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Lysander Spooner's avatar

I didn't know where else to make this comment, but I wanted to kvetch about Taleb's criticism of "The Millionaire Next Door" (which I've used in personal finance classes I've taught), as expressed in "Life in the Negative World." I'm not sure if you've read the original source material (I haven't read Taleb), but according to your summary, Taleb is full of crap on this.

In "Life in the Negative World,": "[Taleb] contends that simply looking at successful people's action's and then extrapolating lessons from what they did is subject to "survivorship bias." For example, the authors of The Millionaire Next Door looked at millionaires to see what they had in common, but they didn't examine the people who did the very same things yet ended up far less wealthy - or even bankrupt. By definition, the method excluded failures from the sample."

Yes, they interview a bunch of millionaires to find commonalities between them, but nowhere in the book do they say, "Do these things and you too will become a millionaire." And they did not only look at millionaires. Much of the book compares people with the same incomes but very different consumption and investment habits, which leads to very different net worths over time. If this isn't including "failures" in the sample, what would be? It's hard to imagine, as the habits emphasized are living well below one's means and investing the bulk of one's savings - how is a researcher going to identify people who did that but were "failures"?

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