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Fooled by Randomness
The main topic of the book is the fact that all humans are simply terrible at judging probabilities. Taleb is a securities trader, so a lot of the book revolves around financial probabilities, but his argument is mainstream and requires absolutely no knowledge of the markets. The book details examples of people wildly misjudging risks and probabilities in many contexts. Often that misestimation is understandable in advance of certain events, but harder to excuse after they've occurred; Taleb hits pretty hard on what he calls "data snoopers," his term for people who back-fit theories to existing data.
One of the most notorious examples is the Bible code (which has been thoroughly debunked), but Taleb argues that analysts who spend their time trying to find patterns in historical market data are no different: if you try long enough and hard enough, you will unavoidably find apparent regularities, which can be extremely compelling when seen in isolation. In context, though, they dissolve into nothing but meaningless statistical anomalies. Taleb rightfully compares these searches for meaning to the famous monkeys and typewriters parable.
Taleb's best example of poor probability intuition is probably the infamous survivor bias, which is our tendency to be disproportionately impressed by success. We almost always ignore the fact that, for one success story, there are many failures. But we seldom hear about the failures (just like we never hear about the many theories that didn't fit the data). So it's all a game of numbers: out of 10,000 traders, a few are statistically bound to be successful, even if they are nothing more than lucky idiots. The fact that they succeeded does not mean anything. It doesn't mean that they are bad traders, but it doesn't mean that they are good traders either, because on average somebody had to succeed.
One of Taleb's hot buttons is that people tend to be too confident in what they know. He argues convincingly that we should take everything, including science, with a grain of salt. Writing about Karl Popper, he points out that there are only two kinds of scientific theories: those that are demonstrably false, and those that are not yet demonstrably false. An irksome (but sadly true) observation, yet most people behave as if what they know is eternal truth. One could of course argue that Popper's observation is but another kind of truth, but I tend to put a lot more trust in people who question what they know than in people who don't.
Another of Taleb's peeves is the human tendency to over-attribute every random event (the old post hoc, ergo propter hoc). For instance, a commentator saying that "the Dow went down ten points today on concerns about Iraq" is talking nonsense: there is no way anyone can tie such a small market move to any particular reason. I found this specific point (which in retrospect is blindingly obvious) especially enlightening, as I am embarrassed to admit that, until now, I just accepted those market comments at face value.
Taleb also has some fun at the expense of economists and analysts, especially those whose predictions turned out wrong, but who claim that the theories were in fact right, and that the facts simply weren't supposed to be that way. This is what he calls denial of history, and is common among investors and gamblers (the two being of course close cousins).
The style of the book is informal and funny, and often meandering. We hop from one topic to the next, which occasionally may detract from the book's continuity, but overall the author's points come through loud and clear. Ironically for a man who advocates self-doubt, Taleb is starkly self-confident, though not in an irritating way.
Taleb is an intriguing, multi-cultural, iconoclastic character that has been around Wall Street for a while, and now runs his own small firm. Malcolm Gladwell (author of The Tipping Point, an absolute must-read for anyone who owns a brain) has written an excellent article that shows how Taleb's reasoning runs counter to just about every bit of conventional Wall Street wisdom. If you're interested in the markets, especially derivatives, and how Taleb trounces most of Wall Street's voodoo doctors, this moderately technical interview from 1996 is worth reading too.
Overall, a warmly recommended book.
You can purchase Fooled by Randomness from bn.com. Slashdot welcomes readers' book reviews -- to see your own review here, read the book review guidelines, then visit the submission page.
(for instance, the fact that you're not dead: is that really because you're so darn good, or does dumb luck play a part?)
There are times where I feel like I should have died but I haven't. Falling off a ravine into a river, losing control of my car in a turn with traffic on the other side. Just dumb luck.
cat /dev/random > top_secret_data
Good point. I'd say I'm that good and
(ughhhh)
NO CARRIER
> (for instance, the fact that you're not dead: is that really because you're so darn good, or does dumb luck play a part?)
.. unfair things happen through dumb luck.
Thats called the Just World mentality. Its not a Just World
I've found this is the single biggest commenality in partiasian schools of thought:
Conservatives tend to think you are where you are because you deserved it. Dumb and lazy people are poor, smart and hard working people are rich. Dumb people get hit by trains, smart people comment on how dumb they are. Your situation is a result of your disposition.
Liberals go the other way. Luck, circumstance, and opportunity play huge roles in where you are. Poor people are poor because of luck and circumstance. People get hit by trains because they might have just plain been unlucky. Your situation is a result of your environment, including dumb luck.
Personally, this is the single biggest reason I can't stand conservatives. It bothers me to no end how capable they are of assuming that anybody in a bad situation is there because they deserve it.
