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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)

#81

Post by HenryBemis »

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…

>Taleb talked

Only because I happen to just starting reading this 4 books [0-3] motohagiography (word-depipction-of-saints?), and until 2-3 weeks ago I am ashamed to say I didn't even know who that was:

Nassim Nicholas Taleb.

[0-3]: Antifragile, The Black Swan, Fooled By Randomness, The Bed of Procrustes

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

#82

Post by jcims »

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…

>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.

One difference here is the solidarity aspect of meme stocks vs lottery.

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

#83

Post by tylerhou »

uyt wrote: post #78
tylerhou wrote: post #74

Earlier quoted context omitted.

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.

Expected utility is positive implies that people have discontinuous utility functions wrt. money. That is, utility will jump significantly after reaching a certain net worth.

Another explanation that is consistent with gambling behavior is that people have inaccurate risk functions; that they overestimate positive upside and underestimate downside.

I am not familiar with the economic literature. But I believe that there is more evidence to support the second hypothesis. Behavioral economics has showed that humans are notoriously unable to estimate risk accurately. I have not seen as much evidence that humans have discontinuous utility functions.

Behavioral economics also tells us that humans are also terrible at estimating their actual utility functions. So I also don’t trust the original poster who claims that they have a discontinuous utility function. The only way to test that is to observe actual human behavior.

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

#84

Post by throwaway2245 »

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…

> Your observation about young people... equivalent of those living paycheck-to-paycheck “investing” in the lottery.

You're so close to uncovering something here...! Why do you think so many people play the lottery?

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

#85

Post by __turbobrew__ »

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…

Why not go to the casino and bet your 4 digit net worth on black jack? You probably have similar or better odds of making money compared to meme stocks.

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

#86

Post by im3w1l »

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…

So something I've been thinking about: Living people enter the market when they make money, and they do that in a correlated way (times of high employment). And they exit the market in a correlated way to spend on retirement or college or whatever. Entering and exiting when everyone else do means you get a bad price.

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

#87

Post by Judgmentality »

stouset wrote: post #80
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…

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…

> 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.

What the hell are you talking about? The short sellers are literally losing tens of billions of dollars, and I believe they are going to lose several times more within the next week.

The short sellers are overleveraged right now, and unless they find some bullshit way to fuck everybody (people are switching away from RobinHood in droves) then they are going to not just lose more money, but go insolvent.

I don't know what's going to happen, and rumors are Melvin is about to get a giant capital infusion, but it really seems like the short sellers are the ones that are fucked and believing otherwise is ignoring data and simply assuming nothing ever changes. The fact that they're doubling down is a sign of desperation, not strength. It's like saying Lehman Brothers can never lose money in 2008.

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

#88

Post by PartiallyTyped »

stouset wrote: post #80
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…

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…

Thank you for your concern, I appreciate it. Yes I have an exit strategy, and with the second semester starting again, I won't really have the time to deal with this all of this. I made enough to setup a system to run experiments and fund my research for a year or two without needing to bug professors or make commitments on topics that don't really interest me.

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

#89

Post by PartiallyTyped »

__turbobrew__ wrote: post #85
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…

Why not go to the casino and bet your 4 digit net worth on black jack? You probably have similar or better odds of making money compared to meme stocks.

I wouldn't say so. After running some simulations and assuming a fair dealer, it makes more sense to follow r/wsb. Doing a sentiment analysis on WSB after you account for bots and spam generally outperforms the market.

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

#90

Post by sokoloff »

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…

I agree with your points on trading frequency, but I still think Robinhood is good for people rather than bad.

I think the alternative destination for a lot of that Robinhood money isn’t “Vanguard VTSAX” but rather slightly positive lifestyle inflation/expenses.

To the extent that’s the case, all the gamification and reinforcement is creating a behavior that’s better than the likely alternative. (Returns are not good if your total lifetime investment trades are zero.)

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