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Black Swan Insights, Confusing Design And Discovery

InvestorEducation / Learn to Trade Oct 24, 2009 - 03:11 AM GMT

By: Charles_Maley

InvestorEducation

Best Financial Markets Analysis ArticleWhen it comes to the things that count, we humans don’t like to admit that we live in a world we know very little about. We also have a tendency to place a premium on the little that we know, and discount the larger amount that we don’t know.


It’s no wonder why we are not good at designing things. The design mindset is grounded in what we “know.” We seem to be much better at discovering things. The discovery process is fueled by what we “don’t know,” so we “tinker” and discover.

I note in the “Why Are We Such Suckers For Prediction?” post, if you are an auto mechanic, you most likely know more about fixing cars than you don’t know about fixing cars. Also, errors are easily rectified. In this light, a good mechanic is an expert. If you are a psychologist or an economist, I don’t think so. In fact, it’s practically impossible that your knowledge of the human condition would exceed your lack of knowledge of the human condition. Not to mention that mistakes can be catastrophic in these “big system” type professions. Plumbers don’t kill people, but doctors do. Mistakes when predicting the weather, the economy, or the financial markets can, and do, ruin our lives.

It seems the big things we know the least about are the very things that count the most.  

Here is a great video of Nassim Taleb and Charlie Rose discussing these issues and the random rare events that have huge consequence:


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Charles Maley
www.viewpointsofacommoditytrader.com
Charles has been in the financial arena since 1980. Charles is a Partner of Angus Jackson Partners, Inc. where he is currently building a track record trading the concepts that has taken thirty years to learn. He uses multiple trading systems to trade over 65 markets with multiple risk management strategies. More importantly he manages the programs in the “Real World”, adjusting for the surprises of inevitable change and random events. Charles keeps a Blog on the concepts, observations, and intuitions that can help all traders become better traders.


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