[HN Gopher] Why It's Usually Crazier Than You Expect
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Why It's Usually Crazier Than You Expect
Author : antdke
Score : 73 points
Date : 2021-01-30 19:10 UTC (3 hours ago)
(HTM) web link (www.collaborativefund.com)
(TXT) w3m dump (www.collaborativefund.com)
| alex_young wrote:
| Seems like another way to read this is to say that unchecked
| capitalism leads to some pretty unhealthy behaviors.
|
| If people weren't trying to get rich selling tusks we would have
| more elephants and if people weren't trying to get rich with GME
| stock we would have less fear of our other investments being
| randomly targeted.
| tradri wrote:
| taking the anarchist's approach: if people are happier owning
| tusks and using the stock market as a casino than seeing
| elephants and having stable finances, let em do it.
| alex_young wrote:
| Do anarchists really believe that the profit motives of the
| few outweigh the collective interest of the masses?
| danShumway wrote:
| > than seeing elephants
|
| I don't want to strawman anyone. Are there really
| Anachrocapitalists who believe that the market should decide
| whether or not we have mass extinctions, or is this post
| mostly satirical?
|
| There are so many problems with this idea, not the least
| being that markets aren't designed to eliminate niche ideas,
| they're designed to support them -- and because wild
| populations of elephants are a shared common resource, even a
| small number of people who are happier owning tusks means
| that their preferences suddenly outweigh the vast majority
| that want them to stop killing elephants.
|
| Markets aren't designed to stop people from irreparably
| damaging commons and messing up the world for everyone. That
| doesn't mean markets are bad, it just means... that's not
| what they were ever designed to do. You're using them to try
| and fix a problem that they're not optimized to fix.
|
| This is very much a, "if all you have is a hammer, everything
| looks like a nail" proposal. We don't need to solve literally
| every single problem with Capitalism. We especially shouldn't
| look at every single problem and say, "Capitalism doesn't
| solve that, so it's not a real problem."
| nradov wrote:
| In general there's no valid reason to fear our investments
| being randomly targeted. GME short sellers have only themselves
| to blame by pushing the total short interest to unsustainable
| levels and failing to hedge. That is a rare situation which
| hardly impacts any of us.
| throwawayboise wrote:
| If people could not become rich by profiting from their
| efforts, we'd all still be living in teepees and spending our
| days foraging.
| alex_young wrote:
| My criticism of unchecked capitalism isn't the same thing as
| opposition to capitalism itself. In fact it's easy to argue
| that capitalism cannot function without the limits we place
| upon it.
| tradri wrote:
| Interesting read about feedback loops and self-fulfilling
| prophecies.
|
| However, the author made it sound as if "momentum" is the only
| thing that drives human behavior. While it's certainly a part, I
| wouldn't say it's the only force driving human decisions.
| cactus2093 wrote:
| I don't think the author was claiming it's the only force. But
| I do agree this was interesting but felt like something was
| missing. If feedback loops are so powerful, why are most things
| actually fairly stable? How and when and why does something get
| sucked into a positive feedback loop? I'd be curious to read
| more thoughts about that.
| tradri wrote:
| isn't that the question of what makes things go viral?
| tradri wrote:
| To link it to the world of investing, other key factors that
| drive returns/risk of assets are value, size, quality, yield
| and volatility, besides momentum. It's a multi-variate
| equation.
| FabHK wrote:
| 1. I was expecting to read about a gamma squeeze... (people buy
| far out-of-the-money calls on GME (low delta), option seller is
| short, buys a bit of GME to get flat, more people buy & price
| goes up, delta goes up, option seller needs to buy more stock to
| hedge, and you have your feedback loop going (until option is far
| in-the-money, delta is one, and option seller doesn't need to buy
| anymore).)
|
| But that never came... it was just positive feedback in
| perception.
