In reply to both Nancy and Thomas:
"For Taleb, then, the question why someone was a success in the financial marketplace was vexing. Taleb could do the arithmetic in his head. Suppose that there were ten thousand investment managers out there, which is not an outlandish number, and that every year half of them, entirely by chance, made money and half of them, entirely by chance, lost money. And suppose that every year the losers were tossed out, and the game replayed with those who remained. At the end of five years, there would be three hundred and thirteen people who had made money in every one of those years, and after ten years there would be nine people who had made money every single year in a row, all out of pure luck. Niederhoffer, like Buffett and Soros, was a brilliant man. He had a Ph.D. in economics from the University of Chicago. He had pioneered the idea that through close mathematical analysis of patterns in the market an investor could identify profitable anomalies. But who was to say that he wasn’t one of those lucky nine? And who was to say that in the eleventh year Niederhoffer would be one of the unlucky ones, who suddenly lost it all, who suddenly, as they say on Wall Street, “blew up”?
-Malcom Gladwell
A magician named Derren Brown made a whole program about horse racing to illustrate the point of the above story. It's kinda interesting, but wastes more time than reading the story above.
It's rather surprising then, that people who success many times in the row, tend to employ eigenvalues rather than use igon value. Why could that be?
Of course, the role of luck in market is huge. But among the sequential winners, you will tend to find people who win a bit more than 50% of the time. There's many opportunities to do something very stupid (e.g. invest in hydrinos) and lose.
Another month, another rationality quotes thread. The rules are: