Comments on: Pigeons, Rats, and Investors http://www.canadiancapitalist.com/pigeons-rats-and-investors/ Helping you invest and prosper Sat, 11 Feb 2012 19:27:54 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Canadian Capitalist http://www.canadiancapitalist.com/pigeons-rats-and-investors/#comment-73021 Canadian Capitalist Tue, 23 Oct 2007 02:03:46 +0000 http://www.canadiancapitalist.com/2007/10/21/pigeons-rats-and-investors#comment-73021 Surely the results depend on people's guesses. If the sequence is GGRGG and I guess GGGGG, I get 80% right. If on the other hand, I guessed GGGRR, I only got 60% right. Surely the results depend on people’s guesses. If the sequence is GGRGG and I guess GGGGG, I get 80% right. If on the other hand, I guessed GGGRR, I only got 60% right.

]]> By: Robert http://www.canadiancapitalist.com/pigeons-rats-and-investors/#comment-73013 Robert Tue, 23 Oct 2007 01:30:48 +0000 http://www.canadiancapitalist.com/2007/10/21/pigeons-rats-and-investors#comment-73013 Prediction addiction sounds good marketing-wise for a book but is meaningless to explain the underperformance. In random games, there is no reason for people to underperfom whether they try to guess or not since the outcome is not dependent of them guessing (or not). The expectation of the game remains the same. The argument could be made (successfully) for games where the behaviors of the participant influence the outcome of the game (stock market, poker, etc.). The mathematical expectation can be modified by superior or inferior tactics. Studies support that in fact in financial endeavors; even more so when bankroll variables are factored-in. Do I make any sense? If so, my first question remain... Prediction addiction sounds good marketing-wise for a book but is meaningless to explain the underperformance.

In random games, there is no reason for people to underperfom whether they try to guess or not since the outcome is not dependent of them guessing (or not). The expectation of the game remains the same.

The argument could be made (successfully) for games where the behaviors of the participant influence the outcome of the game (stock market, poker, etc.). The mathematical expectation can be modified by superior or inferior tactics. Studies support that in fact in financial endeavors; even more so when bankroll variables are factored-in.

Do I make any sense? If so, my first question remain…

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/pigeons-rats-and-investors/#comment-72985 Canadian Capitalist Mon, 22 Oct 2007 22:34:26 +0000 http://www.canadiancapitalist.com/2007/10/21/pigeons-rats-and-investors#comment-72985 Robert: People under perform because they try to guess the next flash despite being told that the sequence is random. Jason Zweig cites research to suggest that we are wired that way. He calls it "prediction addiction". Robert: People under perform because they try to guess the next flash despite being told that the sequence is random. Jason Zweig cites research to suggest that we are wired that way. He calls it “prediction addiction”.

]]> By: Robert http://www.canadiancapitalist.com/pigeons-rats-and-investors/#comment-72976 Robert Mon, 22 Oct 2007 20:36:23 +0000 http://www.canadiancapitalist.com/2007/10/21/pigeons-rats-and-investors#comment-72976 How could people underperform if this is truly random ? Anyhow, assuming a 50-50% game where this result would be replicated (pattern driven people guessing under 50 %), would it imply that betting against the people would lead to a positive expectation game? I can think of a few casino games application... Comments ? How could people underperform if this is truly random ?

Anyhow, assuming a 50-50% game where this result would be replicated (pattern driven people guessing under 50 %), would it imply that betting against the people would lead to a positive expectation game?

I can think of a few casino games application…

Comments ?

]]> By: the Wealthy Canadian http://www.canadiancapitalist.com/pigeons-rats-and-investors/#comment-72971 the Wealthy Canadian Mon, 22 Oct 2007 20:20:28 +0000 http://www.canadiancapitalist.com/2007/10/21/pigeons-rats-and-investors#comment-72971 Hmm, red and green lights, eh.. Sounds like a great idea for some late night infomercial trading platform. Hmm, red and green lights, eh.. Sounds like a great idea for some late night infomercial trading platform.

