Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

How to increase your luck surface area (2010)

codusoperandi.com

Post reply on HN
Print view View original

151–160 of 207 posts

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

#151

Post by koolba »

stouset wrote: post #135
throwaway2245 wrote: post #129

Earlier quoted context omitted.

> the financial education to buy-and-hold through thick and thin I find this somewhat dubious. If you buy-and-hold for a lifetime, you'll face at least a once-in-a-lifetime level of shock at some point. The possibility that this shock will happen just when you need the funds occurs fairly regularly to generations of retirees: but always seems to be forgotten by gold-standard financial advice.

Avoiding that shock is generally (though not completely) resolved by going with a "target retirement"-style fund that shifts your portfolio towards less-risky assets the closer you get to depending on them. Barring this you can also approximate it yourself by weighting further into bonds and fixed-income assets as you age. The FIRE community does something similar with the "bond tent" strategy. That said, I'm honestl…

You can also buy puts as you near retirement. Trading potential return for downside protection.

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

#152

Post by ruang »

adnzzzzZ wrote: post #58
freshpots wrote: post #39

Earlier quoted context omitted.

Check this out, your opinion may change: https://www.youtube.com/watch?v=3LopI4YeC4I (12:03)

Check this out, your opinion may change: https://www.youtube.com/watch?v=iZM_JmZdqCw (54:01)

I like Peter Thiel's quote: A-B testing only works if you have a billion years (from Darwin)

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

#153

Post by bdavis__ »

dkubb wrote: post #146
bdavis__ wrote: post #142

Earlier quoted context omitted.

i was one of those that was just certain trump was going to tank the economy. my thinking was "he has no clue, and his bumbling around will ruin it". very wrong, and missed out on a lot of gains. and not too sure of when to start dollar cost averaging back in.

The only correct answer to this is now. Right now. No one knows if this is the top of the market and tomorrow everything will come crashing down, or if this is the very bottom of a 10 year bull market. On average you do better not trying to time the market and just contribute on an automated schedule. Set up monthly contributions and buy regardless of whatever is happening in the market and then try to forget about i…

you are correct. very good advice. thank you.

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

#154

Post by salty_biscuits »

tylerhou wrote: post #125
salty_biscuits wrote: post #112

Earlier quoted context omitted.

The obvious discontinuity is "never have to work". People talk about this all the time when they talk about this stuff.

> The obvious discontinuity is "never have to work". First, wanting to achieve "financial independence" does not imply a discontinuous utility function. Suppose it takes $X to reach financial independence. Let's say that when I achieve $X, I have utility Y. It is possible that as I approach $X from the left, my utility continuously approaches Y. In fact, I argue that's what happens for most people who have a FIRE goa…

It really depends on an individuals displeasure at work though right? To take a ludicrous example my utility function for eating a sandwich is has a sharp discontinuity as a function of how much Polonium is in the sandwich. So too with some people for money and work, especially when it is far away from your current state. I don't think this is an experiment that a real economist (TM) has ever performed on an individual to discover what the true utility function is (happy to be wrong though).

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

#155

Post by Uptrenda »

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…

Alternatively: we could assume that people are capable of making their own financial decisions and don't need anyone to police what they do with their own money. Treating people like children for taking risks and assuming they are too incompetent to judge the consequences is condescending as hell.

The simple truth is Game Stop was a good trade, and I think comparing stocks to lottery tickets is very inaccurate. Stocks give you all kinds of numbers and information about the company which is just a little more transparent than staring into a random number generator. They have been called risky. But there are far more volatile positions to be holding.

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

#156

Post by autoditype »

Uptrenda wrote: post #155
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…

Alternatively: we could assume that people are capable of making their own financial decisions and don't need anyone to police what they do with their own money. Treating people like children for taking risks and assuming they are too incompetent to judge the consequences is condescending as hell. The simple truth is Game Stop was a good trade, and I think comparing stocks to lottery tickets is very inaccurate. Stock…

> Alternatively: we could assume that people are capable of making their own financial decisions and don't need anyone to police what they do with their own money.

We have assumed that, and it's turned out to be generally a terrible assumption, with most US earners not being able to manage a $500 expense and being indebted to credit card companies

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

#157

Post by autoditype »

stouset wrote: post #126
rubicon33 wrote: post #120

Earlier quoted context omitted.

