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This seems like it sort of ties in with NN Taleb's idea of "Anti-fragile" [1]. Perhaps also Chesterton's fence [2]. Maybe also the whole premature-optimizatio

This seems like it sort of ties in with NN Taleb's idea of "Anti-fragile" [1]. Perhaps also Chesterton's fence [2]. Maybe also the whole premature-optimization thing [3]. And of course the too-clever-by-half coyotes [4]. Really maybe it just comes down to "be wary of making changes that reduce resiliency." I was hoping to come up with something cohesive with this comment, but really I guess I just agree with what you say. And I think there are a bunch of people sort of circling around the same idea, which I don't think we've really quite landed on a precise definition of, just as you say. [1] https://en.wikipedia.org/wiki/Antifragility https://en.wikipedia.org/wiki/Antifragility [2] https://en.wikipedia.org/wiki/G._K._Chesterton#Chesterton's_fence https://en.wikipedia.org/wiki/G._K._Chesterton#Chesterton's_... [3] https://en.wikipedia.org/wiki/Program_optimization#When_to_optimize https://en.wikipedia.org/wiki/Program_optimization#When_to_o... [4] https://www.epsilontheory.com/too-clever-by-half/ https://www.epsilontheory.com/too-clever-by-half/

O_H_E 6y ago
I love this comment on so many levels ;D
plutonorm 6y ago
epsilontheory.com I love every article I have read so far. It's really expanding me. Thanks for sharing.
- jariel 6y ago
  Unfortunately, it's probably quite wrong. He uses the analogy of 'too clever by half' to exemplify his idea that 'financial innovation is always wrong'. Nothing could be further from the truth. Insurance products have changed the world just as much as any technical innovation. Mortgaged backed securities are not a bad thing, far from it, they allow more efficient use of capital by having 'saving Germans and Japanese' invest their money where they otherwise would not be able to. The problem in the 2008 crash was soft systematic corruption and un-ironically a lack of fragility (ie one bank goes down it takes the rest down like dominos) - not necessarily the securities themselves for which he didn't actually even provide any basis of his negative assertion. Efficiency is usually how we gain productivity and it's borderline absurd to say there is inherently something wrong with it on the whole. Like anything 'it depends'. If you can have a software algorithm outperform 100 analysts on weather predictions for your fleet of drivers ... that's probably efficient. But cutting down operating margins so that any bump in the economy will leave you flat is maybe 'over optimisation'.
  - war1025 6y ago
    > He uses the analogy of 'too clever by half' to exemplify his idea that 'financial innovation is always wrong'. I don't really have a horse in this race, but I think you're misreading the article. He says: "Every truly disruptive discovery or innovation in history is the work of coyotes. It’s always the non-domesticated schemers who come up with the Idea That Changes Things. We all know the type. Many of the readers of this note ARE the type." That's not a criticism, that's a point of praise. He then follows it up immediately by saying: "Financial innovation is no exception. And this is Reason #1 why financial innovation ALWAYS ends in tears, because coyotes are too clever by half. They figure out a brilliant way to win at the mini-game that they’re immersed in, and they ignore the meta-game. Eventually the meta-game blows up on them, and they’re toast." That isn't saying it's a bad thing, it's saying that the people who come up with the new ideas lose sight of the broader picture and get taken out by "the thieving raccoons" and the State. He's saying "the coyotes" lose sight of the broader picture, just like in the famed XKCD [1] where the "too-clever-by-half" computer person encrypts all their data, and forgets that the thug who is going to come looking for it will just beat the piss out of them with a wrench until they turn over the key. The core nugget of the article, in my opinion, is exactly the "meta-game is what always gets you" aspect. It's the same thing that NN Taleb refers to as "2nd order effects." [1] https://xkcd.com/538/ https://xkcd.com/538/
bobwernstein 6y ago
the way you wrote this comment, with the sources fully visable at the bottom, amazing. I will start doing this myself.
adwn 6y ago
> [4] https://www.epsilontheory.com/too-clever-by-half/ https://www.epsilontheory.com/too-clever-by-half/ Thank you for this link. I'm halfway through that article and will probably read every single one on that website.

O_H_E 6y ago

I love this comment on so many levels ;D

plutonorm 6y ago

epsilontheory.com I love every article I have read so far. It's really expanding me. Thanks for sharing.

jariel 6y ago
Unfortunately, it's probably quite wrong. He uses the analogy of 'too clever by half' to exemplify his idea that 'financial innovation is always wrong'. Nothing could be further from the truth. Insurance products have changed the world just as much as any technical innovation. Mortgaged backed securities are not a bad thing, far from it, they allow more efficient use of capital by having 'saving Germans and Japanese' invest their money where they otherwise would not be able to. The problem in the 2008 crash was soft systematic corruption and un-ironically a lack of fragility (ie one bank goes down it takes the rest down like dominos) - not necessarily the securities themselves for which he didn't actually even provide any basis of his negative assertion. Efficiency is usually how we gain productivity and it's borderline absurd to say there is inherently something wrong with it on the whole. Like anything 'it depends'. If you can have a software algorithm outperform 100 analysts on weather predictions for your fleet of drivers ... that's probably efficient. But cutting down operating margins so that any bump in the economy will leave you flat is maybe 'over optimisation'.
- war1025 6y ago
  > He uses the analogy of 'too clever by half' to exemplify his idea that 'financial innovation is always wrong'. I don't really have a horse in this race, but I think you're misreading the article. He says: "Every truly disruptive discovery or innovation in history is the work of coyotes. It’s always the non-domesticated schemers who come up with the Idea That Changes Things. We all know the type. Many of the readers of this note ARE the type." That's not a criticism, that's a point of praise. He then follows it up immediately by saying: "Financial innovation is no exception. And this is Reason #1 why financial innovation ALWAYS ends in tears, because coyotes are too clever by half. They figure out a brilliant way to win at the mini-game that they’re immersed in, and they ignore the meta-game. Eventually the meta-game blows up on them, and they’re toast." That isn't saying it's a bad thing, it's saying that the people who come up with the new ideas lose sight of the broader picture and get taken out by "the thieving raccoons" and the State. He's saying "the coyotes" lose sight of the broader picture, just like in the famed XKCD [1] where the "too-clever-by-half" computer person encrypts all their data, and forgets that the thug who is going to come looking for it will just beat the piss out of them with a wrench until they turn over the key. The core nugget of the article, in my opinion, is exactly the "meta-game is what always gets you" aspect. It's the same thing that NN Taleb refers to as "2nd order effects." [1] https://xkcd.com/538/ https://xkcd.com/538/

bobwernstein 6y ago

the way you wrote this comment, with the sources fully visable at the bottom, amazing. I will start doing this myself.

adwn 6y ago

> [4] https://www.epsilontheory.com/too-clever-by-half/ https://www.epsilontheory.com/too-clever-by-half/ Thank you for this link. I'm halfway through that article and will probably read every single one on that website.