]]> By: brad http://www.canadiancapitalist.com/pigeons-rats-and-investors/#comment-72943 brad Mon, 22 Oct 2007 19:26:29 +0000 http://www.canadiancapitalist.com/2007/10/21/pigeons-rats-and-investors#comment-72943 Phil, the behavior you're describing (storing provisions, etc.) is learned behavior, not inherited; it's cultural knowledge passed on from generation to generation. That's not what I mean by hard-wired. There's a lot of evidence that humans have a hard time overcoming our tendency to value short-term self-interest over long-term interests (self-interest or public interest), but fortunately we can sometimes transcend those tendencies through cultural pressure, education, or simple logic. Phil, the behavior you’re describing (storing provisions, etc.) is learned behavior, not inherited; it’s cultural knowledge passed on from generation to generation. That’s not what I mean by hard-wired. There’s a lot of evidence that humans have a hard time overcoming our tendency to value short-term self-interest over long-term interests (self-interest or public interest), but fortunately we can sometimes transcend those tendencies through cultural pressure, education, or simple logic.

]]> By: Phil S http://www.canadiancapitalist.com/pigeons-rats-and-investors/#comment-72921 Phil S Mon, 22 Oct 2007 17:25:03 +0000 http://www.canadiancapitalist.com/2007/10/21/pigeons-rats-and-investors#comment-72921 But with that being said, I will have to admit it can be interpreted that the reason why I max out my RSP every year is for the "instant gratification" of having some tax relief. And when I invest outside of my RSP, I invest for the purposes of supplementing my earned income, not necessarily saving for the future. But with that being said, I will have to admit it can be interpreted that the reason why I max out my RSP every year is for the “instant gratification” of having some tax relief. And when I invest outside of my RSP, I invest for the purposes of supplementing my earned income, not necessarily saving for the future.

]]> By: Phil S http://www.canadiancapitalist.com/pigeons-rats-and-investors/#comment-72918 Phil S Mon, 22 Oct 2007 17:20:19 +0000 http://www.canadiancapitalist.com/2007/10/21/pigeons-rats-and-investors#comment-72918 What? Where did you get that stuff about human nature from? Even back when we were in hunter-gatherer societies, humans would have had to save up provisions to survive the trip until they reach the next hunting grounds. And when we moved to an agrarian society, it became all about storing grain to make it through the winter months between harvest seasons. I would dispute the fact that we are hard-wired for instant gratification - it sounds to me like a lot of brainwashing from the baby boomers to try to make themselves sound like victims of their genetics why they didn't save for retirement. And I know quite a few boomers in that category. What? Where did you get that stuff about human nature from? Even back when we were in hunter-gatherer societies, humans would have had to save up provisions to survive the trip until they reach the next hunting grounds. And when we moved to an agrarian society, it became all about storing grain to make it through the winter months between harvest seasons. I would dispute the fact that we are hard-wired for instant gratification – it sounds to me like a lot of brainwashing from the baby boomers to try to make themselves sound like victims of their genetics why they didn’t save for retirement. And I know quite a few boomers in that category.

]]> By: brad http://www.canadiancapitalist.com/pigeons-rats-and-investors/#comment-72883 brad Mon, 22 Oct 2007 14:38:10 +0000 http://www.canadiancapitalist.com/2007/10/21/pigeons-rats-and-investors#comment-72883 Actually our brains evolved to help us survive as individuals (the species survives as a byproduct of individual survival...natural selection operates mostly at the individual level...or the gene level if you buy Richard Dawkins's theory). Individual survival also explains another human trait that often runs counter to wise investing and saving habits: short-term rewards are more attractive than long-term rewards that involve short-term sacrifice. Saving for the future is actually contrary to human nature: we're hard-wired for instant gratification, because our ancestors who sacrificed often didn't live long enough to reap the rewards, and thus didn't pass on that trait to their surviving offspring. Saving and investing for the future are features of our cultural evolution, which attempts to transcend our baser human instincts. Actually our brains evolved to help us survive as individuals (the species survives as a byproduct of individual survival…natural selection operates mostly at the individual level…or the gene level if you buy Richard Dawkins’s theory). Individual survival also explains another human trait that often runs counter to wise investing and saving habits: short-term rewards are more attractive than long-term rewards that involve short-term sacrifice. Saving for the future is actually contrary to human nature: we’re hard-wired for instant gratification, because our ancestors who sacrificed often didn’t live long enough to reap the rewards, and thus didn’t pass on that trait to their surviving offspring. Saving and investing for the future are features of our cultural evolution, which attempts to transcend our baser human instincts.

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