> The real Robin Hood-esque company in this whole thing is Vanguard, who have almost certainly done more than most any other company in this space to return profits from the market to customers of all wealth ranges. This is true but unfortunately it's one of those situations where you need money to make money and even then it's a slow multi-decade long process. Culturally young people find themselves in something of…

Absolutely. 4% inflation-adjusted returns aren’t going to turn a single contribution of $1,000 into $1,000,000 in anyone’s lifetime. We have a massive economic problem where the young and the economically disadvantaged face massive challenges achieving financial security. And without the spare funds to contribute non-trivial amounts regularly (and the financial education to buy-and-hold through thick and thin), even…

> 4% inflation-adjusted returns aren’t going to turn a single contribution of $1,000 into $1,000,000 in anyone’s lifetime.

Of course it isn't and no one suggested that. A more realistic scenario is investing 1,000/month for 35 years at 5% adjusted returns IS $1,000,000, and isn't even capping the maximum 401k limits.

I agree with you that this isn't possible when you're not employed or otherwise disadvantaged though.

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

#158

Post by confidantlake »

rubicon33 wrote: post #121
darkerside wrote: post #103

Earlier quoted context omitted.

The trouble is that, if it works, why wouldn't you try it again? You're not only a single data point, you are also a snapshot in time. Two months ago, you didn't have much. And, unless you truly decide to stop doing what you're doing, you are likely to have about the same two months from now.

This is exactly right. Posts just like OPs can be found all over the internet, yet it doesn't change the simple facts. Rarely, if ever, do these people come back months later to report that indeed they kept trading and lost all of their gains (if not more). What you have in OP is a snapshot in their time; hardly the complete story. Time will tell, as they say.

As people ask in poker, "But how much did you lose?".

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

#159

Post by okareaman »

Coincidentally I just read this today: "There is no such thing in the world as luck. There never was a man who could go out in the morning and find a purse full of gold in the street to-day, and another to-morrow, and so on, day after day: He may do so once in his life; but so far as mere luck is concerned, he is as liable to lose it as to find it. "Like causes produce like effects." If a man adopts the proper methods to be successful, "luck" will not prevent him. If he does not succeed, there are reasons for it, although, perhaps, he may not be able to see them."

THE ART OF MONEY GETTING or GOLDEN RULES FOR MAKING MONEY By P.T. Barnum

https://www.gutenberg.org/files/8581/8581-h/8581-h.htm

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

#160

Post by tylerhou »

salty_biscuits wrote: post #154
tylerhou wrote: post #125

Earlier quoted context omitted.

> The obvious discontinuity is "never have to work". First, wanting to achieve "financial independence" does not imply a discontinuous utility function. Suppose it takes $X to reach financial independence. Let's say that when I achieve $X, I have utility Y. It is possible that as I approach $X from the left, my utility continuously approaches Y. In fact, I argue that's what happens for most people who have a FIRE goa…

It really depends on an individuals displeasure at work though right? To take a ludicrous example my utility function for eating a sandwich is has a sharp discontinuity as a function of how much Polonium is in the sandwich. So too with some people for money and work, especially when it is far away from your current state. I don't think this is an experiment that a real economist (TM) has ever performed on an individu…

> To take a ludicrous example my utility function for eating a sandwich is has a sharp discontinuity as a function of how much Polonium is in the sandwich.

Well, in the real world, every sandwich likely has a little bit of polonium in it; maybe an atom or two. If that increased to three or four, you would be slightly unhappier, but not sharply so. Every little increase in polonium slightly decreases your utility until you reach a point where you do not derive any utility from your polonium-laced sandwich, and so you would not eat it. Therefore, I argue that your utility function is still continuous wrt. polonium in your sandwich.

(In economics this isn't really how you'd model utility because the assumption is that you always have the option to throw away the sandwich; therefore, having the polonium sandwich gives you more utility than not having it.)

Same with money. Imagine you had a "life changing amount of money," whatever number that means to you. Call that number $X. Now imagine that you instead had $X - $1. And then $X - $2. Even $X - $1000. How much less happy do you feel in those imagined scenarios? A lot less happy? I bet you feel marginally less happy and not sharply. Which implies a "smooth" utility function.

I believe that non-continuous utility functions can exist -- suppose someone says that they will kill you unless you give them $50,000 -- but for most people that's not a real scenario.

> I don't think this is an experiment that a real economist (TM) has ever performed on an individual to discover what the true utility function is (happy to be wrong though).

I don't think ever with polonium, but here's a short video about revealed preference theory. https://www.youtube.com/watch?v=kPXov3D1tfA. In practice, applications of revealed preference theory happen all the time.

But your example did make me think more about "continuity" and "sharpness" and I now think that continuity is not strong enough to support my original claim. Continuous does not mean "smooth" [1]. To define "smooth," I would instead say that most people have utility functions that have positive first derivatives and negative second derivatives; that is, their marginal increase in utility for a good is positive but diminishing.

[1] https://en.wikipedia.org/wiki/Weierstrass_function

Post reply on HN