|
| 2. It's not "usually" crazier than you expect. Most everywhere,
| we have feedback loops that keep things stable. Demand rises,
| prices rise, people think, eh, too expensive, and demand and
| supply are in balance again. Airplane gets bumped nose-up a bit,
| angle of attack increases on the wing and the horizontal
| stabiliser creating upward forces, but everything (centre of
| gravity, tail volume, etc.) is carefully designed such that this
| results in a nose-down momentum until the plane is in equilibrium
| again. And I could go on.
|
| That's why it is so _unusual_ when things spin out of control
| (nuclear bomb, anyone?).
|
| 3. As for GME, I trust that the forces of the market will pull it
| back down where it belongs soon enough.
|
| EDIT: closed parenthesis
| [deleted]
| MaxBarraclough wrote:
| > As the number of elephants declines, tusks become rare. Rarity
| pushes prices up. High prices make hunters excited about how much
| money they can make if they find an elephant. So they work
| overtime. Then fewer elephants remain, tusk prices rise even
| more, more hunters catch on, they work triple-time, on and on
| until the number of hunters explodes as everyone chases the last
| herd of elephants
|
| This is almost the opposite of Jevon's Paradox:
|
| > _the Jevons paradox occurs when technological progress or
| government policy increases the efficiency with which a resource
| is used (reducing the amount necessary for any one use), but the
| rate of consumption of that resource rises due to increasing
| demand._
|
| https://en.wikipedia.org/wiki/Jevons_paradox
| pimlottc wrote:
| Jevon's paradox can also lead to virtuous cycles. For example,
| electric-assist bikes require less user energy per mile, making
| biking easier, which leads to more time spent biking, resulting
| in more overall exercise. Similarly, increased transit use can
| lead to more time spent walking.
| laurent92 wrote:
| There is also the vicious version: Mandating the wearing of
| helmets for cyclists increases the number of deaths, because
| of obesity and cardiac diseases due to raising the barrier to
| cycling.
| Ma8ee wrote:
| I've heard that example many times over the years, but I
| very much suspect it's and urban myth. Do you know if there
| really are any serious studies showing this?
| m463 wrote:
| There was a TED talk about this, don't know about papers.
|
| https://youtu.be/07o-TASvIxY
| the-dude wrote:
| You don't need an urban myth when you already have
| statistics.
| Ma8ee wrote:
| Let me rephrase my question: are there reliable
| statistics that shows that that is the case?
| laurent92 wrote:
| I've personally read it from the book Freakinomics, here
| is the article pointing to one scientific paper. But it
| could still be false, you are correct: From my
| experience, a scientific paper isn't trustworthy until
| another paper comes and shows which limits it has.
|
| https://freakonomics.com/2010/01/19/do-bike-helmet-laws-
| disc...
| Ma8ee wrote:
| Thanks for the link. But that only shows that mandatory
| helmets reduce bicycling a few percent. The leap that it
| actually increases mortality is still missing.
| username90 wrote:
| This paper says it increases mortality for that reason:
|
| https://papers.ssrn.com/sol3/papers.cfm?abstract_id=13680
| 64
| njarboe wrote:
| Mandatory helmets reduce fun and freedom. Laws should not
| be passed for marginal improvements in safety or small
| reduction of public costs, in my opinion.
| bostik wrote:
| Think about it this way: if you _choose_ to wear a
| helmet, you already have done a personal risk evaluation.
| You are also, with a high probability, an avid cyclist.
| You are more likely to invest in quality equipment.
|
| On the other hand, if you are getting a helmet because
| you have to but don't really want to, your selection
| criteria will be different. You are less likely to invest
| in quality equipment.
|
| The problem with dodgy headgear is that a badly fitting
| helmet will not feel right, or align well with your head
| movements. This in turn means such a helmet is a source
| of low-grade irritation and distraction - and due to bad
| fit, may actually limit your field of vision when you
| turn your head around. The latter clearly increases the
| wearer's risk.
