The only reliable way to get rich by intraday trading

<<efficient market does its thing>>

The only reliable way to get rich by intraday trading is to create an on-line course about “The only reliable way to get rich by intraday trading”.

<<efficient market does its thing>>

The only reliable way to get rich by intraday trading is to create an on-line course about “How to create an on-line course about ‘The only reliable way to get rich by intraday trading'”.

Regret minimization as life strategy

Regret minimization (technically regret minmax – minimize maximal regret) is a useful mental model for decision making.

Recently Tyler Cowen discussed it in an excellent interview The Complacent Class, Sex Robots, and Deathbed Regrets: A Conversation with Tyler Cowen (skip to 49:45, but the whole thing is recommended).

There is no transcript so here are my loose citation notes:

If you lived an “optimal” life there would be a lot of regret at the end of it.

Regret minimization is not the best life strategy.

Your deathbed perspective is not the best/most relevant metric of anything:

you perception is at lowest
your cognition is at lowest
your memory is the worst
you are not responsible for anything

Compare with Jeff Bezos’ decision strategy:

“The framework I found, which made the decision incredibly easy, was what I called — which only a nerd would call — a “regret minimization framework.” So I wanted to project myself forward to age 80 and say, “Okay, now I’m looking back on my life. I want to have minimized the number of regrets I have.” I knew that when I was 80 I was not going to regret having tried this. I was not going to regret trying to participate in this thing called the Internet that I thought was going to be a really big deal. I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not ever having tried. I knew that that would haunt me every day, and so, when I thought about it that way it was an incredibly easy decision.”

The same model is cast in different light. I think Cowen and Bezos would actually mostly agree – “local” regret minimization is premature optimization.

  Cowen Bezos
Apparently says that regret min strategy is… bad good
which regret he means experiential self: real-time regret remembered self – regret at life end
does the utility of
death-bed-me matter
not much yes

The only thing, that is not quite reconciled is – how much should you take into account your “death-bed” personas preferences?

Which reminds me of a famous quote:

Twenty years from now you will be more disappointed by the things you didn’t do than by the ones you did do

— apparently NOT Mark Twain

Reading and publishing

One of the recurring topics of this blog is AI and automation. So it is only natural that I also automatized my blogging: I introduce you to my new blog:

scryptomnema.wordpress.com

It will collect various snippets that I’ve found interesting during my reading.

The blog is stochastic – every day it randomly decides if there will be a new post or not and then it randomly picks the snippet.

One aspect that I like about it is that it seamlessly integrates the act of reading with the act of publishing.

The other aspect that I like is that it might be actually good, unlike this blog 🙂

In any case I’ll subscribe to it – it will be nice to receive this random reminders from my past self.

Three Types of Symmetry

Past 6 months brought a lot of travel, relocation to a new city & country, new job…  now let’s try to get back into good habits like writing.

From 101 Things I Learned in Architecture School I finally understood the appeal of asymmetrical architecture and why is it so beloved by modern architects. This appreciation resonated with a 900 year old echo when we visited Angkor Wat.

1. Static symmetry

The most basic type of symmetry is the one we all imagine when one mentions “symmetry”. Invariance of shapes (or systems) under certain transformations (rotation, reflection, scaling) is deeply appealing to us. Like the layout of the Angkor Wat complex.

angkor_wat_m3

2. Symmetry, broken

The breaking of symmetry is however a quintessential physical mechanism that gives rise, among others, to replicating complex patterns balancing on the edge of chaos (aka “life”).

The breaking of symmetry between past and future gives rise to the arrow of time. And where is time there are stories – such as the The Battle of Kurukshetra. Static symmetry of the army formations is ultimately broken to be able to tell the story of the big battle.

angkor-bas-relief-23-s-banerjee1

3. Dynamic balance – the symmetry of asymetry

Finally, we arrive at the least obvious form of symmetry – the dynamical balance.

From 101 Things I Learned in Architecture School:

Balance is inherent in a symmetrical composition, but asymmetrical com-
positions can be either balanced or unbalanced. Consequently, asymmetry tends to
require a more complex and sophisticated understanding of wholeness.

An example – a dancer is in dynamic balance, yet the posture is not symmetrical in the static sense.

serveimage

A spinning dancer is in dynamical balance. To keep with the Angkor Wat theme I could have showed a picture of dancing Apsaras. I found this optical illusion however extra interesting, because in addition to dynamical balance it demonstrates a dynamical clockwise/anti-clockwise symmetry in rotation.

This concept too hasn’t been unknown to the builders of Angkor Wat in the 11th century. My favourite bas relief is The Churning of Ocean of Milk.

angkor-bas-relief-10-yabby1

It shows 92 gods and 88 demons fighting for the elixir of immortality and a snake caught up in the middle. The gods hold the tail, the demons hold the head, while the snake coils itself around Mt. Mandala. Each time the gods and demons pull from their sides, the mountain turns and the ocean churns.

There is a lot of static (translational) symmetry in the repeating figures. The symmetry is also broken (the head and tail of the world-snake, gods and demons, 92 vs. 88). But ultimately there is a dynamical balance, at least for the moment.

