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- Staggering epidemic of stupidity sweeps globe, experts baffled
Staggering epidemic of stupidity sweeps globe, experts baffled
All attempts at vaccination have failed, the human condition remains invincible
Tim Vollans
September 19, 2023 ā¢ Estimated Reading Time: 7 minutes
Thereās no shame in being wrong.
There is shame in being wrong AND stupidā¦
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Right. Iām going to be mean about some people today. More specifically, about the market mistakes those people have made.
As those mistakes were made by people, thereās no way to avoid mentioning them.
To be clear, itās not āthe peopleā I want to focus on. Itās the ideas, the thought processes and what those represent.
Theyāre just people.
As weāve covered many times before, one feature of HumanOS is that weāre ALL capable of doing dumb shit.
Still, itās way cheaper to learn from other peoples mistakes than our own.
Sooooo, letās start with this exchange:
The question on everyoneās lipsā¦
WTF is Beta?
Officially, Beta is a measure of relative volatility. The more volatile an asset is relative to some benchmark that defines ānormalā volatility.
I prefer to think of it as the Alpha Illusion.
Wait. slow down. WTF is Alpha?
Alpha is excess return.
Officially, itās the amount an investment outperforms a benchmark.
Some would argue that buying Nvidia stock rather than buying the S&P 500 this year is generating Alpha.
Alpha = (Asset return - Benchmark return)
Keeping it simple, that investment decision (Nvidia > SPX) has a ācurrent Alphaā of 191 (207%-16%).
But all too often that Alpha is an illusion.
It can be a one off success (as long as you close the trade), but itās not repeatable.. Or with the gift of 20/20 hindsight, it turns out it was all beta (volatility).
One of my favourite visuals of this comes via Howard Marks
The distribution of the returns around different types of investments.
Higher risk often means higher volatility.
With some added notesā¦
Most Alpha is just misdiagnosed Beta. An illusion created by volatility.
Some will argue that Alpha doesnāt even exist. Thatās a different topic entirely.
So, back to Adamās decisions, the 206 tweet thread & most importantly the beta.
High beta usually indicates greater sensitivity to things like systemic risks, deteriorating fundamentals, and the like.
Put another way, when the shit hits the fan, high beta assets get dumped.
The mega thread picked 40 odd altcoins to outperform in 2022.
Reddit numbercrunchers re-visited those predictions on the 4th of December 2022.
As seen from the table, we can conclude that if we had invested according to Adam Cochran's picks, we would be down 82% on our portfolio.
Also, as seen, only three alt-coins (YFI, LDO and RAMP) out-performed BTC, and that too by only 2-6%.
No alpha. Only beta.
Remember, we can all get it wrong sometimes. Thatās just the admission fee for playing the game.
But thatās not what this is about.
See, thereās a MASSIVE difference between being wrong and staying wrong.
Which is why this reply caught my eye (and āinspiredā the post):
seems to not understand VC moneyball or the fact shopping lists are for buying on dips.
And given my net worth is up across that period itās reading comprehension not beta that matters here
If VC moneyball is just throwing a load of shit at the same wall and hoping some sticks, then I guess thatās what it is. Understood.
Then thereās the outcome bias.
āAh well it worked out OK in the end so thatās fine. No lessons to learn lolā
A good process with a bad outcome requires that we remember nothing is for sure.
Bad outcomes from a bad process require a choice. If we are delusional and let our ego dominate, we mistakenly see this as bad luck. While we are aware that we had a negative outcome, we are unaware that it resulted from a bad process. In this case, we learn nothing. We are doomed to repeat our mistakes.
More self-reflective people see bad outcomes resulting from bad process as an opportunity to learn as much as we can to avoid repeat failures.
Noble Intentions Go Unrewarded
Back in 2022, George Noble was hosting amazing Twitter Spaces. Conversations between FinTwitās best and brightest that would go on for HOURS.
The knowledge shared was amazing, the conversations engaging, a genuinely enjoyable intellectual experience.
Which was of course, the problem. Itās far easier to sound intellectual if youāve got a negative outlook.
This became the time when āeveryone was bearishā, so an echo chamber was born and George shot to fameā¦
The warning signs are in the headline. Crusades donāt usually end well.
Nobleās NOPE ETF was launched on September 29th & didnāt even last a year.
The fund is shuttering with less than $19 million in assets and a 68% decline since the start of 2023
Back to what I said at the start.
Thereās no shame in being wrong.
There is shame in being wrong & stupidā¦
Stupid (to me) means not examining why ābad thingā happened.
Whether thatās getting too emotional and fighting the market, or being blinded by your biases or some other root cause, it has to be examined.
And shame isnāt necessarily a bad thing. Itās just feedback.
A precursor to humility.
The humbling experience known as learning things the hard way.
Itās supposed to help us not make the same mistakes over and again.
Being wrong is inevitable. But we canāt skip the humbling.
Thatās just stupid.
Donāt forget!! 20% off premium membership. Get it while it lasts!
The EURCAD trade mentioned earlier is off to a cracking start!