|
| Hence, a cyclist who wears a helmet only because it's
| mandatory is (sadly enough) more likely to get into
| dangerous accidents. They are unable to give their
| surroundings their full attention, and may also be
| suffering from ill effects of their chosen gear.
|
| Net effect? More dangerous situations, with smaller
| safety margins between the cyclist and their
| surroundings.
|
| Full disclosure: I prefer to wear a good, lightweight
| helmet that fits snugly and doesn't accidentally impair
| my vision. I have also experienced badly fitting helmets
| and consider them hazardous. This is the reason why I am
| against mandatory cycling helmets - regulation can not
| guarantee ergonomics, so with mandatory helmets the truth
| is that more people will be in the traffic with headgear
| that will make them less safe to themselves, as well as
| everyone around them.
| tradri wrote:
| another relevant one: lockdowns cause more deaths because
| people don't have a job and are depressed.
|
| Edit: According to Elon Musk and others.
| [deleted]
| newbie578 wrote:
| Wow, a really interesting read, nice to think about.
| sound1 wrote:
| Agree. I thought about how how my personal image perceived by
| others may affect my success or failure in life or career.
| Interesting and scary at the same time.
| yibg wrote:
| Seems like a potential confirmation bias here with regards to
| GME. GME may be in a feedback loop right now, but how many other
| stocks had the beginnings of a feedback loop but fizzled out? How
| many companies started to win but didn't attract the best
| employees?
|
| Put it another way, is there any predictive power here or is it
| only something that can be observed after the fact? Seems like
| the latter.
| didibus wrote:
| There are firms I've heard of who have social media watchers
| and they play based on "buzz". I don't know how that pans out
| in long term holdings, but short term I'm guessing they've been
| successful or they wouldn't keep doing it.
| JW_00000 wrote:
| Also, are we even "after the fact" at this moment? In other
| words, let's see in three months' time (or one year) whether
| there really was a positive feedback loop that saved GME or
| whether there was a rapid boom-and-bust cycle and GME is back
| to where it was last year (or even bankrupt). It's too early to
| draw conclusions while we're still in the middle of the frenzy.
| mslate wrote:
| Isn't Collaborative Fund the one that got smeared by the CEO of
| one of its portfolio companies?
|
| Previously: https://news.ycombinator.com/item?id=24793170
| vladmk wrote:
| It usually is crazier than you expect but I feel the authors
| answer "small trends" is a cop out answer. Small trends can be
| found in any success, the contrarian view is more interesting:
| why do things go right when they're not supposed to? "Small
| trends" is a bad answer for GameStop, the answer is more complex
| and the variables aren't covered in this article
| netsharc wrote:
| It seems like cheap thought but he tries to present it like
| it's deep insight.
|
| And in 2008/09, people probably didn't want to buy from a
| bankrupt GM because it's hard to get spare parts from bankrupt
| car manufacturers. At least for the common definition of
| bankrupt (i.e. shuttered).
| gautamcgoel wrote:
| The ideas discussed in his post, especially the idea of rapidly
| expanding spheres of civilizations consuming all resources in
| their path, were beautifully explored in Stephen Baxter's sci-fi
| book, Manifold: Space (a spin-off of his earlier book, Manifold:
| Time, which is also excellent). In his book, alien intelligences
| are common; once they become sufficiently advanced, their
| civilizations tend to rapidly expand and consume all available
| resources, often to the detriment of other civilizations in their
| path. This pattern leads to some interesting phenomena: first,
| while the night sky might seem quiet at first, once we do
| encounter aliens, we tend to see their signals across many star
| systems in rapid succession. The reason is pretty obvious: there
| is only a brief period of time when we are on the surface of a
| sphere - a few years after our first observations of aliens, we
| are engulfed within their sphere and observe their signals from
| all over our stellar neighborhood. Another idea he plays with is
| the idea of "refugee" species, who attempt to flee oncoming
| spheres by evacuating ahead of their path instead of being
| consumed.
