Each Sunday I compose a list of the most worthwhile content I’ve consumed during the past week. Primarily as a way to keep inventory of material that influenced me and my way of thinking. This edition happens to be heavy on most things Karl Popper.
Confidence Intervals for the Kelly Criterion (2014) by Euan C. Sinclair. How to derive the estimation error in Kelly ratio from errors of estimation of (assessed instead of fixed) parameters in the underlying trade, and how to nullify the consequences through adoption of confidence intervals and fractional Kelly schemes.
Rise of the Dragon (2021) by Chris Cole. Follow up to Cole’s 2020 paper The Allegory of the Hawk and the Serpent. An evaluation of how the Dragon Portfolio (informed by a radical epistemic humility; ‘don’t predict, prepare’) performed during a turbulent 2020. I particularly appreciated the comments on the ”dead cash” problem in regards to long vol implementation, and the pitfalls of re-balancing and monetization. Chris also made an appearance on Odd Lots this week, where he talked about the potential fragility of risk parity in the event of secular change and stressed the difference between nominal and real returns during inflationary regimes. Here’s Warren Buffett on the same topic.
Children’s Play and Independent Mobility in 2020 (2021) by Helen F. Dodd et al. There’s a good summary of the paper at the Guardian website. The observed general trends echo the research made popular by Haidt and Lukianoff in The Coodling of the American Mind a couple of years ago.
I find the research most interesting from the perspective of first principles as expressed in the adversarial relationship between the static and the dynamic. If we allow for the assumption that volatility/risk can’t be eliminated, only transformed and distributed differently over time, this informs an inverse relationship between the volatility/risk being accumulated over time and the ability of an individual to handle the realization of said volatility/risk. The most critical realization of volatility will always confront the most inept – fragile – individual. It’s just a matter of time. Pathemata mathemata. Scar tissue is the foundation of future character.
Some Benefits and Costs of Cost-Benefit Analysis (2021) by Cass Sunstein. Hate-read. This guy knows the price of everything and the value of nothing. Thought he might comment on this piece from a year ago but nope. A tyrant of metrics.
Knowledge Without Authority (1960) by Karl Popper.
A Special Supplement: The Responsibility of Intellectuals (1967) by Noam Chomsky.
Twelve Virtues of Rationality by Eliezer Yudkowsky.
”The fifth virtue is argument. Those who wish to fail must first prevent their friends from helping them. Those who smile wisely and say: “I will not argue” remove themselves from help, and withdraw from the communal effort. In argument strive for exact honesty, for the sake of others and also yourself: The part of yourself that distorts what you say to others also distorts your own thoughts. Do not believe you do others a favor if you accept their arguments; the favor is to you. Do not think that fairness to all sides means balancing yourself evenly between positions; truth is not handed out in equal portions before the start of a debate. You cannot move forward on factual questions by fighting with fists or insults. Seek a test that lets reality judge between you.”
The Devil’s Advocate’s Advocate by Agnes Callard.
”Thinking together is riddled with pitfalls, but we can’t really claim to live together without doing it. That is why we need devil’s advocates: they safeguard group-deliberation from the inside. The devil’s advocate defends faith and justice by being in the group but not of it: by keeping the group divided against itself, she holds a space for truth against the pressure of consensus. A devil’s advocate is, for instance, well set up to hunt for as-yet unshared information, since for her the sharing of information is never an attempt to be on the same page as other people.”
Socrates and the Ethics of Conversation by Frisbee Sheffield.
The New Cold War by Felix Zulauf.
The Tyranny of Titles: The Complex Case of Oedipus by Rosie Wyles.
In Defense of Teenage Knife Fighting by Charles C. W. Cooke. Hilarious.
”In all honesty, I worry that this sort of helicopter policing is making us weak. Back in my day, the people who survived a good stabbing came out stronger for it. I learned a lot of lessons from my time in the ring: self-reliance, how to overcome fear, the importance of agility, the basics of military field dressing. And, given the turnover, I also learned how to make new friends.”
David Deutsch on Brexit and Error Correction, Joe Boswell. Stupendously awesome. Brexit through the lens of Popperian fallibilism. I’ve offered up a similar perspective here and here with a more explicit emphasis on first principles, how stability breeds instability (Minsky), accumulation of volatility (risk), in the context of more or less antifragile (Taleb) institutions.
”Perhaps I should mention that systems that are good at error correction make more errors. Sounds paradoxical but they make more errors than systems that are bad at error correction, until the catastrophe happens. So system that are bad at error correction fudge and fudge and fudge until at some point everything breaks and they’re forced to do something new, usually at random.”
Shadi Bartsch on the Classics and China, Conversations with Tyler.
Cem Karsan: Insider’s Guide to Volatility Hedges, Mutiny Fund.
Jeff Snider on Deflation, Central Bank Failure, and Understanding Money, Macro Hive.