"Old man yells at systemd"
Anyone else think of the Slashdot lameness filter when reading this?
I work at the crossroads between finance and technology so I eagerly read this book. I agree that many, many people in finance are particularly susceptible to making statistical errors. It is amazing how many people are heavily rewarded for dumb luck or what amounts to survivorship bias. There are some smart people in this industry, but there are more people who have had a lucky run.
What ruined the book for me was Nassir's incessant and shameless self-promotion. He shows the same hubris that he finds reprehensible in others and he seems to be trying to settle a few old scores by maligning people.
But the most ridiculous part of the book is when he starts drawing links between finance and neuroscience and trying to explain traders behavior based on our very preliminary understanding of brain physiology. Utter crap.
The basic message is sound: Wall Street is full of people getting paid millions who haven't the slightest understanding of math, science or technology. But that message is clear in about 10 pages and the rest is self-serving, self-promoting tripe.
Anyone who has read and understood a half-decent statistics book is already aware of selection bias. The old "post hoc ergo propter hoc" fallacy is something that everyone with a brain should know about, but unfortunately few do.
So, in short, if you're ignorant, this book is for you. If you have a decent education, you can skip it.
Liberals tend to think that luck, circumstance, and opportunity play huge roles in where you are. Poor people are poor because of luck and circumstance. People get hit by trains while trying to get through the tracks before the train gets there, are just plain unlucky. Your situation is a result of your environment, including dumb luck.
Personally, this is the single biggest reason I can't stand liberals. It bothers me to no end how capable they are of assuming that anybody in a bad situation is there because of bad luck or circumstances beyond their control.
Um, yes, that was a super reductionist post. Obviously, there are shades of grey, and even the most hardcore C or L doesn't look at things in a 100% absolute way that I've suggested.
They are just generalizations, and it's too bad that I'm gunna get modded down to hell for it.
I probably should have left off that last line. It's still a valid point, for the most part.
"Old man yells at systemd"
...there are only two kinds of scientific theories: those that are demonstrably false, and those that are not yet demonstrably false.
;)
Well, yeah - that's why they are theories and not laws. The same sort of argument is made by fundamentalists against the "Theory" of Evolution. It can't be proven. It's only a theory (so let's go back to something infinitely less provable/disprovable such as the divine). Theories are meant to be correct in so much as there is overwhelming evidence toward their ideas.
The book appears to make some good points, however. (Just from the synopsis provided.) The infinitude of random factors that may cause market fluctuations makes prediction completely (probably?) intractable. In CS lingo, it would appear to be NP-Complete.
This sounds more like a book report than a review.
... is Innumeracy: Mathematical Illiteracy and Its Consequences by John Allen Paulos. I read it a couple of years ago, and thoroughly enjoyed it. I think it is an excellent commentary on how probability, large numbers, and basic mathematical principles are largely misunderstood by the general public, and the effects that this phenomenon has both on lives of individuals and society as a whole (e.g. the embrace of numerology, or public policy based on sleight-of-hand statistics). All in all, a short, entertaining, and insightful book.
Life is too important to be taken seriously - Oscar Wilde
Conservatives tend to think you are where you are because you deserved it. Dumb and lazy people are poor, smart and hard working people are rich. Dumb people get hit by trains, smart people comment on how dumb they are. Your situation is a result of your disposition.
This viewpoint is absolutely not essential to conservativism. It is unfair to characterize conservativism as people who punish the poor because they "deserve it."
There is a legitimate conservative idea that many well-meaning social welfare programs actually trap people in poverty by encouraging failure and discouraging success. Clinton famously "ended welfare as we know it" because he believed this kind of reform was the right thing to do.
Of course there is also a wrong kind of conservativism (practiced by many Libertarians and Republicans), in which welfare is cut, while job training programs are cut as well.
Centrists of both parties (such as Clinton) recognize and co-opt the good parts of conservativism and of liberalism. When you say that you can't stand conservatives, I think what you really mean is that you can't stand the self-righteous, self-promoting bigots who make a mockery of the ideology they unfortunately claim to represent.
I don't know how you can be more angry at Conservatives and not at Liberals considering the kind of society we live in where the first response to any incident is "sue". There is no longer a concept of personal responsibility. Its always "the other guy's" fault.
You fat? Sue McDonalds.
You fail your classes? Sue your teachers.
You offended by something someone has said? Sue the author.
You want to maintain your manufacturing job that is an overpriced labor cost to your company? Sue to prevent outsourcing.....etc.
Mac OS X and Windows XP working side by side to fight back the night.
