Hi Guys,
Presently, I am focusing my reading on a forecasting theme. The state-of-the art is not encouraging. Overall, it is in a very sorry state. One book that I recently finished even sadly recommended taking investment action on dream interpretations. But there are some prospects being offered from research being conducted in the academic community.
Yesterday I posted on the Man-Machine Investment War topic that partially discussed some forecasting research funded by the IARPA (Intelligence Advanced Research Agency). Logically, IARPA is the alphabet soup outgrowth of ARPA. Al Gore notwithstanding, ARPA-net, which was designed to promote the rapid dissemination of ARPA sponsored cold war research among its participants, really fathered the Internet.
All this was and is very serious stuff. The IARPA contracts with Phil Tetlock to study forecasting shortfalls and ways to improve the output demonstrate a more relaxed and enlightened attitude within the agency. Good for them; even better for us.
Given this relaxation of tensions, perhaps a little humor is appropriate.
From another book that addresses techniques to identify and mitigate the uncertainty of business and investment unknowns, I discovered this humorous tale about forecasting follies. My memory of it follows.
A recently anointed Indian chief was asked by his tribe to forecast the weather severity for the upcoming winter. Whatever talent in this arena earlier chiefs possessed had not been inherited by the current leader. Being conservative, he instructed his tribe to gather wood for a cold winter.
Being uncertain about his prediction, and being a more modern chief, he decided to call a local US National Weather Station. A meteorologist verified his ah hoc opinion. His opinion being reinforced, the newbie chief ordered his tribe to more aggressively collect wood.
A few days later, the chief again called the Weather service. This time the meteorologist was adamant about a very cold winter. The chief reacted by committing his entire tribe to the wood gathering task. But uncertainty again crept into the leader’s mind.
One more call to the weather bureau. This time, the weather expert was positive that the winter would establish extreme cold temperature records. The chief was motivated to question why.
The seasoned meteorologist answered: Over years, we’ve identified a reliable indicator. The local Indians are excellent at forecasting the upcoming winter severity. They have never been busier collecting wood than this year. It will be a long and cold winter.
There’s a great lesson or two in this story. Positive feedback loops can create bubbles. Also, be alert to interdependent information sources. The multiple sources will falsely reinforce their coupled predictions. The wisdom of the crowd is only realized when the many sources are truly independent.
Sorry for the length of this story, but I really liked it, and it was completely unexpected. I hope it entertained you as much as it brought a smile to me.
I recognize that the following is not a great segue, but in my recent readings, I came across the following definitions for political structures that you might find amusing.
SOCIALISM: You have two cows. The state takes one and gives it to someone else.
COMMUNISM: You have two cows. The State takes both of them and gives you the milk.
FASCISM: You have two cows. The State takes both of them and sells you the milk.
MILITARY DICTATORSHIP: You have two cows. The State takes both of them and shoots you.
BUREAUCRACY: You have two cows. The state takes both of them, accidentally kills one and spills the milk in the sewer.
CAPITALISM: You have two cows. You sell one and buy a bull.
PURE DEMOCRACY: You have two cows. Your neighbors decide who gets the milk.
REPRESENTATIVE DEMOCRACY: You have two cows. Your neighbors pick someone to decide who gets the milk.
AMERICAN DEMOCRACY: The government promises to give you two cows if you vote for it. After the election, the president is impeached for speculating in cow futures. The press dubs the affair "Cowgate".
ANARCHY: You have two cows. Either you sell the milk at a fair price or your neighbors kill you and take the cows.
Please do not take offense; this is definitely not intended as a political post. Its purpose is to take the edge off the day trading and to have some fun. A little humor now and again is healthful.
If I wasted your time, I apologize, but I did warn you in the title of my posting.
Best Regards.
Comments
Reminds me of a joke that Dave Chappelle did in front of a small audience not that long ago. He talked about visiting China and investing in the economy by building an 18 room, $450,000 house completely out of Legos. He bought all the parts at the local toy store, called Toys R All of Us.