And to close the circle (another symmetry), my new “home” town is famous for its own version of a building in a dynamic equilibrium, that is inspired by dancers: The Dancing House.

untitled-23

 

 

Psychology of happiness 2: If Money Doesn’t Make You Happy Then You Probably Aren’t Spending It Right

Continuing the research notes from the previous post, here is a summary If Money Doesn’t Make You Happy Then You Probably Aren’t Spending It Right by Elizabeth W. Dunn et al. The author re-published this research in the book Happy Money.

My main qualm about the paper is, that it does not differentiate between the remembering vs. experiencing self distinction, so the advises are a tangle of both.

Summary

  • you want to:
    1. extend anticipation before
    2. diminish adaptation during
      • by making events smaller but more frequent
      • by introducing some uncertainty
    3. Prefer experiences to material goods
      • more reminiscence after
      • less externalities/secondary costs
    4. Make everything social
      • spend prosocially
      • share experiences

 

(1) Buy more experiences and fewer material goods

  • Advantages:
    • more anticipation before event, less adaptation during, more reminiscing after
      • reasons:
        • material goods more prone to focalism: you actually don’t think about them very often and therefore don’t get that much utils/hedons
        • material goods usually have more secondary effects, externalities, upkeep costs
      • experiences DO suffer from focalism too: how often do you reminiscence about your vacations – not much, but more than about your fancy hardwood floor
    • negative experiences are easier to forget (or turn to humor)
    • experiences are more often social
  • note: remember the trade-off between remembering / experiencing self

(2) Use their money to benefit others rather than themselves

  • prosocial spending

(3) Buy many small pleasures rather than fewer large ones

  • less adaptation and diminishing marginal utility
  • due duration neglect, higher frequency > longer duration
  • splitting facilitates anticipation
  • Example: massage chair
    • customers got either 180s massage or 2x 80s
    • the split experience was rated higher
  • Exploiting uncertainty
    • having surprises / some uncertainty about the reward increases anticipation (you think about it more due to uncertainty)
    • also diminishes adaptation because you don’t know what’s next what’s

(4) Eschew extended warranties and other forms of overpriced insurance

  • exploit loss aversion and endowment effect

(5) Delay consumption

  • pay upfront to remove sting, delay consumption for anticipation

(6) Consider how peripheral features of their purchases may affect their day-to-day lives

  • especially material goods have upkeep costs, secondary effects & externalities

(7) Beware of comparison shopping

  • it focuses you of easily comparable features
  • e.g. picking a flat: lots of parameters on the web comparison, but you don’t e.g. how is the community, atmosphere etc.

(8) Follow the Herd Instead Of Your Head

  • general ranking is usually a good estimate of your enjoyment, no need to over think it

von Neumann’s Nightmare

Via the always excellent Stephen Hsu – apparently the concept of Technological Singularity can be traced back to von Neumann’s nightmare:
One night in early 1945, just back from Los Alamos, von Neumann woke in a state of alarm in the middle of the night and told his wife Klari:

“… we are creating … a monster whose influence is going to change history … this is only the beginning! The energy source which is now being made available will make scientists the most hated and most wanted citizens in any country.

The world could be conquered, but this nation of puritans will not grab its chance; we will be able to go into space way beyond the moon if only people could keep pace with what they create …”

He then predicted the future indispensable role of automation, becoming so agitated that he had to be put to sleep by a strong drink and sleeping pills. Source: Von Neumann, Morgenstern, and the Creation of Game Theory: From Chess to Social Science, 1900-1960.

In his obituary for John von Neumann, Ulam recalled a conversation with von Neumann:

[about the] “ever accelerating progress of technology and changes in the mode of human life, which gives the appearance of approaching some essential singularity in the history of the race beyond which human affairs, as we know them, could not continue.”

It is only fitting that the (co-)father of both game theory and computation also “discovered” their common endpoint.

As you recall the concept of intelligence explosion is attributed to I. J. Good and the term technological singularity to Vernor Vinge.

Psychology of happiness 1: Notes on Kahneman’s work

Below are my research notes based on:

  1. Chapter 5 of Thinking, Fast and Slow, by Daniel Kahneman
  2. Living, and thinking about it: Two perspectives on life, by Daniel Kahneman & Jason Riis
  3. Experienced Utility and Objective Happiness: A Moment-Based Approach, by Daniel Kahneman

For a quick overview see also Kahneman’s TED talk.

