Sublime

People must recognize that the accuracy of forecasts in systems with phase transitions is dismal, even by so-called experts.

The physicist Richard Feynman once said, “Learn by trying to understand simple things in terms of other ideas—always honestly and directly.”

subjective probabilities

Even if their forecasts were true (they aren’t), no individual can get the same returns as the market unless he has infinite pockets and no uncle points. This is conflating ensemble probability and time probability. If the investor has to eventually reduce his exposure because of losses, or because of retirement, or because he got divorced to marry

‘Homo economicus’,

Once you subscribe to the principle of volatility-based decomposition, you will start seeing possible volatilities everywhere and can easily overdo it.

There is no Newtonian law of markets; they are all ephemeral relationships in a sea of noise and the only way you can do that and capture non-linearity and complexity is with a system that is rich enough to be able to contain all the models, so a universal approximator—that’s what neural nets are—and allows you to do that.

Scientific models that seek to predict the consequences of human actions with some reasonable accuracy—such as game theoretical models of economic behavior—for the most part ignore human individuality in favor of aggregated outcomes.

the required behavior is accomplished by an interaction between the various encapsulated areas of volatility.