Ludic Fallacy
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Ludic Fallacy
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Re: Ludic Fallacy
#2Interesting. I see the examples don’t cite “technical analysis” of price action of stocks. Is that also an example of Ludic fallacy?
Re: Ludic Fallacy
#3Interesting. I see the examples don’t cite “technical analysis” of price action of stocks. Is that also an example of Ludic fallacy?
If the person went bust, it is. If he didn't, it's not.
Re: Ludic Fallacy
#4Interesting. I see the examples don’t cite “technical analysis” of price action of stocks. Is that also an example of Ludic fallacy?
The ludic fallacy could apply here as well. If you calculate that on average you will make a profit but in actuality this profit fluctuates so wildly that you will almost certainly go bankrupt in the process the ludic fallacy could apply.
Another criticism by Nassim Taleb to this field is the use of the normal distribution to distributions that are not normal at all. This could lead to the problem that I described in the previous paragraph.
Re: Ludic Fallacy
#5The nicest example of this I've seen is that Tim Ferris won a kickboxing championship without being a kickboxer, https://www.martialdevelopment.com/how-to-win-kickboxing-wro...
The fallacy is that winning a world championship at kickboxing must mean that you're an excellent kickboxer, but nope.
Re: Ludic Fallacy
#6Isn't the first example extremely bullshit?
> A third party asks them to "assume that a coin is fair, i.e., has an equal probability of coming up heads or tails when flipped. I flip it ninety-nine times and get heads each time. What are the odds of my getting tails on my next throw?"
Istm that Fat Tony here gets the right answer to the wrong question. Whether we should assume this is not part of the question. That this is a useful thing to ask IRL doesn't change the fact that if you posed this to me IRL and smugly quoted the ludic fallacy at me for correctly answering your question I'd be strongly tempted to deck you.
https://xkcd.com/169/ comes to mind.
Re: Ludic Fallacy
#7The nicest example of this I've seen is that Tim Ferris won a kickboxing championship without being a kickboxer, https://www.martialdevelopment.com/how-to-win-kickboxing-wro... The fallacy is that winning a world championship at kickboxing must mean that you're an excellent kickboxer, but nope.
Istm he was an excellent kickboxer to exactly the extent the world championship was one of kickboxing.
Re: Ludic Fallacy
#8Isn't the first example extremely bullshit? > A third party asks them to "assume that a coin is fair, i.e., has an equal probability of coming up heads or tails when flipped. I flip it ninety-nine times and get heads each time. What are the odds of my getting tails on my next throw?" Istm that Fat Tony here gets the right answer to the wrong question. Whether we should assume this is not part of the question. That th…
That’s actually exactly what I was going to say. Of course you should update your priors continuously and thus evolve your model. A model is never perfect but it’s the best approximation to reality we have. In the end, Fat Tony has a model in his head, too.
Re: Ludic Fallacy
#9Interesting. I see the examples don’t cite “technical analysis” of price action of stocks. Is that also an example of Ludic fallacy?
Yes and no - mostly the market is a game, like foxes and rabbits where the "rabbits" are forced into behaviours that the foxes can exploit. The dominant strategy for the rabbits is created by policy and regulation and also business success - all that money has to go somewhere. The foxes know that Mr. Rabbit will come back from the veg garden at 6pm and so wait at the hole. All is well as the rabbits grow in number, fatten and prosper, and so do the foxes. So in this situation its all games and you can get rich if you play well.
Good examples are carry trades and insurance market punts - people know that the central bank of Japan has to do X, they know that people are getting old in the developed world... betting on this happening is mostly a clever thing to do.
Every so often at random along comes an event that throws all this into the air - this might be something massive or something small but when it happens people go bust. For example, well look around.
There is a lot of talk that "oh we will know when we are in trouble and we will just change strategy" but sometimes that just proves not to be so. The point is that getting to play the game well for long enough to prosper is just luck, getting out at the right time is just luck. You can be stupid and get taken to the cleaners at any time, and you can play well and just be "the fat rabbit" at any time as well. So, be lucky and play well.
Re: Ludic Fallacy
#10Isn't the first example extremely bullshit? > A third party asks them to "assume that a coin is fair, i.e., has an equal probability of coming up heads or tails when flipped. I flip it ninety-nine times and get heads each time. What are the odds of my getting tails on my next throw?" Istm that Fat Tony here gets the right answer to the wrong question. Whether we should assume this is not part of the question. That th…
That’s actually exactly what I was going to say. Of course you should update your priors continuously and thus evolve your model. A model is never perfect but it’s the best approximation to reality we have. In the end, Fat Tony has a model in his head, too.
Right - "assume at the start that the coin is fair - you are free to update the assumption as you go" is a different thing than they said. Usually "assume that" assumptions are meant to hold throughout the question.
As Randall says, "communicating badly and then acting smug when you're misunderstood is not cleverness."