As provocative as the book's thesis seems to be -- and I must admit that my information on it comes entirely from this review -- it's not new. In the 1970s, Burton Malkiel's A Random Walk Down Wall Street posited that market fluctuations are mutually independent, though the market follows a general upwards trend, and thus it's impossible (ceteris paribus) to make any bets on short-term stock performance. The upshot is that the only way to beat benchmark indexes is to assume additional risk: trying to beat the market in most cases is nothing more than gambling on an upmarket roulette wheel.
"Freedom is kind of a hobby with me, and I have disposable income that I'll spend to find out how to get people more."
The stock market, day traders, etc are all dependant of this sort of thing. even though the possibily that their successes are often not distinguishable from random luck gives them all nightmares.
kinda difficult to pick out signals where they are buried in the noise floor to begin with.
"It is a greater offense to steal men's labor, than their clothes"
... Murphy should be right. Is one of the more universal laws.
I'm not dead because I'm alive.
Very good read.
The main issue I have with what he says is comparing Time Series analysis (a topic that is near and dear to my heart), to the people that read the bible and then find prophetic phrases in there.
Aside from that being a bad analogy (but it sounds good if you don't know anything of time series analysis), it is also misleading in that time series analysis can be proven if it will work or not.
There is an equation (that is f'ing driving me nuts right now that I can't recall the name of it) that will tell you if your time series data is truly random or if it leads to predictability.
It has been shown over and over again that the stock market, were it a perfect market would in fact be random - but since there is human intervention that drives it, it is no longer truly random and there are non-linear patterns that are within the data.
The human brain is wired to pick up on linear patterns (to the point we see them where they are in fact not really there - it is advantageous to us to see a lion in the brush and run - when in fact there isn't a lion there, than the other way around and get mauled by a lion that we never saw).
That is more to what he speaks of, humans seeing what isn't there (there are a crapload of great books written about this - How We Know What Isn't So: The Fallibility of Human Reason in Everyday Life by Thomas Gilovich immediately comes to mind) - but the way he speaks, he also includes computational analysis in there and is wrong in his generalization.
Now it is going to bug me all day as to what that frickin' algorithm is called - the one that shows the strength of your time series data... I know it doesn't start with an A, or a Z... and I don't think there is a C there... other than that, I'm pretty much at a total blank.
There are some odd things afoot now, in the Villa Straylight.
Well, I've never been fooled by a random ness, but once I was drunk enough that this dude did manage to pull a Crying Game on me.
To avoid embarrassment, always check first for an expectedly large seed value before wasting any of your time.
- mailed 1/2 the folks a prediction that stock X would rise, mailed the other 1/2 the opposite.
- threw away the 1/2 who ended up with the incorrect prediction
- repeated until there were a few folks left who had gotten 10 correct predictions (either 4 or 8 people, depending on n)
- asked the remaining folks for investments.
- split with the cash
Now imagine stock analysts all making predictions. Eventually there will be a star.This is particularly concerning for those of us involved with evolutionary computation in trading stocks and futures. I havent read the book, is he claiming that optimization of trading stratgies through genetic algorithms, or that neuroevolutionary strategies wouldnt work? Jeff Katz uses GA optimization to great effect in _The Encylopedia of Trading Strategies_.
The solution is to PICK something important that may not be meaningless and random. After all, the world just might not be meaningless and random. This is kind of like Pascal's wager. If you go around believing everything is meaningeless and random and act accordingly like it is, than you gain nothing. You'd sit home and drink beers and watch Jerry Springer all day because theoretically, you aren't any worse or better off than Mother Theresa, Bill Gates, or any other "successful" person. If, however, you pick a goal or ideal to work toward and give it meaning, your life does have meaning and value. At the very least, if others around you deem your efforts worthy, you will gain the love and affection of others (which MOST people are biologically wired to need and crave). Therefore, it is possible to gain something (the pleasure of being valued) out of the void of randomness by giving your life some purpose, even if that purpose is ultimately meaningless in the big scheme of things.
So keep playing the game of life. You've got nothing to lose and only stand to gain.
I read it on Slashdot!
<a href="http://www.joblessjimmy.com">Work is dumb and so is Jobless Jimmy.</a>
For a sci-fi angle on finding patterns in the stockmarket, see the film Pi
...something about seeing under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all?
I guess it just goes to show that there is nothing new under the sun.
"How to Do Nothing," kids activities, back in print!
I don't the point is taht you can't contriol anything in your life, I think the point is that a lot of the time good or bad things can happen regardless of any choices you have made in the past.
I mean, all you can really do is put yourself into a situation where good/bad things could happen.
For instance, someone who has worked hard throughout their student life, got a master's degree in engineering is much more likely to get decent job than a high school drop out, but that doesn't mean either person is garaunteed a job or never getting one. I mean, it wouldn't be uncommon for that engineer to be stuck in dead-end jobs for years while the high school drop out makes a fortune. But the chances are higher that it will be the other way around.
