Investment heuristics

Note to self:

The concept is that when faced with something new and unfamiliar, people try and understand it by relating it to something they have previously encountered and understand. They then apply this model to it and perhaps run a few checks to see if it is similar, and tweak their understanding of the new thing according to the results of the checks. This is a lazy and efficient way to understand things, if you assume some basic knowledge in the domain -- you don't need to reinvent the wheel.

However, this system works best when you already have a good 'library' of models to draw from, and know what sort of questions to ask. If you can ask good questions, you will be able to isolate and identify key differences which make something new very different from something old.

Example:

Deer --> has 4 legs --> like a horse? --> Eats grass --> ok i guess it's safe to hang around.
Lion --> has 4 legs --> like a horse? --> eats deer --> shit!

Good questions.

Lion --> has 4 legs --> like a horse? --> has lots of hair --> must be a hairy version of a horse. Let's try and ride it, it must be more comfortable...

Bad questions.


Same with investment products.
Hmm, pays me interest every year? --> like a deposit? --> did i buy it at the same bank i put deposits with? --> yes, and it has a bank name in the product's name. --> probably a deposit. should be safe.

Bad questions!


So to empower people who use heuristics to understand financial products better, you have to increase the library of products that they understand. Easier said than done of course, since it is very effortful to build something from the ground up and understand it that way. And with a whole universe of things out there, how do you make sense of it?

Of course, luckily blur naive people can hope to rely on the collective wisdom of teachers around us. If you don't know what a lion is and whether it is safe, you could always ask someone who knows about wild animals. As long as he does not have an interest in feeding you to the lion so he can eat the deer, this is fine.

But perhaps if we can break up and organise the universe into small discrete manageable chunks based on basic ideas, one can try and understand it in small basic pieces. Then one just needs to be able to ask the right questions to figure out how complicated things differ from basic things. hmm.

Multidimensional graphs

Off a random MSN conversation one night:


[P] says (11:22 PM):
i have this theory of friendship/relationships
[P] says (11:22 PM):
it is about multidimensional graphs
[P] says (11:22 PM):
imagine the X axis to be time
[P] says (11:23 PM):
imagine that you as a human being can have your character and essence boiled down into a few dimensions and numbers so that they can be plottable on a graph, like, say, you have a patience of 40 and risk-averseness of 20
[P] says (11:24 PM):
imagine there is also an axis representing some form of position in space.
[P] says (11:24 PM):
now every person is a plotted line across time
[P] says (11:24 PM):
and they change in their personalities, slowly, but they do change, and they change in their space-position somewhat more rapidly (was thinking about this while abroad and had lots of friends who moved about in space)
[P] says (11:27 PM):
so people are lines on this graph
and before you meet them for the first time, you have no idea about all these other people out there

A says (11:27 PM):
mmhm
[P] says (11:28 PM):
and you sort of only can come into contact with other lines who are there in the same space time
[P] says (11:28 PM):
but once you have come into contact with them, you start to exert an influence on each other, and here i insert the assumption that the more time you spend with one another, the closer you will grow to be in your personalities/interests/whatever dimension
A says (11:29 PM):
yes, probably.
[P] says (11:29 PM):
so gradually your lines will move closer together
[P] says (11:29 PM):
if they are close enough, even if a line were to move off into somewhere else due to a shift along the space-dimension
[P] says (11:30 PM):
you would still retain this closeness on the other dimensions, and stay as close friends, even if you do not keep in touch all that often anymore
A says (11:30 PM):
yeah
[P] says (11:30 PM):
and over time the lines may drift, or not
[P] says (11:30 PM):
but if they don't drift that far, then when the person comes back and your space/time is aligned again, can be friends easily
A says (11:30 PM):
mmhm
A says (11:30 PM):
like with my pri sch best friend, on facebook
A says (11:31 PM):
you should blog this. it's an interesting image

Runtime error

While (Andrew.run == 1) {
if (Andrew.tired == 0) {
run.somemore();
run.time++;
}
else Andrew.run=0;
}


if run.time < 30 {
ThrowException("You are super unfit.");
}



"You are super unfit."

Newspapers

I suspect I like reading the technology section of the NYT because technology coverage is by its nature forward looking and full of promise, everything looks shiny like the world is going to be a better place. Lots of the other sections in the papers however capitalise on reporting tragedies.