|
| Actually, he pushes this idea even further: in the book, our
| solar system was _already_ engulfed in a few spheres millions of
| years ago. He suggests that this why Venus is such a hellscape:
| the aliens came, took the resources they wanted, and left behind
| a polluted mess. In the case of Venus, they left lots of
| greenhouse gases behind as the result of some chemical process
| used to extract resources; as a result, Venus quickly became the
| warmest planet in the solar system. It 's a fun twist on the
| Fermi paradox: signs of aliens are actually all around us, we are
| just too dumb to notice them.
|
| Another interesting idea he explores a bit is "ownership" of
| resources. Do the resource-rich asteroids in our solar system
| really belong to us? Or are they available to any alien race who
| happens to pass through? In the book, we first notice aliens by
| observing unexplainable infrared radiation from the asteroid belt
| (later revealed to be thermal emissions from their resource
| extraction). He suggests that these aliens will potentially crowd
| out humans; even if they are not overtly hostile, they could
| gobble up all the resources we would have used to expand our
| civilization.
|
| Highly recommend this book.
| abbadadda wrote:
| Where does one buy said book, "Manifold: Space"? I'd prefer
| paperback or hardcover (no options on UK Amazon)... sounds very
| interesting.
| jfk13 wrote:
| eBay? https://www.ebay.co.uk/sch/i.html?_from=R40&_trksid=p23
| 80057...
| AndrewDucker wrote:
| https://smile.amazon.co.uk/dp/0008134472/ref=cm_sw_r_cp_apa_.
| ..
| kqr2 wrote:
| https://www.amazon.co.uk/Space-Manifold-Trilogy-
| Book-2/dp/00...
| superzamp wrote:
| Had to read this twice, I think you meant to comment on this
| thread: https://news.ycombinator.com/item?id=25972111
| TameAntelope wrote:
| An article last week referred to this as "reflexivity".
|
| * Reflexivity is a theory that positive feedback loops between
| expectations and economic fundamentals can cause price trends
| that substantially and persistently deviate from equilibrium
| prices.
|
| * Reflexivity's primary proponent is George Soros, who credits it
| with much of his success as an investor.
|
| * Soros believes that reflexivity contradicts most of mainstream
| economic theory.
|
| https://www.investopedia.com/terms/r/reflexivity.asp has some
| additional info.
|
| I wonder if there's a way to marry "efficient market hypothesis"
| with "reflexivity on the edges" somehow. _Well_ outside my
| ballywick, in any event.
| marcosdumay wrote:
| No, you can't marry the Efficient Market Hypothesis with any
| kind of inefficiency. Even less one that isn't compatible with
| a market settling into equilibrium.
|
| The hypothesis is just false. Markets do seek efficiency, but
| not the way it states. But the Efficient Market Hypothesis
| leads to tractable mathematics, so people try to approximate
| the real world into it.
| FabHK wrote:
| I think Keynes captured the essence of reflexivity nicely in
| his beauty contest:
|
| "It is not a case of choosing those [faces] that, to the best
| of one's judgment, are really the prettiest, nor even those
| that average opinion genuinely thinks the prettiest. We have
| reached the third degree where we devote our intelligences to
| anticipating what average opinion expects the average opinion
| to be. And there are some, I believe, who practice the fourth,
| fifth and higher degrees."
|
| https://en.wikipedia.org/wiki/Keynesian_beauty_contest
| TeMPOraL wrote:
| I've read the Investopedia article, but I struggle to see
| what's the big deal about it? Where's the conflict?
|
| The best I could summarize it is that "reflexivity" postulates
| that economic equilibria are usually not stable, but
| metastable. That is, they can be easily pushed out of their
| stability regime, at which point the feedback loops will no
| longer balance, and the equilibrium will get re-established
| elsewhere (if at all).
|
| That's the only thing I can see that requires some empirical
| justification. Other than that, the postulates seem to be
| basically "feedback loops 101", and the "mainstream economics"
| concepts, as I understand them, are built on the same
| principles too.
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