Financial history doesn't repeat itself, but it often rhymes. You can't be stupid enough to trade off anything I say.... I'm lucky they let me out of the straight-jacket long enough to trade.

J. P. Morgan

"Sell down to your sleeping point"

Monday, August 25, 2008

Philosophical Construct.

If you believe that people behave in Irrational ways, and that Therefore the world is random.

Say you believe that "People are comfortable Seeing the world as something Structured, ordinary and comprehensible." .... Calling it a "Platonic fallacy" Which Leads People into:

"Three Distortions"

  1. Narrative Fallacy: creating a distorted post hock history, that fits your Narrative.
  2. Ludic Fallicy: Believing structured randomness found in game theory, or mathematical models matches unstructured chaos found in life
  3. Statistical Regress Fallacy: Believing that future events are predictable by examining Past events.
I can go on......

Here is the Catch 22(Circular logic)..... Say you predict that people will behave with these "distortions".... Isn't that Predicting the Future. If you can predict human behavior, then doesn't that negate your Premise, that the universe is not Structured or Comprehensible.

In fact, I can reverse this... Is it possible that thinking that people behave with "Three distortions."... Isn't that a "Platonic Fallacy'"... are you not negating your Premise before you start?

.... and if you travel through time and have sex with your grandmother, and become your own Grandfather.......

Let me point out that those "Distortions" have been documented and argued for Centuries, and are not new concepts, in most "philosophical, Psychological, and Religious Thinking/Writing.".....

and.... Some argue, It's through understanding those Concepts, in ones self then in others... That brings on "Enlightenment"... or what ever the Localized Nomenclature for an awareness of "Reality" is. Whatever Reality is.

shows why Business majors could use some Philosophy. I agree with the Premise, but not the Conclusion... Because People are predictable, it makes things Predictable.... But we will always Distort our perceptions.... This is why we developed the scientific method.... and yet... Still Distortions Occur.

1 comment:

Tony said...

An important concept in life, and trading, is protection from the one "distortion" that can destroy you.

Taleb calls this the Black Swan event. Even the most successful prognosticator (because that is what a trader is, after all) will be inaccurate a significant number of times.

The human brain loves narrative-- it is evolutionarily imprinted into our DNA. It's okay to engage in narrative, but one must realize that it is fraught with error and must take all narrative with a grain of salt.

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