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It's not just "nobody knows" -- it's "there isn't a reason". Big difference. It is impossible to reason about what intrinsic values cause one model to be more h

by gxti 16y ago

It's not just "nobody knows" -- it's "there isn't a reason". Big difference. It is impossible to reason about what intrinsic values cause one model to be more highly touted than another because there aren't any. The value ascribed is entirely extrinsic. This is the obvious way in which markets are different: even though prices get way overinflated from speculators chasing trends, there is in fact a real fundamental value buried in the noise and sooner or later the people who are good at finding that value will outweigh the noise traders and trend chasers. Then the momentum turns into fear (because none of the speculators knew what they were doing) and we have a lovely crash. It's painful and irrational but eventually enough people wake up and realize that prices are nowhere near valuation. Models don't crash. They disappear, but there's no "reckoning" in which their popularity is brought back to true values of beauty. The momentum is the only source of value.

Jun8 16y ago
I agree with you that there's a big difference between those two, but not in the sense that you mention. Adopting the "there's no reason" approach is akin to treating the process as random. First advocated by Boltzman to lay the groundwork of statistical physics, this approach basically says that the process is so complex that the only way to deal with it is through probabilistic methods. This approach in fact is widely used in analyzing stock markets. So in fact, the current wisdom is not to disregard the "noise" in the market to arrive at the "real" model, but to treat the whole market data as noise!
- timwiseman 16y ago
  Adopting the "there's no reason" approach is akin to treating the process as random. First advocated by Boltzman to lay the groundwork of statistical physics, this approach basically says that the process is so complex that the only way to deal with it is through probabilistic methods. I must respectfully disagree with you and agree with gxti. Based on the article, it seems that what gets a modelling career started to build up its momentum is virtually random. Once it is started its own momentum can sustain it for some time, but that start is random. Now, the market on a day to day basis is indeed virtually random. But the overall trends are not. Over the long term with general trends, the stock of strong companies will do well because they generate profits which are largely independent of the stock price. On the other hand, a high stock price might bolster an otherwise failing company for a while, but only for a while. Daily fluctuations are almost entirely random, but long term trend lines will tend to track the actual value of a company, with some exceptions.
deleted 16y ago
[deleted]
todayiamme 16y ago
>>>This is the obvious way in which markets are different: even though prices get way overinflated from speculators chasing trends, there is in fact a real fundamental value buried in the noise and sooner or later the people who are good at finding that value will outweigh the noise traders and trend chasers.<<< The problem is that they only do so in the longer run, where as people expect performance on a daily basis from a trader. Here is where social influences come into play. Who do you think will get more commendation from their bosses? A trader who makes an investment based upon intrinsic value that may take years to show? Or, someone who "rode the markets" that day? The problem is that the free market hypothesis assumes that we are rational beings capable of making cold judgments. Our "rationality" is inexplicably tied to our emotions we may not realize it, but this is something as ubiquitous as our ability to learn language. Ask anyone with a mood disorder and they can tell you just how different the world looks when the balance is tilted. You may argue that I am citing an extreme case, but evidence points out that mood disorders are nothing but abnormal functioning of circuits within our brain. They just happen to expose just how fragile our worlds are. On the other hand, I've always wondered if it is possible to take advantage of this and make an "infinite money generator". It's a thought experiment really; Let us say that you have this program running on an impressive machine that scans the entire internet and parses out information related to financial markets, and categorizes it on the basis of stock, the perception attached to that stock and the emotions associated with it (twitter/facebook/the latest fad). It also has data on how this "herd" has behaved before. Let us also assume that AI has born the fruit of accurate simulation of humans at a larger scale. If we input this data into the program and use it to predict the market do you not think that it will be more successful at making money than a machine designed to work only on the "facts"?
stcredzero 16y ago
(Please don't take the following as something disparaging about your position. It's not. Rather, it is some general observations about markets.) The previous comment would seem to be implying that there's "a real fundamental value buried in the noise" for investment instruments, but none for models. I would say that there's always real fundamental value in people, models included, and that this value is in some sense more real than anything in any market. The momentum is the only source of value. The momentum is the only source of value modulo the market. There is indeed "a real fundamental value" to all personnel assets, but it isn't even "buried in the noise." The problem is that the market is almost totally disconnected from this underlying reality. (The question seems too complex, to ever be fully connected.) There is a sort of fear and insecurity that overtakes tastemakers faced with overabundant choices with no good analytical tools to help them. I'm not sure what the solution is. An "indy" market is no solution -- these seem to merely become the "bush leagues" for their preexisting mainstream. After awhile in cultural markets, the noise machine takes over the market and disconnects it from the human and cultural perceptual machinery which gave rise to it. (Which I will call "true taste.") Subcultural 'scenes' arise with a renewed connection to true taste, but these scenes eventually get swept up into the same disconnected market. I suspect that Buddhism talks about this. I suspect that this is just a part of the human condition. Things like Rotten Tomatoes can help, in that rogue tastemakers who are simply succumbing to bribes and other simple manipulations can be left out in the cold. Maybe the 4chan folks have got it right, and informational/social anarchy is the ultimate solution. In the meantime, a dispassionate analysis of such markets might yield opportunities to make money through trading.
- Retric 16y ago
  At a fundamental level resource is susceptible to bubbles of one type or another. Diamonds are in the middle of a fairly long and stable one, but there are significant parallels between Super models, Diamonds, and Land in China. Generally, a short term spike in demand is extended for some arbitrary length of time due to human psychology. I suspect the length of a given spike is generally related to both scarcity and underlying value. PS: VHS and Global Worming are poor examples for this however they are both somewhat sticky beyond their technical merits. EX: The amount of GW research relates to its political implications far more than the complexity of the theory. When the implications stop having economic implications the level of interest and resistance will quickly drop. As will the amount of debate by people with limited understanding of the issue. Also, VHS's initial technical advantage was soon less important than its level of adoption.
cma 16y ago
>This is the obvious way in which markets are different: even though prices get way overinflated from speculators chasing trends, there is in fact a real fundamental value buried in the noise and sooner or later the people who are good at finding that value will outweigh the noise traders and trend chasers. As Ken Arrow and others have pointed out, what will have real value in the future can depend heavily on what "noise traders and trend chasers" are doing now. Investment choices have feedback effects.