Experiencing vs. Remembering Self

  • Remembering Self
    • “Overall how would satisfied are you with your life?”
      • connected to decision utility (“wantability”, one used in economics)
      • focus of most of the well-being, life satisfaction literature
      • also called: (overall) life satisfaction
      • domain of System 2
        • but hampered by:
          1. Peak/end effect
          2. focusing illusion
          3. can be affected by recent emotional effects
            • e.g. availability heuristic, current affect, recency bias
          4. Culture can play a role in different effect (France vs. US)
  • Experiencing Self
    • “How happy/satisfied do you feel right know at this moment?”
    • connected to “hedonic” utility (how “good” you feel)
    • measured by: real-time sampling, or detailed day reconstruction
    • also called: “U-index” (fraction of time spend in negative emotional state)
    • Example of sampling results – U-index was:
      • 29% for the morning commute,
      • 27% for work,
      • 24% for child care,
      • 18% for housework,
      • 12% for socializing,
      • 12% for TV watching,
      • 5% for sex.
  • Trade-of between selves
    • Kahneman’s initial vs. current position:
      • initial: experiencing self is more relevant, “live in the moment”
      • current: need to take care of both of them
    • what changed his mind:
      • Coherent definition of well-being needs to take into account our goals (preferences) which in turn do have impact on life-satisfaction
    • Effect of Goals
      • ask students how much they value money
      • follow-up in 20 years
      • those who value more, earn more (even housewives!)
      • those who earn more & value more are more satisfied than those that earn less & value more

Remembering vs. experiential well-being – impact on policies

  • policies especially medicine and welfare:
    • E.g. investment that should be made in the treatment of e.g. blindness:
    • Should the investments be determined by how much people fear these conditions?
      • => Focusing illusion (Seeing)
    • Should investments be guided by the suffering that patients actually experience?
      • => Ignores preferences (there is not much difference in experiential happiness between blind and seeing)
    • Or should they follow the intensity of the patients’ desire to be relieved from their condition?
      • => Focusing illusion (Blind)
  • Should a policy make people experientially better of even if it is “remembered” as worse
  • Should a policy make people miserable so that they remember it as more positive
    • concrete example: colonoscopy experiment / cold water experiment
  • Remembering-self has a stronger saying in deliberate decision making (picking holidays, or treatment procedure), but not always (hyperbolic discounting)
kahneman_colonoscopy

Patient A suffers less (experiencing self), but rates the procedure worse than Patient B. If given choice to repeat the procedure, the option B is preferred – i.e. more suffering. Should a policymaker comply? I was always saying, life is like a colonoscopy.

Happiness Puzzles

  • Marriage Satisfaction
    • this is effect on remembering: around marriage you are likely to recall it and include it in the overall eval
    • effect on experiential well-being: neutral, it just redistributes (less positive time with friends, more chores, but more positive time with partner)

    marriage

    Show this to your husband/wife for an awkward conversation.

  • Genetics
    • on both the remembering and experiential self has a major effect
  • France vs. US
    • france reports well-being on the level of unemployed americans
    • experiential well-being turns out to be: about same level
    • “Culture” has a large effect on the reporting
  • Income
    • experiential well-being plateaus at ~75k annual family income
    • remembering-self well-being continues to grow
    • Summary plot from Kahneman & Deaton 2010:

    kahneman_income_happiness

  • Holidays
    • you plan holidays for remembering self, not experiencing self
    • e.g.:
      • spend 10 days in Baltic seeing billion things
      • spend 30 mins / year fondly remembering and 30 mins / year reviewing photos (I’m supper generous here)
      • for that you “tortured” your experiencing self
        • of course it is not only about pure hedons, point is that remembering self if strongly overweighted in decision making
    • Thought Experiment
      • money/time is not an issue, you can go for 10 days wherever and do whatever
      • afterwards your memory will be wiped and photos deleted
      • will you plan a different kind of holiday?

Peak/end effect

  • best predictor for remembering self: average between the peak and the end satisfaction / pain
  • duration has next to no impact
  • “horrible noise at the end of record destroyed the whole experience”

Focusing illusion = focalism

  • “Nothing in life is as important as you think it is when you are thinking about it.”
  • E.g. buying a fancy car
    • How happy will it make me? very!
    • When does it make me happy? When I think about it
    • How often will you think about it? Actually not much!
  • famous experiment:
    • California vs. Ohio Weather
    • quadriplegic (ask people how happy they think they are 1/2 years after, people will overestimate their unhappiness because they focus on thinking about their disability)

Affective forecasting and miswanting

Affective forecasting
predicting emotional effects of future events or things

  • we are terrible at it (focalism, impact bias etc.)

Miswanting

wanting out of biased reason, due to failure of affective forecasting

Hedonic vs. Aspirational adaptation

  • Example
    • you were poor, ate crappy food, enjoyment ranked 5/10 (remembering self)
    • you get rich, you eat great food, time passes, you rank food again 5/10 (remembering self)
  • Hedonic treadmill / adaptation
    • you get used to the recent standard and revert to your set point
    • it means: you actually enjoy (experiencing self) less the better food
  • Aspirational adaptation
    • instead: we have aspirational set-point: somewhere between the base happiness and best-hope outcome
    • with time this baseline adjust higher, but not necessarily the overall enjoyment
      • I.e. experienced self-would rank the food 9/10 (i.e. no real hedonic adaptation), but the remembering self says 5/10 due to aspirational adaptation
  • Summary
    • it is likely that both occur
    • hedonic adaptation is important, but can be established only by sampling experiencing self not remembering self
    • conditions do matter to the experiencing self
      • better food IS better even if you have it every day
      • better city IS better even after longer time
    • but for remembering self the difference becomes invisible