I'd rather be lucky than good.
But I wasn't necessarily commenting on the book. I haven't read it. But based on the review and the links here, the books seems only to confirm something I already felt in my bones: traders and economists sling a lot of BS around. But you know what? A little BS in a world of uncertainty and randomness can carry you a long, long way. Tha't why traders and economists are so full of BS!
<a href="http://www.joblessjimmy.com">Work is dumb and so is Jobless Jimmy.</a>
Fnord.
The one thing that I didn't like in the book was how he trashed Jim Rogers because of a statement he made in 1989 in Market Wizards. Rogers said he didn't like to buy options because 80 to 90 percent of options expire worthless. He basically thinks Rogers is one of those lucky idiots who somehow made a fortune. In another part of the book, he has nothing but praise for Victor Niederhoffer, who bankrupted his company trading options. He lost a lot of credibility with me because of this. I did enjoy the book very much, except for these points.
True, true ... but don't you find that the arbitrary nature of picking a goal like that undermines your belief in it in an insurmountably recursive way?
What can you do. Shrug your shoulders and smile as /dev/random scrolls past.
So, basicly everything is random? Great, Ive been living like that for years. Havent bought a lottery ticket in as long. Its about as likely to buy a winning ticket than finding a winning ticket on the street ;)
Yup. Now please excuse me while I go get another beer. Jerry Springer is almost on. :)
<a href="http://www.joblessjimmy.com">Work is dumb and so is Jobless Jimmy.</a>
Something else I've noticed people being bad at is estimating ratios. Example: back in high school an English teacher asked the class what the population ratio of blacks to whites in Michigan was. Some guessed as high as 50%, but I was the only one with the correct (lowest) answer of around 10%.
I have always wondered what affected this the most. It could be that we were a suburb of Detroit, or that the local television stations' news programs may have featured more black people (scaring white viewers makes for good ratings), or that these kids hadn't travelled very far from the Detroit area, or that they were just really lousy at estimation of distances and population and had no concept of the size of the state.
Certainly, some of the error may have come from cultural bias. I didn't notice any overt racism in the school, but the specter of the "dangerous negro" was/is probably still present.
Is this still on-topic? Anyway, it seems that we need to do better in our educational system of teaching people how to get their heads around the concepts of chance and estimation. Letting any bias influence these will cause errors.
Fantastic sounding book, I've ordered it.
:-)
:-)
I've long since been a believer in the "largely random" nature of the world and this puts me in mind of a wonderful piece of "research" I came across in New Scientist a few years ago.
It cut through a lot of bullshit to ask the question:
"can you predict the longevity of a system or state if you know almost nothing about it"?
i.e. life's pretty random and bothering to analyse the details will only get you so far
So how can we address, from a probabalistic standpoint, questions like:
"How long will the pyramids stand"?
"How long before my bank goes bust"?
"How long before we're hit by an asteroid"?
The reasoning went like this:
Take any "thing"/"system" etc. with a finite existance and ask the question:
"With a 95% certainty, how much time does it have left"?
For the sake of argument lets say you plant a tree, and you know nothing about trees.
Ten years later you come back and the tree is still alive and so you ask the above question about the tree.
Well, the tree is clearly alive but you don't know where "now" is in it's lifespan.
From a purely probabalistic point of view you've got a 50% chance that "now" is the middle half of it's life, i.e. you're not in the 25% of it's "youth" or the 25% of it's old age. So thats a 50% chance that it's had 75% of it's life already (middle age + youth).
Turning this into an equation, if:
x = current age
y = total age
p = probability
then: (it helps with a diagram)
x = py + (y-py)/2
or, rearranging to solve for y:
y = 2x/(p+1)
Going back to our tree then, if it's 10 years old
it's got:
95% chance of making it to 10.26 years
50% chance of making it to 13.33 years
The magic figure I keep in my head is that if you know NOTHING about something, you've got a 95% chance that it will last 1/39th as long again.
I find this little nugget invaluable when considering how much to spend on insurance or investments - cos I know/care NOTHING about them.
After all, why bother with the details, life is random
I'm just as suspicious of claims that it's all luck as I am that it's all skill.
Miko O'Sullivan
Check out these books by Robyn M. Dawes, another heavywieght in the emerging field of 'decision science.'
Rational Choice in an Uncertain World: The Psychology of Judgement and Decision Making
Everyday Irrationality: How Pseudo-Scientists, Lunatics, and the Rest of Us Systematically Fail to Think Rationally
House of Cards: Psychology and Psychotherapy Built on Myth
bullseye!
