Description

The fallacy is a central argument in the book and a rebuttal of the predictive mathematical models used to predict the future – as well as an attack on the idea of applying naïve and simplified statistical models in complex domains. According to Taleb, statistics is applicable only in some domains, for instance casinos in which the odds are visible and defined. Taleb's argument centers on the idea that predictive models are based on platonified forms, gravitating towards mathematical purity and failing to take various aspects into account:

Example: Suspicious coin

One example given in the book is the following thought experiment. Two people are involved:
A third party asks them to "assume that a coin is fair, i.e., has an equal probability of coming up heads or tails when flipped. I flip it ninety-nine times and get heads each time. What are the odds of my getting tails on my next throw?"
The ludic fallacy here is to assume that in real life the rules from the purely hypothetical model apply. Would a reasonable person, for example, bet on black on a roulette table that has come up red 99 times in a row ?
In classical terms, statistically significant events, i.e. unlikely events, should make one question one's model assumptions. In Bayesian statistics, this can be modelled by using a prior distribution for one's assumptions on the fairness of the coin, then Bayesian inference to update this distribution.

Example: Fighting

Nassim Taleb shares an example that comes from his friend and trading partner, Mark Spitznagel. "A martial version of the ludic fallacy: organized competitive fighting trains the athlete to focus on the game and, in order not to dissipate his concentration, to ignore the possibility of what is not specifically allowed by the rules, such as kicks to the groin, a surprise knife, et cetera. So those who win the gold medal might be precisely those who will be most vulnerable in real life."

Relation to platonicity

The ludic fallacy is a specific case of the more general problem of platonicity, defined by Nassim Taleb as: