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How to increase your luck surface area (2010)

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Re: How to increase your luck surface area (2010)

#71

Post by dehrmann »

stouset wrote: post #54
motohagiography wrote: post #31

Taleb talked about this with his recommendation to get exposure to randomness that has asymmetric upside, and is analogous to luck is preparedness meeting opportunity. What I like about the OP's model is it also explains the asymmetry of social media where people do very little at all and talk about is a lot because the kind of non-linear success we are aiming for is a function of exposure. When you have wealth of an…

Your observation about young people with four-figure net worths thinking it’s rational to gamble it all on options is pretty much this week’s equivalent of those living paycheck-to-paycheck “investing” in the lottery. The bigger problem is that this is rarely just a one-time decision to gamble. And repeatedly doing this is statistically pretty certain to lose you significant amounts of money—particularly when compare…

> The real Robin Hood-esque company in this whole thing is Vanguard

This.

I do worry a bit that there's something I'm missing because Vanguard is a Boomer thing that's no longer relevant, but I suspect all the research is solid and Vanguard being shareholder-owned aligns interests. Robinhood is probably just clever marketing and gamification of stock and options trading.

Re: How to increase your luck surface area (2010)

#73

Post by dehrmann »

Nevermark wrote: post #44
motohagiography wrote: post #31

Taleb talked about this with his recommendation to get exposure to randomness that has asymmetric upside, and is analogous to luck is preparedness meeting opportunity. What I like about the OP's model is it also explains the asymmetry of social media where people do very little at all and talk about is a lot because the kind of non-linear success we are aiming for is a function of exposure. When you have wealth of an…

I hate to say “Bitcoin” because of its high risk, short track record, volatility, faddish aura, etc, but: I believe it’s filling a gap beyond being a better gold-like asset. Better gold = digitally portable, 24 hr liquidity, digital literate friendly, fixed cap, transactions (even with its limits), decentralized control, etc. But the solidly fixed cap is more profound than I think most people recognize. Potentially,…

> fixed cap

This makes it more like a collectable (say, baseball cards) than a currency. The number is capped and some will be lost. It has value as long as people are interested in it--scarcity does not imply value.

It also has a short track record and could run into issues if miners collude, there's a DDoS attack, or someone with a lot of resources reverses transactions, hurting confidence in it.

Re: How to increase your luck surface area (2010)

#74

Post by tylerhou »

PartiallyTyped wrote: post #66
stouset wrote: post #54

Earlier quoted context omitted.

Your observation about young people with four-figure net worths thinking it’s rational to gamble it all on options is pretty much this week’s equivalent of those living paycheck-to-paycheck “investing” in the lottery. The bigger problem is that this is rarely just a one-time decision to gamble. And repeatedly doing this is statistically pretty certain to lose you significant amounts of money—particularly when compare…

Being a 4 digit net worth grad student in Europe, riding a few meme stocks just for a short-while has increased my 'wealth' and given me tremendous amount of financial freedom. I understand that the odds are against me, but really, the expectation even when accounting for variance, and adjusting for risk tolerance are a no brainer to me. I made >40% of my net worth in the first 2 weeks of January alone, and with GME…

In the short term, when someone gains in the stock market, someone else loses. Because of “invisible” transaction fees that go to Wall Street, retail is losing on net. So in the bigger picture, small investors aren’t winning, despite our insistence that we are. Some of us are winning. Most of us are losing. And the net result is that Wall Street is getting richer. That’s not good.

Re: How to increase your luck surface area (2010)

#75

Post by sgpl »

punnerud wrote: post #47
motohagiography wrote: post #31

Taleb talked about this with his recommendation to get exposure to randomness that has asymmetric upside, and is analogous to luck is preparedness meeting opportunity. What I like about the OP's model is it also explains the asymmetry of social media where people do very little at all and talk about is a lot because the kind of non-linear success we are aiming for is a function of exposure. When you have wealth of an…

I love how Reddit (and HN) enable fast sharing, fact checking of information and lifting ideas. When it comes to increase luck surface I think Clubhouse maybe will become one of the most important platforms. GME case seems to exploit the possibility for “short attack” by flipping the table into a infinite price increase, because the hedge funds accidentally created more fake shares that there is shares in existence a…

I'm actually not super bullish on clubhouse. I'm sure they'll find some success but to call it something that will become one of the most important platforms, I don't see it. And perhaps I'll be proven wrong in the next decade on this.