I know I am going to be flamed for this, but this very topic is discussed at extreme length in Stephen Wolfram's book, "A New Kind of Science". He specifically goes on end about a particular one-dimensional cellular automata, "rule 110" (IIRC), which seems to produce randomness, but which is based off of a small handful of simple rules, and a base starting condition of a single black pixel. He demonstrates in excruciating detail how, no matter how complicated you make a system, that all such systems can be brought back to the set of simple one-dimensional CAs. He demostrates how Turing machines can be set up (via initial starting conditions - not just a single pixel) which use these same CA to perform Turing machine calculations - thus these same CA can, in theory, execute (albeit very slowly) and emulate any current computer or program in existance today. He names this "the principle of computational equivalence".
He explores at great length how systems that are seemingly random can actually be simulated by these self-same CAs, which are based on simple sets of rules - blowing away the time-held notion that complexity arises from an underlying complex ruleset. It stands to reason that given the ruleset, and a result output from the CA, one can work back to the initial starting conditions - the problem arises in that we may only have the initial conditions, figuring out that ruleset is (probably) impossible.
He explores our current methods of perception and analysis, and shows how while our current methods of analysis show that something is random, as humans using our senses we have an affinity for picking out what look to be like patterns - he seems to make the point (unless I have misinterpreted him - which is very likely) that it isn't our senses decieving us, it is our methods of analysis that are incomplete. He also presents ideas and thoughts on how we can overcome these limitations.
The book is much more than that, however - I have read articles dismissing the work as everything from a form of plagerism (at worse) to restating others thoughts (at best). I do not believe this is the case. While it is true many others in the past have played with CAs, what Wolfram has done is go that extra step, building on these ideas and bringing them all together under one umbrella of thought. He acknowledges this throughout the book.
Anyone interested in these topics and others tangent to them owes it to themselves to read Wolfram's book and come to their own conclusions. I honestly believe he is on to something, which could have profound effects in the future (perhaps far in the future, but much sooner if we read it and understand it now).
Other related links:
Collection of Reviews on ANKOS
Stephen Wolfram's Web Site
ANKOS Web Site
Reason is the Path to God - Anon
Yeah. That's Ecclesiastes 9:11. It's the biblical equivalent of "shit happens."
I would like to applaud the submitter of this story, and the courageous editor who approved it (despite there being no mention of how sucky Microsoft is, or how linux won 25 new computers in a Tazmanian pre-school)... It's the most interesting read I've had on slashdot in months!
I read The Fortune Sellers a few years back and it seems to be along the same lines. Basically, people who "predict" the future (be it the stock market, the weather, lifestyle trends, etc.) will highlight the year they got it right and not mention the times they got it wrong. Read it and you'll look at things differently (and never listen to long-range weather forecasts again).
I live ze unknown. I love ze unknown. I am ze unknown.
For instance, if every single person in the world is bullish on the stock market then you can bet that the markets will start to decline immediately because everyone who can get into the market already has, and there are no buyers left. So there are factors that tend to ensure that most people will lose money.
It's why people from "better" backgrounds can recover from poverty quickly - why good business-people can create new businesses from catastrophes repeatedly - and why very hard working people who don't know how to work tactically can still die poor. Knowledge and social networks are what keeps one out of poverty, not hard work.
As an aside, drug addiction exists in that gray area between choice- and not-choice, since it can be thought of practically as a "disease of the choice-making mechanisms of the mind." When drug addiction is responsible for poverty, there's little chance of escaping the poverty without addressing the addiction; likewise for mental illness.
Writing about Karl Popper, he points out that there are only two kinds of scientific theories: those that are demonstrably false, and those that are not yet demonstrably false.
In fact the exact OPPOSITE is true. You can never prove an unrestricted negative.
Some things are inherently impossible, like a married bachelor, or round square. Only contradictions are truly false.
Anyway, here is a good discussion on the subject.
I don't read or respond to AC posts
I find it interesting when the terms "investor" and "trader" seem to be interchangable.
Deep in the human unconscious is a pervasive need for a logical universe that makes sense. But the real universe is always one step beyond logic.
--from "The Sayings of Muad'Dib" by the Princess Irulan
Apparently the guy is unaware of the fact that there are today more people alive than there have ever been dead.
It's simple actually. Invest on sunny days!
Random is the New Order.
There is no one equation that will tell you if something is totally random or if it is predictable - predictability depends on your model. There are a number of non-linear systems that will appear completely random if analyzed with linear models (i.e. pseudo-random number generators of the WWII era). Quack!
Quack!Quack!.....QUACK!!
Based on random dice rolls. We can play as many times as you like. If you are one who believes in luck, lets see if you can beat me.
People who aren't good at statistics will get creamed. Its this way in real life too. Success is not dumb luck, its playing the odds. Its just an excuse when the loser blames the dice.
