Category: Notes

Regression to the mean is an unintuitive yet pervasive phenomenon and is among the tools of rationality that should become second nature to educated people.

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Traditional systems (like wood-plank-keeled boats) have an advantage over innovative systems (like the then-novel plywood trimarans) in that the whole process of maintaining traditional things is well explored and widely understood. Old systems break in familiar ways. New systems break in unexpected ways.

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Because indicators direct one’s activities, you should guard against overreacting. This you can do by pairing indicators, so that together both effect and counter-effect are measured.

– Andy Grove

Hotelling’s simplified model describes an iron law: under the right set of assumptions, sellers end up homogenizing their products, and niche interests end up under-served.

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A good teacher is less of a teacher and more of a mentor. She always teaches you by asking the right questions that help you learn about yourself. And then improve from that point forward. You need to trust your teacher and believe you share a common interest to get there. It begins with acknowledging that a teacher has more experience than you, and it doesn’t have anything to do with their age. You can learn from someone younger but with more experience than you in a specific arena. That experience is there to help you get more context and help you independently arrive at the decisions that help you improve.

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The optimistic view…that all good things must be compatible, and that therefore freedom, order, knowledge, happiness…must be at least compatible, and perhaps even entail one another in a systematic fashion…is not self-evidently true…Indeed, it is perhaps one of the least plausible beliefs ever entertained by profound and influential thinkers.

– Isaiah Berlin

Hindsight occurs when a surprising event takes place and the surprise is very brief, replaced almost immediately by a need to make sense of it. The individual has learned something from the event. For example, if there were two football teams that you considered equally-matched, and one of them trumps the other 5-0, they are no longer equally strong in your mind. One of them is clearly better than the other. This makes sense of their victory. It also makes it virtually impossible for you to re-construct that, earlier, you thought they were equal.

Now, we think that the team that actually won “had to win.” Why did it have to win? Because it won. It won because it was stronger. How do we know it is stronger? Because it won. This is hindsight. It has a huge effect on our thinking, it has a huge effect on investing behaviour, and it has a very pernicious effect, in that it teaches us something quite wrong about the nature of reality…

So, the pernicious effect of hindsight is that we get the sense, after the fact, that an event was predictable, so we get the sense that the world is predictable. We think the world makes sense, and that exaggeration of the coherence, consistency and predictability of the world means that we deny the real uncertainty with which we are faced in existence. And this denial of uncertainty in turn produces irrational action.

– Daniel Kahneman

If your opinions on one subject can be predicted from your opinions on another, you may be in the grip of an ideology. When you truly think for yourself, your conclusions will not be predictable.

– Kevin Kelly

The best new ideas always have unanticipated benefits. So it’s stupid to require people who want to do new things to enumerate the benefits beforehand. The best you can do is choose smart people and then trust their intuitions about what’s worth exploring.

– Paul Graham