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There’s one reaction to this, my initial reaction: “that’s just common sense”. But I think it’s a valuable post nonetheless: it’s succinct, it’s a punchy remin

There’s one reaction to this, my initial reaction: “that’s just common sense”. But I think it’s a valuable post nonetheless: it’s succinct, it’s a punchy reminder of something we should all try to remember, and as a colleague of mine says: “common sense is not always common practice.” Trying to fortify some system against some failure mode overwhelmingly often makes it more vulnerable to some other one. This is what keeps terrorists in business. EV[failure] = P(failure) * cost-of-failure.

throwawaysleep 5y ago
A lot of that is just developer/general employee incentives. As an employee, it is far more important for me to avoid blame than to be efficient as I will get no credit for marginal improvements/no hit for marginal harms, but will get blamed if there is a very noticeable bad incident. I am far more likely to have an annoyed boss from the wrong person showing up to work than driving away 100 candidates as the interview seemed hostile. So the calculation is heavily weighted towards fortification for me as an employee, as I benefit not from the enterprise value but do from the value of my boss not being annoyed with me.
yowlingcat 5y ago
At the risk of asking a naive and perhaps dumb question, wouldn't this assertion invalidate the entire product class of P&C insurance, wherein that specific asymmetry is directly and entirely hedged against?
- benreesman 5y ago
  Transacting financial instruments is for most entities a negative sum game. There are transaction costs in the general case. But we can get more conceptual clarity by modeling it as a zero-sum game: one actor wins, one loses. In general the actor with the asymmetrical relationship to forecasts about future price action wins. Sometimes the smart guy loses because he's undercapitalized. Watching PHDs in friggin "steering outcomes under low gravity conditions" running home to Gaussian assumptions, the Central Limit Theorem, Fourier math, and VAR would be amusing if it wasn't going to put actual hunger on people who no one ever sent the link to HN. In light of the outrageous concrete human suffering, I think I can stifle my amusement.
  - benreesman 5y ago
    This is not directed at the parent, I know nothing about the parent's situation. But god damn am I sick of rich kids. I thought I would get some catharsis from kicking them around like a soccer ball on the biggest field in consumer technology, but it didn't really make me feel any better. One guy stomping the shit out of legacies at Ivies for a few years doesn't change anything. This year, next year, ten years from now: paper-failures like @sama will still know the right people. "I didn't make anything anyone wanted, and I'm still rich as fuck."
    - yowlingcat 5y ago
      At the risk of over-reading a situation I know nothing about, perhaps you could use a break from the SV. I had a friend who grew up blue collar in Europe and with whom I worked with in NYC. He spent a couple years in SF for his career and just about ended up strangling people. I visited him in SF for a weekend and nearly ended up in the same place. Ultimately, he ended up back in NYC and back to his usual happy go lucky self. For all the criticisms I could make about rich kids in the Bay Area, it is simply that they are _lame_. I'm nothing but a middle class public school educated child of immigrants myself, but I always keep in mind my mother's somewhat cynical advice -- "always remember you will work twice as hard for half as much in this country" followed by "and it will still give you a better life than where we immigrated from." If I can give you a piece of advice (maybe advice is too strong a word, as this is really just a coping mechanism for me personally), it is to remember that the karmic gears of time tick slowly but