5 ms·

In the original Foundation books by Asimov, the conceit of "Psychohistory" was similar to the concept of machine learning for pricing: The future can be predict

In the original Foundation books by Asimov, the conceit of "Psychohistory" was similar to the concept of machine learning for pricing: The future can be predicted _if people aren't aware of the prediction to change their behavior in relation to it_ This is similar to 'adverse selection' in real life & in Zillow's model. The article makes a nod to this, but seems to imply that if you train your model on that adverse selection, you can come out ahead after paying to learn about it. To me that kind of misses the point. Adverse Selection isn't a static feature of the landscape you can identify and avoid, it is people understanding what you understand, adapting, and responding. Train your model with adversaries trying to beat it, then you'll maybe counter the specific first round strategies they use, and they'll learn new ones and beat your new model with their 2nd round strategies. It's a continuous game. Your requirement to gather a corpus of training data will keep you in the 2nd turn of a game where the wins are biased to whoever has the 1st move.

JKCalhoun 5y ago
I'm reminded always of the Hunt brothers that tried (and failed) to corner the silver market in the 70's/80's: https://en.wikipedia.org/wiki/Silver_Thursday https://en.wikipedia.org/wiki/Silver_Thursday
- JanisL 5y ago
  Basically the COMEX changed the rules explicitly to disadvantage the Hunt Brothers. The changes made to margin requirements is what made the difference here. I don't think anyone could claim that the silver market is an entirely free market, I remember last year a press release where the COMEX said they weren't sure how much they actually had in their vaults in eligible and registered, with a plus/minus 50% figure being given on their estimates. I can't think of any other major market where someone would come out and say they didn't know how much inventory they had and that their best estimate could be 50% off. And the participants in the silver market are still rather ridiculous to this day: https://www.reuters.com/business/finance/jpmorgan-pay-60-mln-settle-precious-metals-spoofing-lawsuit-2021-11-19/ https://www.reuters.com/business/finance/jpmorgan-pay-60-mln...
  - skinnymuch 5y ago
    Would some cryptocurrency stuff count? We have no idea how much a handful of whales control Bitcoin or Eth. The tether thing seems really shaky too with how much they actually have in reserves. Same with a number of exchanges or major market players. Cryptocurrency is also a bit wonky because of always including forever lost access to a solid percentage of the currency. Bitcoin is the most notable.
    - Ekaros 5y ago
      Bitcoin is best example. Somehow currency we aren't sure how much is reachable anymore should come some sort of gold standard... Like at any moment significant fraction of it could be dumped on market. Probably won't, but it is not entirely certain...
      - JanisL 5y ago
        Bitcoin is a lot less liquid than many people think, a lot of wash trading has occurred recently that has obscured this.
        skinnymuch 5y ago
        I wish there was better or more reporting and stuff on this. I have assumed this is the case. But :/
    - JanisL 5y ago
      Tether is an enormous fraud and the financial reporting of the reserves has just never been up to generally accepted standards. The thing with crypto is that much like some of these other commodity markets there's less real trading volume than many people think (there's been a lot of wash trading going on: https://cryptobriefing.com/binance-wash-trading-icebergs-tips/ https://cryptobriefing.com/binance-wash-trading-icebergs-tip...). Where crypto is very different from the futures markets is that you can just buy the stuff directly because the costs of holding it are much lower. Say I want to invest in oil, it's a massive pain in the ass to build warehousing to start taking delivery, whereas something like crypto is much easier for a company or individual to hold. From this point of view there's very real non-regulatory reasons why trading futures for oil makes sense whereas this is not so for cryptocurrencies.
- skinnymuch 5y ago
  I don’t get it. Wiki only says they failed because of the other institution changing the rules because of them. What’s the analogy to housing or Zillow? Sure they failed. But the only data we have is that they failed because of something very specific which doesn’t relate to much else.
musingsole 5y ago
> It's a continuous game. This is what most profit seeking strategies can miss. Their designers (consciously or not) can't help but to stop thinking through their plan at the profit step and just assume "rinse and repeat" forever after.

JKCalhoun 5y ago

I'm reminded always of the Hunt brothers that tried (and failed) to corner the silver market in the 70's/80's: https://en.wikipedia.org/wiki/Silver_Thursday https://en.wikipedia.org/wiki/Silver_Thursday

JanisL 5y ago
Basically the COMEX changed the rules explicitly to disadvantage the Hunt Brothers. The changes made to margin requirements is what made the difference here. I don't think anyone could claim that the silver market is an entirely free market, I remember last year a press release where the COMEX said they weren't sure how much they actually had in their vaults in eligible and registered, with a plus/minus 50% figure being given on their estimates. I can't think of any other major market where someone would come out and say they didn't know how much inventory they had and that their best estimate could be 50% off. And the participants in the silver market are still rather ridiculous to this day: https://www.reuters.com/business/finance/jpmorgan-pay-60-mln-settle-precious-metals-spoofing-lawsuit-2021-11-19/ https://www.reuters.com/business/finance/jpmorgan-pay-60-mln...
- skinnymuch 5y ago
  Would some cryptocurrency stuff count? We have no idea how much a handful of whales control Bitcoin or Eth. The tether thing seems really shaky too with how much they actually have in reserves. Same with a number of exchanges or major market players. Cryptocurrency is also a bit wonky because of always including forever lost access to a solid percentage of the currency. Bitcoin is the most notable.
  - Ekaros 5y ago
    Bitcoin is best example. Somehow currency we aren't sure how much is reachable anymore should come some sort of gold standard... Like at any moment significant fraction of it could be dumped on market. Probably won't, but it is not entirely certain...
    - JanisL 5y ago
      Bitcoin is a lot less liquid than many people think, a lot of wash trading has occurred recently that has obscured this.
      - skinnymuch 5y ago
        I wish there was better or more reporting and stuff on this. I have assumed this is the case. But :/
  - JanisL 5y ago
    Tether is an enormous fraud and the financial reporting of the reserves has just never been up to generally accepted standards. The thing with crypto is that much like some of these other commodity markets there's less real trading volume than many people think (there's been a lot of wash trading going on: https://cryptobriefing.com/binance-wash-trading-icebergs-tips/ https://cryptobriefing.com/binance-wash-trading-icebergs-tip...). Where crypto is very different from the futures markets is that you can just buy the stuff directly because the costs of holding it are much lower. Say I want to invest in oil, it's a massive pain in the ass to build warehousing to start taking delivery, whereas something like crypto is much easier for a company or individual to hold. From this point of view there's very real non-regulatory reasons why trading futures for oil makes sense whereas this is not so for cryptocurrencies.
skinnymuch 5y ago
I don’t get it. Wiki only says they failed because of the other institution changing the rules because of them. What’s the analogy to housing or Zillow? Sure they failed. But the only data we have is that they failed because of something very specific which doesn’t relate to much else.

musingsole 5y ago

> It's a continuous game. This is what most profit seeking strategies can miss. Their designers (consciously or not) can't help but to stop thinking through their plan at the profit step and just assume "rinse and repeat" forever after.