Sublime

“Tell her to think like a trader! You win a few, you lose a few.” “I decided to evaluate my portfolio only once a quarter. I am too loss averse to make sensible decisions in the face of daily price fluctuations.” “They never buy extended warranties. That’s their risk policy.” “Each of our executives is loss averse in his or her domain. That’s perfe

Innumerable ways exist to skim off values from within the financial system. Since brokers get a commission for each transaction, they can maximize their incomes by frequent trading on their accounts (a practice known as ‘churning’) no matter whether the trades add value to the account or not. High turnover on the stock exchange may simply reflect c

Today, in our society, in economics, and in finance, we place far too much trust in numbers. Numbers are not reality . At best, they are a pale reflection of reality. At worst, they’re a gross distortion of the truths we seek to measure. But the damage doesn’t stop there. Not only do we rely too heavily on historic economic and market data; our opt

Nassim Taleb, author and researcher, sums it up in this graph:

Adaptation through rapid trial and error is invaluable.

The uncertainty in question will not be an accident of our circumstances — it will be entirely deliberate. We want to tempt others to engage in economic behavior, the output of which is uncertain, at the opportunity cost of behavior that is presumably much more certain. In effect, we are buying uncertainty with certainty.

In December 2010,