Stand and Deliver, Cashtags and Highwaymen

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In the olden days, when men were real men and deodorant was unknown, highwaymen roamed the roads, holding up coaches and relieving victims of their wealth.  In those days the felons had to take real risks in order to run off with their booty but today the process is generally a lot simpler and involves a lot less horse power.

Such is the experience of the StockTwits platform which has just seen its $ stocktag idea pinched by Twitter in the form of cashtags, as the ubiquitous social network seeks to find new ways of justifying its eyewatering investment funding.  Of course, many highwaymen ended up swinging from a roadside gibbet, although perhaps being hoist by their own petards might be a better, albeit mixed, metaphor.

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Maxwell’s Demon Investor

Self-Organising Wardrobes

In the long-term we’ll all be dead because, in the long-term, there is no escape from the iron hand of thermodynamics which tells us that every system moves from a state of order to one of disorder. It’s a bit like your wardrobe spontaneously re-organising itself. Only when it’s finished you can’t actually find anything in it any more. Neat but bloody useless.

The measurement of order in a system is known as entropy and the idea that entropy always increases is bound up with the idea that energy ultimately moves from a useful and usable state to one in which it’s unusable and useless. And this is as true of stockmarkets as any other system – not even the perfect demon can outperform the markets other than by luck unless they can also escape the laws of physics. Entropy rules – OK?

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Satisficing Stockpicking

Logical Lab Rats

When we make decisions we nearly always do so in the context of something or other. In fact about the only time we’re asked to make contextless choices is in academic exams and laboratory based psychology experiments. As these are the two most familiar situations faced by the academics generating the theories that underpin most of modern finance we shouldn’t be awfully surprised if their great ideas are somewhat lacking in any understanding of … well, anything, really.

Being trained to think logically and probabilistically is a necessary part of being a modern economist, but it’s hardly a requirement for most people in most professions most of the time. You don’t find many baristas trying to make Bayesian inferences about which particular coffee to pour next. We clearly don’t rationalise most decisions, we make them quickly and effortlessly. We don’t optimise, we satisfice.

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