Value Versus Trend Following with Michael Covel on Trend Following Radio.
Timur Kuran is an economist, professor of economics and political Science, Gorter Family Professor in Islamic Studies at Duke University and author of “Private Truths, Public Lies: The Social Consequences of Preference Falsification.” His work spans economics, political science, history, and legal studies.
Timur is responsible for coining the term “preference falsification.” So what is preference falsification? It is the act of misrepresenting ones wants because of social pressures. There is a movement going through colleges where students feel they are being suppressed. They don’t feel they can express themselves because of fear they may be called a racist, sexist, etc. Despite America being seen as a country of freedom and self-expression, 90% of students feel they cannot speak freely or engage with professors and other students in lively debate.
What was the a-ha trigger moment that pushed Timur toward working on preference falsification? It happened while he was a PhD student studying economics. While learning about different theories, he looked around the classroom and knew not all of the students agreed or accepted the theories being taught. He felt uncomfortable himself challenging his professor and knew there was more to how he was feeling and how his classmates seemingly felt. This stayed in the back of his mind throughout his PhD program and he decided that after graduation he would start working on his new theory.
Timur uses the 2016 U.S. election between Clinton and Trump as an example of preference falsification. Trump showed he wasn’t afraid to take on the establishment, no matter how high up they may be. He challenged the media, a war hero, and other politicians and made them look like victimizers. Trump understood “the thinkable” and “the unthinkable.” By tapping into unthinkable thoughts that had never been articulated by other politicians, Trump gave hope to millions of people who otherwise may have discounted him. Timur also uses the 2011 Egyptian uprising as well as the caste system in India as other examples.
Aaron Brown is a finance practitioner, expert on risk management and gambling, speaks frequently at professional and academic conferences and author of “Red-Blooded Risk,” “The Poker Face of Wall Street,” and co-author of “A World of Chance.” He was Chief Risk Manager at AQR Capital Management and one of the original developers of value at risk.
At 8 or 9 years old Aaron would read the newspaper everyday just to see the sports and Wall Street numbers. Over time, he started to see patterns in those numbers and felt he might be able to make money off it. He came across a book at his library that mathematically proved he could “beat the house.” At age 14 Aaron knew he could walk into a poker game and walk out with his opponents money. He gambled into his early 20’s until he realized the real money to be made was on Wall Street.
How does Aaron define being a quant? Someone who makes calculations and then bets on those calculations. Clients are drawn to Aaron because he is known for being able to solve problems most cannot. That being said, he only takes on problems where he knows there is a solution. When hired, Aaron disrupts systems mainly because he operates on the opposite side of Wall Street. He unveils flaws in systems – disrupting sales and creating more work for developers.
Michael and Aaron finish up discussing, “What is a black swan event?” It is a low probability, high impact event because it was unexpected. Drawing from Nassim Taleb’s wisdom, “People over estimate the last event happening again and underestimate the next crisis.”
Cyrus Farivar is a Senior Tech Policy Reporter at Ars Technica, radio producer and author of “Habeas Data: Privacy vs. the Rise of Surveillance Tech.” Cyrus sees the privacy battle as an ever winding, never-ending road. Privacy is hard, national security is hard, law enforcement is hard but Cyrus is optimistic we can strike a good balance between all three.
Do we really know the extent to which we are being watched? Probably not. Surveillance technology affects us all – for better or worse. For example, nearly half of Americans are in facial recognition data bases. In addition, most Americans have a drivers license, identification card, or passport – putting just about every adult into a government system.
Does this mean privacy is dead? Not necessarily. Some things will continue to be private. Cyrus lays out some companies that build their whole business model around keeping the information of their clients secure from any outsiders – whether it be a private citizen or the government.
Having heightened security and better technology has it’s advantages and disadvantages. Obvious disadvantage? Loss of privacy. What is one advantage? Law enforcement can not only use surveillance to catch bad guys, but it can also be used to keep themselves in check. Just about every person has a phone with great video technology. Everything is recorded and everything can be seen. Michael and Cyrus end the conversation discussing the controversy around aerial surveillance and private use of drones.
I Like How @Naval Thinks with Michael Covel on Trend Following Radio.
All fundamental data, insights, and prediction, reduces to price. Price is the foundation for all trading. Michael caught a reminder of this in a recent twitter debate with Elon Musk. A NBC reporter challenged Musk on his insights and wanted him to come by the news room to have an interview and see his “process”. Michael reads the debate between the reporter, Musk and Scott Adams (creator of the Dilbert comic strip). Michael weaves his commentary and insights throughout.