inexorably. To be a paper-failure 10 years from now that didn't make anything anyone wanted and to still be "rich as fuck" is a certain kind of Dantean hell in and of itself. Your entire life is the real life version of the Chinese "heaven's ban" where you are surrounded by sycophants who always lie to you to get access to your resources, and anyone else worth knowing would never want to associate with you because they deem you a clown and a fraud. You never learned the skills during your formative years to stand on your own two feet, and now you are too old to do the work that brings at least its own intellectually stimulating and market validated reward, as well as the respect of people in the world who are most worth associating with -- never mind the respect of salt of the earth people! Perhaps this is my NYC elitism creeping in, but I wouldn't switch lives with such a paper failure SV talking head if you paid me. They'll never have taste, or be able to truly enjoy the finer things in life, or stand on their own two feet, or live in a truly cosmopolitan manner; they'll never have the edge to be as good of an operator as me or the operators I respect. And they will always know that deep down inside they are inferior no matter how hard they posture -- in a sense, I am more free than they will ever be, and if the pinnacle of life is to "live free or die" then they are effectively the walking dead, while I am breathing my own air free and clear. Where was I going with this rant? Ah yes. Perhaps you need a break from SV because it's only there where these sorts of folks receive any kind of societal acceptance. I'd recommend either the east coast (I love NYC and it's never been more fun), or southern Europe (Spain and especially Portugal have always been nice to me). If you stay long enough in the SV echo chamber, it will warp your thinking and make life seem a lot less sunny than it could be. In my opinion (and this is having no idea about your personal situation), I view it as just a bubble where you happen to work to make your living, and you can always exit as you please when you need a break or you've had enough. Hope I haven't been too presumptuous with this post and that I've at least been a little helpful.
ford 5y ago
Oftentimes things that are common-sense at the macro level are really hard to implement or remember day-to-day, and as you mention stories like this can be good reminders to keep perspective. I.e. when investing in the stock market it's almost common knowledge that silently putting money in an ETF every month will outperform almost everyone, even professional traders. Overreactions to day-to-day things like corrections or a 1-in-a-million hiring situation break the obvious macro strategy
- benreesman 5y ago
  The investment analogy is a pretty great one in my opinion, and very timely given what I think we're all sort of agreeing is a set of asset bubbles driven (mostly) by "accommodative" monetary policy. When an asset class is going up and up and up, FOMO can get even serious professionals to go long at a (relatively) high price, and gloss over the risk management. When things correct a bit, a lot of folks realize they hadn't managed the risk and get short "before it gets any worse". This is probably the most common way to buy high and sell low, and while retail investors probably do more of this than hedge fund managers, hedge fun managers also do it. Dollar cost averaging into a diverse set of ETFs is the simplest and cheapest thing that gets you highly competitive returns (at least to date). But I think that this is more to do with how much it takes emotion out of the picture than that SPY is like, ideal. Buffet, and Michael Burry, and others have demonstrated that if you're willing to spend years to decades of 16-hour days reading public filings in a drab office, it's not "hard" to beat the S&P. But those people are a lot more dispassionate about their trades than I am, and I suspect than most people are.