I've recently started using twitter again (after initially using it in 2010/2011) and I feel that there's so much self promotion all the time disguised at knowledge sharing. It also seems like everyone (most people) have a podcast, a newsletter, a youtube channel, etc. I understand that on a surface level people are doing this to increase their 'surface area' but there's just too much and while I'm sure it does a some/a lot of good for the people putting it out there, most of it just seems like noise to me. So that's my reasoning to think that clubhouse won't really become as meaningful as you - it just adds more noise. Sure I can hangout in this room or listen to some folks talk about x/y/z topic, etc. but honestly I feel that after some time people will realize that their time could be better spent.

Re: How to increase your luck surface area (2010)

#76

Post by threedots »

dehrmann wrote: post #71
stouset wrote: post #54

Earlier quoted context omitted.

Your observation about young people with four-figure net worths thinking it’s rational to gamble it all on options is pretty much this week’s equivalent of those living paycheck-to-paycheck “investing” in the lottery. The bigger problem is that this is rarely just a one-time decision to gamble. And repeatedly doing this is statistically pretty certain to lose you significant amounts of money—particularly when compare…

> The real Robin Hood-esque company in this whole thing is Vanguard This. I do worry a bit that there's something I'm missing because Vanguard is a Boomer thing that's no longer relevant, but I suspect all the research is solid and Vanguard being shareholder-owned aligns interests. Robinhood is probably just clever marketing and gamification of stock and options trading.

No you're good. I'm a career hedge-fund/market guy and all of my investable assets (outside of my company and my house) are in vanguard trackers. I'd guess most of my friends who are professional investors are the same (except they likely have some investment in their own fund).

That's not to say there aren't better investment options in the world but they aren't accessible to ordinary people (even quite rich ones).

Re: How to increase your luck surface area (2010)

#77

Post by YZF »

punnerud wrote: post #47
motohagiography wrote: post #31

Taleb talked about this with his recommendation to get exposure to randomness that has asymmetric upside, and is analogous to luck is preparedness meeting opportunity. What I like about the OP's model is it also explains the asymmetry of social media where people do very little at all and talk about is a lot because the kind of non-linear success we are aiming for is a function of exposure. When you have wealth of an…

I love how Reddit (and HN) enable fast sharing, fact checking of information and lifting ideas. When it comes to increase luck surface I think Clubhouse maybe will become one of the most important platforms. GME case seems to exploit the possibility for “short attack” by flipping the table into a infinite price increase, because the hedge funds accidentally created more fake shares that there is shares in existence a…

Not too sure about the "fact" side of things. But the Internet has created opportunities for all sorts of people to get together faster than ever for all sorts of things.

You don't need >100% short interest for a shorted stock to go to infinity. A single share can do that. If I own all the shares, and you borrowed a single share and sold it back to me... well, good luck. Also these sort of attacks aren't really new. Short squeeze has happened before and various other similar ideas (attacking someone with leveraged positions or otherwise risky positions, including currencies). The interesting bit here is IMO the way these people, at least temporarily, acted together. Also the way the hedge funds couldn't grok that like they surely would if they were under attack from a more standard player.

Re: How to increase your luck surface area (2010)

#78

Post by uyt »

tylerhou wrote: post #74
PartiallyTyped wrote: post #66

Earlier quoted context omitted.

Being a 4 digit net worth grad student in Europe, riding a few meme stocks just for a short-while has increased my 'wealth' and given me tremendous amount of financial freedom. I understand that the odds are against me, but really, the expectation even when accounting for variance, and adjusting for risk tolerance are a no brainer to me. I made >40% of my net worth in the first 2 weeks of January alone, and with GME…

In the short term, when someone gains in the stock market, someone else loses. Because of “invisible” transaction fees that go to Wall Street, retail is losing on net. So in the bigger picture, small investors aren’t winning, despite our insistence that we are. Some of us are winning. Most of us are losing. And the net result is that Wall Street is getting richer. That’s not good.