He makes some good points (yes people do overvalue success, yes people in general suck at estimating probability, yes there is uncertainty in any complex system that obscures truth to the point of making it undeciferable to a certain fact, etc...)in the work but it's taken too far. It's sensationalized deconstructionist arguements that are in and of themselves false by their own premises.
Yes an analyst talking about Iraq can't say that the market is loosing 10 points due to concerns but it takes a true idiot to believe that uncertainty over Iraq isn't affecting the market in a negative way and contributing to those 10 points. Quantifying influence is often impossible but recongnizing it is usually not that hard. It's not just about probability but also trends, and uncertainty is a bad trend in finance.
Okay...uneducated, non-trader rant over!
Taleb mentions that the long-term winners like Soros tend to have a trait in common : they hold no pre-conceived ideas, and will swing with the market. In other words, they accept the facts as they are, instead of trying to fit them into theories.
One could of course argue that Popper's observation is but another kind of truth
That it is me boyo, deduction (which Poper used to come to his conclusions about science and theories) is a whole different way of reasoning.
As an example:
2 + 2 = 4, can be arrived at by deduction completely apart from any external stimulus.
My desk is made of wood, can only be arrived at by induction, or at least by some method relying on input to the senses.
My personal thoughts are that yes, Poper's ideas are just another form of "truth" whatever that means, but that deduction is far more fundamental than induction...
very true.
I agree with a lot of what Taleb has to say - which is why the bible code analogy bugged me. It is frustrating when someone says a series of things that are intelligent and then goes off on a tangent like that.
the feedback loop is a problem you can't get around with stock market models. the more money you put into your model, the more you directly effect the movement of the stock and then throw off the model (I'm pretty sure I just wrote somehthing like that the other day in my journal).
the two obvious ways around this that firms use are 1) don't talk about what you do and trade "small", and 2) continuously update that trading strategy.
Saying to do XYZ today might not work out tomorrow, so find your model, trade using it, and then reevaluate your model again now that there is new data in there. and then trade again.
a simplistic view - but it works.
the reason you will never see always up (or always down for that matter, although that is technically easier) in terms of bringing in money is for exactly what Taleb says the best (and also most obvious part) - it is the unknown.
You might have an ideal model that will work out to give you a great series of correct runs over time - but it won't (and can't) take into account another 9/11 type event.
There are many insurance and reinsurance companies out there using neural nets to do risk assessment and are looking at data and calculating how likely a hurricane will hit Bermuda at T time on D date, or even the 5 or so firms (and schools) that are analyzing with NNs to watch for terrorist/war threats coming up.
It would be interesting to combine the output of all of those efforts into a stock model to try to account for future unknowns... but it is impossible.
The neural net outputs data that has some level of error even if you give it perfectly accurate data.
But if you feed it data that already has its own data (from the NN that it came from), it will then go on to produce much larger error as it goes through the new NN.
Anyway, the main point of contention was that Taleb made a really bad analogy that bothered me and made it sound like it was not possible to predict the market at all.
To always get it right, nope - but to get very close over and over again - yes.
It is then a matter of using that exactly the way he does - maximize profit and minimize loss.
The guys that are risking it all time and time again are either stupid or cocky.
There are some odd things afoot now, in the Villa Straylight.
Heck, I've got friends who claim to know everything. After something has occurred, they paint themselves to have known the whole time. Unlike me, of course, who really *did* know it was going to happen. Well, sometimes, anyway.
i use linux and windows oh god how can i have an opinion
Taleb makes a living from unforeseen events...
That's his job ? Doesn't that make a cashflow forecast a bit tricky ?
Bank Manager: Mr Taleb, you're mortgage payment bounced this month
Taleb: Oh. I never saw that coming...
Never, ever lose a file again. Ever.
"For instance, a commentator saying that 'the Dow went down ten points today on concerns about Iraq' is talking nonsense: there is no way anyone can tie such a small market move to any particular reason."
Good market news coverage almost always uses the phrase "amid concerns," indicating that the market's movements are not necessarily directly caused by a particular event. Rather, they try to give some perspective to what was happening. The only time you hear a direct link made is when news impacts a particular sector and the move is a clear response to that news. A perfect example would be the drop to NASA contractor stocks the Monday after the Columbia tragedy. The quote listed above is a good example of why you shouldn't get your market coverage from local news.
And it beats me how a trader can get any clients with the line "Heck, I don't know why this works but it has so far so just gimme the money and I'll make you rich"
All these books (its a god damn Genre now) are just pety attempts at copying Godel, Escher, Bach which every first year cs/math major should have read.
Today's french lesson:
Ce ne pas une sig. C'est un moniteur.
Ce n'est pas une sig. C'est un moniteur.
and in the post to which you replied:
maybe you are a Quebequois?
