Michael Lewis: Don't Eat Fortune's Cookie

I had a great time reading the following group of related books.

How To Beat the Dealer by Ed Thorp.

You might think this is lame and outdated, but it will clue you into how bond traders think. In fact, Bill Gross of pimco was so inspired by the book that he went to Vegas and became a gambler (before pimco but OTW). That book also is the holy grail for card counting. It will up your blackjack at least, and prepare you for the next book.

Liars Poker by M.Lewis

Lewis actually mentions Thorp, b/c Thorp went on to become a wildly successful trader throughout the 90s: he even called out B.Madoff as a crook in the early 90s (dude knew his finance games and clearly the SEC did not), and Thorp developed a lot of arbitrage trade strategies that are common today. All of this and more as M.Lewis clues you into wallstreet cronies and big bond trading, insider talk about salmon smith barney, and just how sketchy that industry really is ...

Ok now you know a few things about wallstreet and trading, now go to:

The Big Short by M.Lewis

Lewis again with an awesome breakdown of how/what of the credit bubble and various characters betting against that massive momentum as it builds. Really this book is about personal fortitude: having a vision as a trader and sticking to it, even when the rest of the world is betting against you, even when your vision implies the rest of the world is d0000med in an almost end-of-money kind of way :)

Now move into an interesting layer of finance, which all of us Hackers will enjoy ...

The Quants by S. Patterson

This has the making of a great movie if only hacking were interesting on film (too bad its not really like Hugh Jackman in Swordfish!). Buffet: "beware of geeks bearing formulas" ... exactly and this book is all about the buildup of these trading systems and the people behind them, the little bill gates (relative to bank-account) characters that run those giant quant funds ... And just questions on layering probability and the feasibility of trading into this complexity.

Read on ...

>It is the latter group that you are failing to acknowledge, which is perhaps why you are seeing so many down-votes. I wouldn't simply attribute it to "anti-intellectualism."

That group, if it really even exists, is completely irrelevant to my point and thus there is no reason I should need to acknowledge it, other than political correctness. Remember, my comments were about my experience and to a lesser extent, Lewises.

Downvoting my comment-- which was on topic and well written-- because I failed to endorse a politically correct point of view (e.g.: the existence of that group, or its significance) is the very essence of the anti-intellectualism I was describing.

So, I agree with you that this is likely a probable cause of the votes, but we disagree as to their meaning.

You know what the sad thing is? I actually crafted this post carefully to only talk about myself, and Mr. Lewis, specifically to avoid being down voted for being politically incorrect. But the intolerance on Hacker News for anything that isn't ideologically leftist is very strong. Obviously my self-censorship instinct was not strong enough.

Meanwhile, of course, people can make snotty comments about other political ideologies and they get way up voted, even when their comment adds nothing to the discussion. (not to mention the thinly veiled name calling, and disingenuous attacks that are also common here.)

This is nothing you can change, and I'm not really attempting to pursuade you of something here. I'm just lamenting that anti-intellectualism is so prevalent in society and so common on this site. I know it was not always that way. But the reddit.com/r/politics crowd has invaded and like there they are eager to silence anyone who thinks different.

I've read a bit on discovery. There are 3 main theories discussed on scientific discovery - the great genius, the cultural zeitgeist and just chance. The great genius without who history would be greatly changed was discounted on the commonality of multiple inventions and the existence of many sufficiently intelligent people at any given time. The cultural zeitgeist holds that there are many ideas in the air and one only has to look to pick it, that it is the intellectual backdrop that determines when and what gets discovered. That multiple inventions are often separated in time and not all discoverable items are found when they could be runs counter to this. The chance model suggests not all discoveries are found and scientific discovery is random as to who gets it and that it follows a Poisson distribution. In one article [1] , an example of a tree with 1000 ripe apples and 1000 apple pickers was given, how many apples are picked?How many people pick the same two or three?

A refinement of the stochastic model considers that geniuses exist but they are able to see and synthesize more than others not that they can see what others can't. They benefit from the cultural backdrop and do not innovate as islands. Their discoveries would eventually be replicated by a large number of individuals making blind turns with individual portions. In sum, not all ideas that are discoverable within a cultural zeitgeist are found, it is essentially random who discovers what but there are a few lucky individuals that tend to be over-represented [2].

How lucky? In numerous ways. In addition to having the right set of genes, epigenetic developments and beneficial stochastic fluctuations in neural development they also need the right set of skills and experiences, and then to not just pick a solvable problem but to pick one solvable by their particular mindset. Solving problems is not a deterministic process but more a sampling of a large combinatorial construction of possibilities acquired only through expertise. So there is an element of chance in fixing the right permutation of ideas. So run history twice and Einstein might not have found General Relativity. In getting recognized luck also plays a role in setting up a Matthew Effect. The only part in which luck is only partial is in being enthusiastic on a subject, the time and effort spent to gain expertise on it (base level of intelligence luck determined, 1 sigma sufficient) and the obsession to be able to think all the time on a subject.

If you are interested in this sort of thing I strongly suggest anything by Simonton (as an aside one of his papers argues that it is not what age you start that matters but how many years into your career that determines the drop off, so late starters get the same burst and drop just shifted in time).

[1] http://www.garfield.library.upenn.edu/essays/v4p660y1979-80....

[2] A small group of highly productive individuals is most likely to participate in multiples, including independent rediscoveries. These same persons are also unusually intimate with the "technoscientific" zeitgeist and perhaps equally gifted with an inordinate amount of good luck.

Not free: http://www.deepdyve.com/lp/psycarticles-reg/multiple-discove...

1) I don't eat the cookie, I just read the fortune.

2) You only get one fortune a day, so the 2nd would be a waste.

3) My instinct as leader would be to let the other two split it or "first come" - whichever is quickest.

4) Nevertheless, the 2nd "alpha" cookie always tastes better.

PG posted an interesting speech a while ago by Richard Hamming. It was about what makes the most successful people so successful. I really like his take on luck.

"I claim that luck will not cover everything. And I will cite Pasteur who said, ``Luck favors the prepared mind.'' And I think that says it the way I believe it. There is indeed an element of luck, and no, there isn't. The prepared mind sooner or later finds something important and does it. So yes, it is luck. The particular thing you do is luck, but that you do something is not." http://www.paulgraham.com/hamming.html