by gxti 16y ago

Jun8 16y ago

I agree with you that there's a big difference between those two, but not in the sense that you mention. Adopting the "there's no reason" approach is akin to treating the process as random. First advocated by Boltzman to lay the groundwork of statistical physics, this approach basically says that the process is so complex that the only way to deal with it is through probabilistic methods. This approach in fact is widely used in analyzing stock markets. So in fact, the current wisdom is not to disregard the "noise" in the market to arrive at the "real" model, but to treat the whole market data as noise!

timwiseman 16y ago
Adopting the "there's no reason" approach is akin to treating the process as random. First advocated by Boltzman to lay the groundwork of statistical physics, this approach basically says that the process is so complex that the only way to deal with it is through probabilistic methods. I must respectfully disagree with you and agree with gxti. Based on the article, it seems that what gets a modelling career started to build up its momentum is virtually random. Once it is started its own momentum can sustain it for some time, but that start is random. Now, the market on a day to day basis is indeed virtually random. But the overall trends are not. Over the long term with general trends, the stock of strong companies will do well because they generate profits which are largely independent of the stock price. On the other hand, a high stock price might bolster an otherwise failing company for a while, but only for a while. Daily fluctuations are almost entirely random, but long term trend lines will tend to track the actual value of a company, with some exceptions.