Either you're a Quebecer, or you just are québécois(e).
The most random web page on the internet!
FoundNews.com - get paid to blog.,
Are you on the voting commity that turns theories into laws?
That fact that it got modded up at all is rather scary.
Theory vs law is just a name.
A very common one is the 2nd Law of Thermodynamics. Why is it a law? Because it was named as such. Commonly this law is pitted against evolution by ignortant zealots as if evolution violated the 2nd law of Thermodynamics and was therefore impossible.
Of course, the reality is the evidence for the Theory of Evolution is so much more vast then that for the 2nd Law of Thermodynamics (which is really just a guideline and not a hard fast rule). "law" vs "theory" is just a naming convention based on what sticks.
I am so glad that the Bible code has been debunked. That was a potential hole for a great deal of deception, both atheists and Christians can agree (the Christians who rejected it). Off-topic, I know.
Go into the weekly radio program, the NEW HOUR, and back a few weeks ago they had an interview with the guy
t m
i n. htm
more other cool stuff at http://www.financialsense.com/asktheexpert/2002.h
http://www.financialsense.com/transcriptions/ma
Liberty freedom are no1, not dicks in suits.
You're a brand-new engineer out of college. (smart) You sign up at a company that makes widgets and you come up with an idea for a new product the company can sell that's so ingenious it makes the wheel look not quite so revolutionary. (also smart) You work 80 hours a week to design and build the prototype, then you continue to work 80 hours a week getting it through the manufacturing stage. (hard working) The public just doesn't get it, and/or hates the idea. The company goes bankrupt, you're out of a job, and you're starting again at square one.
Wow, um, all that hard work and intelligence just went to waste, now didn't it? You're just treading water, and get to go through this cycle all over again, perhaps many times over. This happens a lot by the way. Companies and projects fail all the time because of luck, bad timing, or bad moves, through no fault of your own. You might be working your ass off, but if the marketing department doesn't make good decisions, you're screwed. You might be working your ass off in marketing, but if your engineers are making bad decisions, you're screwed. Repeat as necessary for customer service, management, and support personnel. Most people spend their lives going through this cycle time and time again, and you're completely forgetting that success happens with a large component of luck.
The formula goes something like this:
1 part skill + 1 part hard work + 2 parts luck = success.
Just because *you* are smart, worked hard, and succeeded, and all the people you know who have succeeded are smart and worked hard doesn't mean that that's all you need to succeed. For every 1 person like you, there are 50 just like you in every respect except that they're failures. You don't see that in your position though, because the entire experience is completely subjective for you. Equally subjective is the exposure you've had to poor people. How many of them have you actually met? How many have been your friends at one time or another? What experience do you have to judge them for anything at all, let alone ascertain reasons as to why they are where they are? I've known idiots that were rich and poor people who were graduates.
Just look at the components of luck in your three reasons: #1 is bloody obvious, there's a chance, however small, that your contraception won't work. #2 The smarter you are the more likely you are to fail at high school. The opposite is also true, and for mostly the same reasons. It's simply not a world that either represents reality in any way shape or form, or even for the most part teaches you anything of any real worth. Smart people do their best to find a way to opt out of it and get that all-important diploma anyway. #3 I can't argue with however.
"No problem. I have the capacity to do infinite work so long as you don't mind that my quality approaches zero."-Dilbert
> You can never prove an unrestricted negative.
> Only contradictions are truly false.
Yes, and the whole point of proving a scientific theory wrong is to prove that it leads to a contradiction. If there is no way to demonstrate that the theory could be disproven, then it is not a scientific theory.
So it appears that you can't prove that Popper is wrong. I still think that Popper is correct on this score.
When one implies that the first half of Popper's statement is false, one is possibly allowing a semantic drift from applied terminology to absolute terminology by implying that there is no such thing as a false "scientific theory" - on the reasoning that if it's false, then it's not a "scientific theory." That's a needless strawman rebuttal. There is no such thing as an unfalsifiable "scientific theory", and history is full of "scientific theories" proven false.
I'm sure you know this, but I'll say it anyway: Simply because something is not falsifiable does not mean it is incorrect or correct.
Yes, and the whole point of proving a scientific theory wrong is to prove that it leads to a contradiction. If there is no way to demonstrate that the theory could be disproven, then it is not a scientific theory.
Ok, well by all means, please share with us a scientific theory which leads to a contradiction. This cannot be a contradiction based on language semantics, like the round circle.
I don't read or respond to AC posts
I'm sure you know this, but I'll say it anyway: Simply because something is not falsifiable does not mean it is incorrect or correct.
The problem is we have people who look at things as being absolutes. This is perhaps one of the greatest reasons quantum mechanics has such a difficult time in the scientific community. Science is about probability, not laws, and not absolutes. The purpose of science is to determine what is most likely true, given current understanding and knowledge.
