I had no idea what I was getting into from the headline and subtitle. What a glorious ride! I have been wanting an easily understandable metaphor for feedback cycles within a “free” market system. This tidies it all up quite a bit.
Talking of complexity economics, Doyne Farmer was great craic on life scientific on R4 this morning and I can't recommend his recent book 'Making Sense of Chaos' highly enough.
Really is too much (for me) to absorb in one reading! Love how you put intellectually demanding stuff out there *and* how you condense/clarify so much of it.
Vaguely recall Weitzman (on climate change) talking about fat tails. Not sure if that's the same thing as (radical) uncertainty- which is what İ always thought Taleb was talking about. Apparently, during the financial crisis some top banker (at Lehman (?)) said the chances of that happening- according to the models which assumed a normal distribution- were in the 24 std deviations space!
Thanks for this fascinating post …I have been trying to better understand the black swan vulnerability, particularly since reading Brian Klaas’s Fluke. This post was well worth the time and…for my statistical theory disinclined disposition…effort.
Love this! Especially the fat bird bit at the end.
Another metaphor I find illustrative is from simulations of reductive market behavior. Folks have created simple computer models with arbitrary populations that start with equal resources and trade with each other over iterative cycles.
The trick is that in each trade, one party randomly gets a tiny advantage, meaning they don’t trade $1 for $1, they trade $.99 for $1.01.
Within relatively few cycles, one winner has all the wealth. There is no value they are offering, they just had a slightly better set of random outcomes.
Run after run you get the same outcome.
Perhaps the way to think of it is pegs that are slightly out of round won’t give a Gaussian distribution.
I agree wholeheartedly with first two comments. Killing off big bullies has been on a lot of people’s minds lately I suspect. It has occurred to me that killing off, or taking a chainsaw to, their companies is the way to go. How to accomplish this? Can a flock of birds coordinate - sometimes.
I had no idea what I was getting into from the headline and subtitle. What a glorious ride! I have been wanting an easily understandable metaphor for feedback cycles within a “free” market system. This tidies it all up quite a bit.
Thanks! Trust me, it was a 3 dog walk (and some) problem.
Such a great post.
🙏
This is remarkable for its clarity on topics which (I thought) I already knew. So well done.
Brilliant. Best substack I have read bar none!
Talking of complexity economics, Doyne Farmer was great craic on life scientific on R4 this morning and I can't recommend his recent book 'Making Sense of Chaos' highly enough.
Thank-you:) I will see if I can find that on iplayer.
Really is too much (for me) to absorb in one reading! Love how you put intellectually demanding stuff out there *and* how you condense/clarify so much of it.
Vaguely recall Weitzman (on climate change) talking about fat tails. Not sure if that's the same thing as (radical) uncertainty- which is what İ always thought Taleb was talking about. Apparently, during the financial crisis some top banker (at Lehman (?)) said the chances of that happening- according to the models which assumed a normal distribution- were in the 24 std deviations space!
Thanks🙏 A generous comment as always.
Thanks for this fascinating post …I have been trying to better understand the black swan vulnerability, particularly since reading Brian Klaas’s Fluke. This post was well worth the time and…for my statistical theory disinclined disposition…effort.
Love this! Especially the fat bird bit at the end.
Another metaphor I find illustrative is from simulations of reductive market behavior. Folks have created simple computer models with arbitrary populations that start with equal resources and trade with each other over iterative cycles.
The trick is that in each trade, one party randomly gets a tiny advantage, meaning they don’t trade $1 for $1, they trade $.99 for $1.01.
Within relatively few cycles, one winner has all the wealth. There is no value they are offering, they just had a slightly better set of random outcomes.
Run after run you get the same outcome.
Perhaps the way to think of it is pegs that are slightly out of round won’t give a Gaussian distribution.
Thanks, yes that computer simulation demonstrates it perfectly. Tiny changes in the initial design of the system can lead to huge changes elsewhere.
I remember reading about this, but lost the source. Do you have it, please?
It is referred to as the “Yard Sale Model”
https://physics.umd.edu/hep/drew/math_general/yard_sale.html
Thanks 🙏🏻
I agree wholeheartedly with first two comments. Killing off big bullies has been on a lot of people’s minds lately I suspect. It has occurred to me that killing off, or taking a chainsaw to, their companies is the way to go. How to accomplish this? Can a flock of birds coordinate - sometimes.