May 17
lindsayrgwattRandom john mauldin, philosophy, thinking
I’ve never been a big fan of Donald Rumsfeld, but way back in 2002 he had a killer quote that expressed a great idea:
There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know. But there are also unknown unknowns. These are things we do not know we don’t know.
I love this quote but have always been frustrated by it. The ex-consultant in me thinks “you’ve only described three quadrants of a 2×2 matrix!” After all, what is an “unknown known”?
Today, I got an inkling of what that might be.
I was catching up on reading some John Mauldin Frontline Thoughts and noticed this graph:
John’s hypothesis is that we’re at the end of 60 year debt supercycle (1950-2010; preceded by 1880-1933) and it’s going to be a vicious delevering that’s going to reshape the world.
The interesting point in the graph below is where the kink upwards started: 1980, just a couple of years after I was born. Moreover, the damn line’s been going up pretty much ever since I’ve started thinking about things more complex than what to do after the school day ended.
And this brings me back to the unknown known. If John is correct (and I think he is), then everything I know about the world is tinged with the fact that I learned it going through the biggest credit bubble anyone alive has seen. A lot of the ‘facts’ I learned growing up (you’ll always be wealthier than your parents, social programs can be paid for, etc.) are going to be challenged over the next 30 years and I’m going to have to unlearn what I knew. My pattern recognition is going to be skewed because it was trained on a pretty crappy underlying dataset.
It won’t be easy, but now I think I finally know what a unknown known might be…
May 12
lindsayrgwattFinance, NYC, Random nassim nicholas taleb, philosophy, statistics
Last night Wen, Rich and I went and listened to Nassim Nicholas Taleb be interviewed at the powerHouse Arena. I’ve been a big fan of his books for years, but this was the first time I’d seen him speak. The interview started on a couple of false notes (he spent a few minutes telling us that they’d all just been out for drinks; the interviewer apologized for her French-accented English), but he had a couple of quotable points:
- The difference between a fool and a saint is timing
- If a problem is too hard to compute, the outcome is essentially random
- Black swans are not black swans for everyone: only for ‘suckers’. To be crass, the 9/11 terrorist attacks were a black swan for Americans; for the terrorists were exactly what they were expecting
- Debt levels map one-to-one with forecasting overconfidence
- If I told you that you have a 3.4% chance of losing everything on a trade, you probably wouldn’t take it. If I told you that a catastrophic failure only occurs every 30 years, you would
- Religion is not about beliefs, it’s about creating heuristics for people who otherwise couldn’t think them up themselves
- The best science is done by independents (Einstein, Darwin), not by people associated with institutions – those people try to please the tenure committee. There probably isn’t a perfect institution for creating better science, but abolishing tenure is likely a good start. (This feels very akin to how innovation in business occurs)
- ‘Forecast’ is ‘prophesize’ in Arabic – but how would you feel about next year’s business ‘prophecy’?
Basically, everything he said could boil down to the following:
- Almost everything that’s interesting in the world is nonlinear
- And no one really understands how nonlinear dynamics work
- So if anyone tells you they do, don’t believe them
- Instead, always compute the likelihood that something will happen…
- …and make sure that you’re never the ‘sucker’ based on those probabilities
He closed with an interesting comment that he wants to move from a world of true/false to sucker/non-sucker. An interesting thought; if you get a chance to see him speak, do so.
Jul 13
lindsayrgwattRandom inspiration, philosophy, prophet
When I was in high school, the band Mad Season recorded the song River of Deceit, which began with the following lines:
My pain, is self-chosen
At least, so the Prophet says
I never really understood it, but it took on a bit more poignancy when Layne Staley, the lead singer and songwriter, later died of a heroin overdose.
Recently, I began to understand a bit more where the lyrics came from, as Karim gave me a copy of Kahlil Gibran‘s The Prophet and I read it on the honeymoon.
In the passage On Pain, Gibran writes:
Much of your pain is self-chosen.
It is the bitter potion by which the physician within you heals your sick self.
Therefore trust the physician, and drink his remedy in silence and tranquility;
The book is littered with brilliant insights. Here are some of my favourites.
From the opening chapter:
Let not the waves of the sea separate us now, and the years you have spent in our midst become a memory.
You have walked among us a spirit, and your shadow has been a light upon our faces.
Much have we loved you. But speechless was our love, and with veils has it been veiled.
Yet now it cries aloud unto you, and would stand revealed before you.
And ever has it been that loves knows not its own depth until the hour of separation.
From the section On Work comes the following:
You have been told also that life is darkness, and in our weariness you echo what was said by the weary.
And I say that life is indeed darkness save when there is an urge,
And all urge is blind save when there is knowledge,
And all knowledge is vain save when there is work,
And all work is empty save when there is love;
And when you work with love you bind yourself to yourself, and to one another, and to God.
Or the following from On Joy and Sorrow:
Your joy is your sorrow unmasked;
And the selfsame well from which your laughter rises was oftentimes filled with your tears.
The book goes on and on (actually, it’s only 96 large type pages) with more great verses; let me close with one from On Teaching:
The astronomer may speak to you of his understanding of space, but he cannot give you his understanding.
The musician may sing to you of the rhythm which is in all space, but he cannot give you the ear which arrest the rhythm nor the voice that echoes it.
And he who is versed in the science of numbers can tell of the regions of weight and measure, but he cannot conduct you thither.
For the vision of one man lends not its wings to another man.
RSS
Recent Comments