deleted 16y ago

[deleted]

todayiamme 16y ago

>>>This is the obvious way in which markets are different: even though prices get way overinflated from speculators chasing trends, there is in fact a real fundamental value buried in the noise and sooner or later the people who are good at finding that value will outweigh the noise traders and trend chasers.<<< The problem is that they only do so in the longer run, where as people expect performance on a daily basis from a trader. Here is where social influences come into play. Who do you think will get more commendation from their bosses? A trader who makes an investment based upon intrinsic value that may take years to show? Or, someone who "rode the markets" that day? The problem is that the free market hypothesis assumes that we are rational beings capable of making cold judgments. Our "rationality" is inexplicably tied to our emotions we may not realize it, but this is something as ubiquitous as our ability to learn language. Ask anyone with a mood disorder and they can tell you just how different the world looks when the balance is tilted. You may argue that I am citing an extreme case, but evidence points out that mood disorders are nothing but abnormal functioning of circuits within our brain. They just happen to expose just how fragile our worlds are. On the other hand, I've always wondered if it is possible to take advantage of this and make an "infinite money generator". It's a thought experiment really; Let us say that you have this program running on an impressive machine that scans the entire internet and parses out information related to financial markets, and categorizes it on the basis of stock, the perception attached to that stock and the emotions associated with it (twitter/facebook/the latest fad). It also has data on how this "herd" has behaved before. Let us also assume that AI has born the fruit of accurate simulation of humans at a larger scale. If we input this data into the program and use it to predict the market do you not think that it will be more successful at making money than a machine designed to work only on the "facts"?

stcredzero 16y ago

(Please don't take the following as something disparaging about your position. It's not. Rather, it is some general observations about markets.) The previous comment would seem to be implying that there's "a real fundamental value buried in the noise" for investment instruments, but none for models. I would say that there's always real fundamental value in people, models included, and that this value is in some sense more real than anything in any market. The momentum is the only source of value. The momentum is the only source of value modulo the market. There is indeed "a real fundamental value" to all personnel assets, but it isn't even "buried in the noise." The problem is that the market is almost totally disconnected from this underlying reality. (The question seems too complex, to ever be fully connected.) There is a sort of fear and insecurity that overtakes tastemakers faced with overabundant choices with no good analytical tools to help them. I'm not sure what the solution is. An "indy" market is no solution -- these seem to merely become the "bush leagues" for their preexisting mainstream. After awhile in cultural markets, the noise machine takes over the market and disconnects it from the human and cultural perceptual machinery which gave rise to it. (Which I will call "true taste.") Subcultural 'scenes' arise with a renewed connection to true taste, but these scenes eventually get swept up into the same disconnected market. I suspect that Buddhism talks about this. I suspect that this is just a part of the human condition. Things like Rotten Tomatoes can help, in that rogue tastemakers who are simply succumbing to bribes and other simple manipulations can be left out in the cold. Maybe the 4chan folks have got it right, and informational/social anarchy is the ultimate solution. In the meantime, a dispassionate analysis of such markets might yield opportunities to make money through trading.

Retric 16y ago
At a fundamental level resource is susceptible to bubbles of one type or another. Diamonds are in the middle of a fairly long and stable one, but there are significant parallels between Super models, Diamonds, and Land in China. Generally, a short term spike in demand is extended for some arbitrary length of time due to human psychology. I suspect the length of a given spike is generally related to both scarcity and underlying value. PS: VHS and Global Worming are poor examples for this however they are both somewhat sticky beyond their technical merits. EX: The amount of GW research relates to its political implications far more than the complexity of the theory. When the implications stop having economic implications the level of interest and resistance will quickly drop. As will the amount of debate by people with limited understanding of the issue. Also, VHS's initial technical advantage was soon less important than its level of adoption.

cma 16y ago

>This is the obvious way in which markets are different: even though prices get way overinflated from speculators chasing trends, there is in fact a real fundamental value buried in the noise and sooner or later the people who are good at finding that value will outweigh the noise traders and trend chasers. As Ken Arrow and others have pointed out, what will have real value in the future can depend heavily on what "noise traders and trend chasers" are doing now. Investment choices have feedback effects.