What is correct is that which is more likely to be true. What is incorrect is that which has little evidence in its favor.
Until this simple fact becomes standard operating procedure, there science will remain stagnant and we will be stuck with imperfect "laws" like E=mc^2.
I don't read or respond to AC posts
Though I was born and raised an athiest and still am one, the above statement is true even if there is a . Even if you and your diety(s) are in love with each other the fact remains: NOBODY ELSE CARES. The existances of you and your God are equally meaningless.
But people don't live on an Infinite Cosmic scale. They live on earth a rather small and homely place.
The grandparent post says that you should make a Pascal's Wager that the universe has some unseen properties that give your life meaning and have faith in that arbitrary selection of religion. The problem with that is that it supposes that people need the Entire Cosmos to be constructed so a to justify their actions or they are somehow worthless. Why follow some random faith to it's illogical logical conclusions or feel guilty to have sinned against such ideals just to have an answer to why you do something?
If something is important to you and you want to do it, that should be enough reason to persue it even if you do not have an answer to 'Why is that important to you?'. That you feel joy/satisfaction/humor/whatever from it is justification enough. Why do you feel happy/sad/whatever about something? Who cares? You are wired to feel that way, so you do. Sure events may have helped wire you but now you are wired that way. Because they are arbitrary, you also have the freedom to change your mind if you see your habits/ideals as the cause of your unhappiness. You are not bound to them, because they are not derived from some religion's version of the supposed 'Unchangable and Eternal Fabric of Reality'.
Everybody has a fate no matter how they try to avoid it. Some fate will eventually be the story of your life. This is a self evident truth that requires no faith. Your actions are motivated by motives that come from inside you. This is also self evident. The seeds that grow into your actions come from inside you. Duh. Instead of making a Pascal's wager on having faith in an external arbitrary and not very convincing religion to be true, why not make a different wager. Why not bet on yourself? Have faith in yourself to be a worthwhile person you are glad to be.
Eat at Joe's.
This reminds me of an old aphorism, one version of which is in my unix fortune dataset. One wonders just which Ginsberg this is:
"Ginsberg's Theorem:
(1) You can't win.
(2) You can't break even.
(3) You can't quit the game.
Freeman's Commentary on Ginsberg's theorem:
Every major philosophy that attempts to make life seem meaningful is based on the negation of one part of Ginsberg's Theorem. To wit:
(1) Capitalism is based on the assumption that you can win.
(2) Socialism is based on the assumption that you can break even.
(3) Mysticism is based on the assumption that you can quit the game."
It's easier to be a result of the past, but more fun to be a cause of the future! http://www.spacefinancegroup.com/
Thank you for your thoughtful reply.
I think that quantum theory should be a complete theory, and it can never be complete. Quantum uncertainty may give quantum theory the incompleteness it needs to avoid having inconsistencies such as contradiction in fact, but that is not necessarily provable and so hardly any guarantee of universal correctness.
I do not sympathise with efforts to remove religious belief, no matter how often often any authority or individual misuses such beliefs. Religious belief is an invaluable asset to the individual because it insulates against external force. For example, nobody needs it to be scientifically proven that they should or should not exist. I don't think anybody needs science running their lives 24 hours a day, but that seems to be a likely direction of future scientific misuse. I think Lord Acton had some similar observations going a little further.
I'm not feeling too well today so I apologize in advance for any sloppiness in these sentiments.
Personally the trend to insist on all households being dual income sickens me. I really believe that children benefit more from having a stay at home parent than they do from having money.
I couldn't agree with you more. One has to ask which state of affairs creates more wealth in the long run:
a) Generation after generation of children taught by the television that being "good little consumers" is the path to happiness, or
b) Generation after generation of children raised by loving, caring, and present parents, at least one of whom is often around to help each child understand the ever-more-complex world around them
With only one income in our household, my wife and I may not be able to afford that SUV, because our consumer society is priced for dropping your kids in front of $199 TVs thus "allowing" both parents to work. However, it's my hope that the gain in prestige of parenting well-adjusted citizens will be worth the loss in prestige of driving the bestest gas-guzzler in existence.
Get back to me in 30 years or so, and I'll tell you how the experiment went.
And of decievers, I am Gambling
-- Hairy Krishna
Eat at Joe's.
Well! There are hundreds. Here's one explaining that the Sun's energy isn't the result of continual bombardment of meteorites. Lamarck's theory of evolution predicted that siblings would share the phenotype of their parents, and they could change that phenotype during their lifetime. This was fairly easily debunked.
Literally, there are hundreds. That's how science advances, through the creation and disproval of scientific theories.
since 87% of all facts are made up on the spot!