Tooootally Random

Occasionally I’ll run into a friend on the street, at a restaurant, or at a ball game, and often the Thing To Say is “Hey, good seeing you… This is so random.”

“Totally.”

But is it though?  I created a plan ahead of time, left my home, and deliberately made my way to my destination.  My friend did the same thing.  We made conscious decisions to end up in a certain spot.  What made it feel “random” was that we weren’t expecting it. But we both took deliberate actions.  So is it still random?

This seems like a question of syntax, so it may be helpful to think about what exactly is random.  OED defines “random” in the technical and statistical sense as “Governed by or involving equal chances for each of the actual or hypothetical members of a population; (also) produced or obtained by such a process, and therefore unpredictable in detail.”  Random is a very specific idea, and it turns out that there are almost no natural examples of pure randomness.  As Leonard Mlodinow points out in his Drunkard’s Walk, there’s no such thing as a perfect die: “…no one can make a perfect die.  There will always be some faces that are favored and some that are disfavored.  It might take 1,000 throws to notice the difference, or 1 billion, but eventually you will notice it.  You’ll see more 4s than 6s or maybe fewer.”  In the strictest sense, the only truly random objects that exist are unstable atoms, which are used to create perfectly random number generators.  Before quantum generators, random number tables were never fully random since they were based on imperfectly random inputs.  They always had certain numbers that occurred more frequently than others, a slightly lopsided random.

If we look closely at the OED definition, we’ll find two subtle definitions of random.  The first part is more technical and is defined as a perfect distribution of chances in a recurring sampling.  This is called the frequency interpretation.  The second definition is known as the subjective interpretation, and it’s more loosely defined as “unpredictable.”

Since I don’t spend my days studying unstable atoms, I prefer to think about future events as “unpredictable” instead of random.  The word “unpredictable,” with its negating prefix, reminds us that there are degrees of unpredictability, as opposed to the more binary-sounding “random.”  Future event probabilities fall along a scale of predictability, i.e. some events are more predictable than others.  We have a good idea what the weather will be like in the next few hours, but it’s impossible to know what it’s going to be like 100 years from tomorrow.

We occasionally discover new tools that can make previously unpredictable events more predictable.  Satellites and computers make the accuracy of predicting the weather two days from now much higher.  Let’s think about the coin toss, the quintessential random unpredictable event.  In theory, a future computer program with a highly accurate map of reality could predict the outcome of a coin toss once the coin was in mid-air.  It could model out the weight of the coin, the velocity of the spin, the distance to the ground, the type of surface, and get a pretty good (say, over 65%) accuracy rate.  I’d bet this’ll happen within the next 50 years.  Now, would a computer be able to predict the outcome of a toss before the coin was flipped?  Probably not.  I don’t believe we’ll ever get to the ability to predict the exact amount of force a given person will happen to put into flipping his thumb.

Some investors allocate their capital by predicting highly complex events, such as the exact interest rate a year from now, the level the S&P 500 will be six months from now, the value of the dollar compared to the euro, or the price of oil.  I can’t use enough synonyms of “big” and “complex” to describe the number of inputs that drive these outcomes.  Other types of investors focus on situations where the number of inputs are much smaller and simpler, leading to higher degrees of predictability.  I don’t believe it’s an accident that the greatest investor ever Warren Buffett not only chooses predicting microeconomic outcomes instead of macroeconomic ones, he also invests in businesses that are relatively simple, in effect minimizing the number of inputs and maximizing predictability.

So, next month’s weather or running into someone at a restaurant may not be totally random, rather they’re unpredictable.  Next time you run into someone, maybe the better Thing To Say is “Hey, good seeing you… This is so unpredictable,” awkward syntax and all.