All of Ricki Heicklen's Comments + Replies

I'm running a quant trading bootcamp at Lighthaven (in Berkeley) Nov 6-10. This is my first time trying the extended weekend model; it starts Wednesday night so if you're local you only have to take off Thursday and Friday. You can register here, or check out the LessWrong event here.

The course covers the fundamentals of quant trading (markets, order books, auctions, risk and sizing, adverse selection, arbitrage, how quant trading firms make money). In terms of vibes, it's a cross between the Jane Street trading internship, Manifest, and summer-camp-style ... (read more)

1Kabir Kumar
damn, those prices are wild
3Alexander Gietelink Oldenziel
Wow this sounds great ! Any way to tune in from abroad ?

Puzzle Hunt Credits

  • Organizers:
    • Ricki Heicklen
    • Rosie Campbell
    • Phil Parker
  • Puzzle Creators:
    • Drake Thomas
    • Eric Neyman
    • Adam Scherlis 
    • Jacob Cohen
    • Guy Srinivasan 
    • Samira Nedungadi
    • Seraphina Nix
  • Writers:
    • Sammy Cottrell
    • Avital Morris
    • Ronny Fernandez
    • Rafe Kennedy
    • Ruby Bloom 
  • Engineers:
    • Julian Aveling
    • Sophie Superconductors
    • Art Zeis
    • Robert Mushkatblat
    • Peter Schmidt Neilson
  • Playtesters:
    • Brian Smiley
    • Eloise Rosen
    • Lawrence Kesteloot
    • Judy Heicklen
    • (& many others)
  • General Helpers:
    • Tess Hegarty
    • Simon Baars
    • Ms. Aveling
    • Paul Crowley
    • Sparr
    • Ross Rheingans-Yoo
    • Sydney Von Arx

(Any omissions acci... (read more)

InDesign! Or anything on page layout / publishing / how to make a pretty and well formatted book

Probably worth including that the winner's curse will also tend to be a feature when the object to be bought is a one time, one customer type setting.

I don't think the winner's curse is limited to this; e.g., I think if the top five bidders win in an auction for vacation tickets (not knowing the value of the vacation package in advance), the effect still exists. It also doesn't need to be a one time thing, or a unique good. 
 

Or would you agree that under your view, the market clearing price of a Walrasian auctioneer the price is also too high in

... (read more)

In response to various comments, I've edited this post to change the title, clarify my fundamental thesis and some terminology choices, and provide explanations for each example. I apologize if this makes some of the existing comments confusing; for posterity, the original version is here.

The high level changes:

  1. I changed the title from "Conditional on Getting to Trade, Your Trade Wasn’t All That Great" to "Toward a Broader Conception of Adverse Selection," since I think the former was distracting from the substance of the piece and led to people believing
... (read more)

It seems like the more the EMH is true in a situation/amount of optimisation pressure applied the more you should expect to be disappointed with a trade.

Yes, this is exactly right—post #2 in the sequence is about what environmental factors increase or decrease the prevalence of adverse selection, and ways to improve trading (and everyday decision making) in light of it. Stay tuned :)

... I would also not be doing it nearly as badly as OP postulates I would. (Because I would be, say, a market-maker like Jane Street, which makes a lot of money off doing that sort of thing.)

I'm not sure I follow. Is the argument here that Jane Street is good enough at market-making that they are not vulnerable to adverse selection? i.e. that the dynamic in example #11 (Widgets stock) wouldn't apply to them?

The fact that you have to reach for exotic scenarios ... [such as] auctions by naive non-auction goers who don't even know to account for winner's curse or getting stuff for free should make you rethink what you are claiming about "most trades you make aren't all that great".

The thing I'm describing here is winner's curse—my point is that the winning bidder (in example #5) overpays relative to the true value, while the median bidder (in example #6) neither profits nor loses. (A bidder whose model is mistaken such that they substantially underbid also profi... (read more)

2jmh
Probably worth including that the winner's curse will also tend to be a feature when the object to be bought is a one time, one customer type setting. Or would you agree that under your view, the market clearing price of a Walrasian auctioneer the price is also too high in some way? After all, it's pretty clear from the simple S & D graph that most of the buyers could have, in theory at least and likely in reality if they could directly communicate, bough whatever they bough at a price lower than the market clearing price; S slopes upwards and includes the producers required rate of return.

I don't claim here that all trades you get to do are bad. I claim that they're worse than they might naively seem without accounting for adverse selection, i.e. for the fact that your opportunity to get something depends on nobody else wanting it (as in the case of the subway seat or the parking spot) or somebody else actively wanting the other side of the trade (as in the case of the zero-sum bedroom selection or the juggling contest).

I'm surprised that these are exotic scenarios to you. I regularly take the subway. I might not be understanding the releva... (read more)

8TsviBT
That seems dependent on it being difficult to scale the specific skill that went into putting together the experience at the good restaurant. Things that are more scalable, like small consumer products, can be selected to be especially good trades (the bad ones don't get popular and inexpensive).

For context, this post was itself inspired by my party, and the events described are all only slightly embellished: https://partiful.com/e/yEpJqHYiOj1w0JHrNcFw

[mod hat] I moved this from "post" to "question," but if that seems incorrect feel free to change it back.