Expected value (a straightforward sum of total money in the system) is the wrong way to look at it.

His point is that the expected utility of these gambles is still positive for people who have nothing.

Re: How to increase your luck surface area (2010)

#79

Post by [deleted] »

tylerhou wrote: post #74
PartiallyTyped wrote: post #66

Earlier quoted context omitted.

Being a 4 digit net worth grad student in Europe, riding a few meme stocks just for a short-while has increased my 'wealth' and given me tremendous amount of financial freedom. I understand that the odds are against me, but really, the expectation even when accounting for variance, and adjusting for risk tolerance are a no brainer to me. I made >40% of my net worth in the first 2 weeks of January alone, and with GME…

In the short term, when someone gains in the stock market, someone else loses. Because of “invisible” transaction fees that go to Wall Street, retail is losing on net. So in the bigger picture, small investors aren’t winning, despite our insistence that we are. Some of us are winning. Most of us are losing. And the net result is that Wall Street is getting richer. That’s not good.

[deleted]

Re: How to increase your luck surface area (2010)

#80

Post by stouset »

PartiallyTyped wrote: post #66
stouset wrote: post #54

Earlier quoted context omitted.

Your observation about young people with four-figure net worths thinking it’s rational to gamble it all on options is pretty much this week’s equivalent of those living paycheck-to-paycheck “investing” in the lottery. The bigger problem is that this is rarely just a one-time decision to gamble. And repeatedly doing this is statistically pretty certain to lose you significant amounts of money—particularly when compare…

Being a 4 digit net worth grad student in Europe, riding a few meme stocks just for a short-while has increased my 'wealth' and given me tremendous amount of financial freedom. I understand that the odds are against me, but really, the expectation even when accounting for variance, and adjusting for risk tolerance are a no brainer to me. I made >40% of my net worth in the first 2 weeks of January alone, and with GME…

Look, it's great that you managed to be one of the people who came out ahead in all of this.

But while you personally have seen some success so far, it's important to recognize that overall this is a transfer of wealth from people in your financial situation to the wealthy. The fact that this one situation is so incredibly newsworthy should be strong evidence of how unlikely such successes are in practice.

Further, a lot of the people holding on to $GME right now will be caught holding the bag once the selloff begins. Once the reversion happens, there won't be buyers willing to take this rapidly-pluging asset at every price point along the way. Certainly some people will get out at sky-high prices, but the overwhelming majority will be left holding a $10 asset they purchased at $400+.

> I made >40% of my network in the first 2 weeks of January alone...

Only if you've sold. And if you haven't, I do genuinely hope that you're one of those who manages to get out in time. But even if you are, it's important to realize that the eventual winners of this scenario aren't going to be the Redditors holding on to $GME shares, but the wealthy short-sellers who manage to either predict the pop or simply have enough assets to hold on long enough for it to happen.

> I have literally nothing to lose.

No, you had 4 digits of net worth to lose. And while that might not seem like "much", it's quite literally not nothing. And while you've been fortunate to win on this play, the statistics are pretty clear that plays like this keep more poor people poor than make the poor rich.

> Keeping track of my bets even before getting into this, I was right more often than not, and I am aware of survivorship bias and confirmation bias. In the limit, it makes more sense to spend 4-5 hours per day learning about market analysis, observing trends close to me and making decisions about sectors/fields that I know about.

First off, compare your plays to overall market returns, not to net-zero. Your benchmark over the past five years should be something around +90% (about 14% YoY returns). Actually, you need to be a little better due to trading expenses and (in the U.S. at least) short-term capital gains tax raets vs. long-term gains.

Second, it's astonishingly easy to be profitable when the overall market is having record returns. The trick is not losing your shirt when the market goes upside down, and everyone thinks that part is going to be much easier than it really is in practice.

In sum, I genuinely wish you luck, but I'm sadly all too aware that the statistical reality is that spending 4-5 hours per day learning about market analysis and making trades based on your findings is overwhelmingly more likely to leave you poorer than richer.

You can find people who've become rich betting it all on black at the casino, but that money didn't come from the house. It's just redistributing funds from all of the other suckers at the table, while the casino takes home the real winnings.

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