throwawaysleep 5y ago

A lot of that is just developer/general employee incentives. As an employee, it is far more important for me to avoid blame than to be efficient as I will get no credit for marginal improvements/no hit for marginal harms, but will get blamed if there is a very noticeable bad incident. I am far more likely to have an annoyed boss from the wrong person showing up to work than driving away 100 candidates as the interview seemed hostile. So the calculation is heavily weighted towards fortification for me as an employee, as I benefit not from the enterprise value but do from the value of my boss not being annoyed with me.

yowlingcat 5y ago

At the risk of asking a naive and perhaps dumb question, wouldn't this assertion invalidate the entire product class of P&C insurance, wherein that specific asymmetry is directly and entirely hedged against?

benreesman 5y ago
Transacting financial instruments is for most entities a negative sum game. There are transaction costs in the general case. But we can get more conceptual clarity by modeling it as a zero-sum game: one actor wins, one loses. In general the actor with the asymmetrical relationship to forecasts about future price action wins. Sometimes the smart guy loses because he's undercapitalized. Watching PHDs in friggin "steering outcomes under low gravity conditions" running home to Gaussian assumptions, the Central Limit Theorem, Fourier math, and VAR would be amusing if it wasn't going to put actual hunger on people who no one ever sent the link to HN. In light of the outrageous concrete human suffering, I think I can stifle my amusement.
- benreesman 5y ago
  This is not directed at the parent, I know nothing about the parent's situation. But god damn am I sick of rich kids. I thought I would get some catharsis from kicking them around like a soccer ball on the biggest field in consumer technology, but it didn't really make me feel any better. One guy stomping the shit out of legacies at Ivies for a few years doesn't change anything. This year, next year, ten years from now: paper-failures like @sama will still know the right people. "I didn't make anything anyone wanted, and I'm still rich as fuck."
  - yowlingcat 5y ago
    At the risk of over-reading a situation I know nothing about, perhaps you could use a break from the SV. I had a friend who grew up blue collar in Europe and with whom I worked with in NYC. He spent a couple years in SF for his career and just about ended up strangling people. I visited him in SF for a weekend and nearly ended up in the same place. Ultimately, he ended up back in NYC and back to his usual happy go lucky self. For all the criticisms I could make about rich kids in the Bay Area, it is simply that they are _lame_. I'm nothing but a middle class public school educated child of immigrants myself, but I always keep in mind my mother's somewhat cynical advice -- "always remember you will work twice as hard for half as much in this country" followed by "and it will still give you a better life than where we immigrated from." If I can give you a piece of advice (maybe advice is too strong a word, as this is really just a coping mechanism for me personally), it is to remember that the karmic gears of time tick slowly but inexorably. To be a paper-failure 10 years from now that didn't make anything anyone wanted and to still be "rich as fuck" is a certain kind of Dantean hell in and of itself. Your entire life is the real life version of the Chinese "heaven's ban" where you are surrounded by sycophants who always lie to you to get access to your resources, and anyone else worth knowing would never want to associate with you because they deem you a clown and a fraud. You never learned the skills during your formative years to stand on your own two feet, and now you are too old to do the work that brings at least its own intellectually stimulating and market validated reward, as well as the respect of people in the world who are most worth associating with -- never mind the respect of salt of the earth people! Perhaps this is my NYC elitism creeping in, but I wouldn't switch lives with such a paper failure SV talking head if you paid me. They'll never have taste, or be able to truly enjoy the finer things in life, or stand on their own two feet, or live in a truly cosmopolitan manner; they'll never have the edge to be as good of an operator as me or the operators I respect. And they will always know that deep down inside they are inferior no matter how hard they posture -- in a sense, I am more free than they will ever be, and if the pinnacle of life is to "live free or die" then they are effectively the walking dead, while I am breathing my own air free and clear. Where was I going with this rant? Ah yes. Perhaps you need a break from SV because it's only there where these sorts of folks receive any kind of societal acceptance. I'd recommend either the east coast (I love NYC and it's never been more fun), or southern Europe (Spain and especially Portugal have always been nice to me). If you stay long enough in the SV echo chamber, it will warp your thinking and make life seem a lot less sunny than it could be. In my opinion (and this is having no idea about your personal situation), I view it as just a bubble where you happen to work to make your living, and you can always exit as you please when you need a break or you've had enough. Hope I haven't been too presumptuous with this post and that I've at least been a little helpful.

ford 5y ago

Oftentimes things that are common-sense at the macro level are really hard to implement or remember day-to-day, and as you mention stories like this can be good reminders to keep perspective. I.e. when investing in the stock market it's almost common knowledge that silently putting money in an ETF every month will outperform almost everyone, even professional traders. Overreactions to day-to-day things like corrections or a 1-in-a-million hiring situation break the obvious macro strategy

benreesman 5y ago
The investment analogy is a pretty great one in my opinion, and very timely given what I think we're all sort of agreeing is a set of asset bubbles driven (mostly) by "accommodative" monetary policy. When an asset class is going up and up and up, FOMO can get even serious professionals to go long at a (relatively) high price, and gloss over the risk management. When things correct a bit, a lot of folks realize they hadn't managed the risk and get short "before it gets any worse". This is probably the most common way to buy high and sell low, and while retail investors probably do more of this than hedge fund managers, hedge fun managers also do it. Dollar cost averaging into a diverse set of ETFs is the simplest and cheapest thing that gets you highly competitive returns (at least to date). But I think that this is more to do with how much it takes emotion out of the picture than that SPY is like, ideal. Buffet, and Michael Burry, and others have demonstrated that if you're willing to spend years to decades of 16-hour days reading public filings in a drab office, it's not "hard" to beat the S&P. But those people are a lot more dispassionate about their trades than I am, and I suspect than most people are.