4 ms·

Beware of geeks: Beware of geeks with clever computer models: “I mean they had all these types from Wall Street, you know, and they had advanced degrees, and t

by dpatru 18y ago

Beware of geeks: Beware of geeks with clever computer models: “I mean they had all these types from Wall Street, you know, and they had advanced degrees, and they look very alert, and they came with these — they came with these things that said gamma and alpha and sigma and all that. And all I can say is beware of geeks, you know, bearing formulas.”

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- deleted 18y ago
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SirWart 18y ago
As a corollary, beware of geeks who think they know the right course of action for Treasury right now.
adrianwaj 18y ago
It's a good quote here by Buffet, amazing one can repost in the thread like that word-for-word and cop 15+ Karma points for it. All the non-Geeks here mod this one up? Using Buffet's analogy, why bother innovating when one can just imitate? On the extreme, the imitators resent the innovators and hate the idiots. The innovators see the imitators as an unfortunate evil.
- known 18y ago
  Innovators != Inventors
- run4yourlives 18y ago
  I don't think you're quite understanding what he's saying there. It's just a fancy way of saying the data can be made to support any opinion, so beware of something that has all this data to back it up, but still smells fishy on the surface.
  - adrianwaj 18y ago
    I sort of know what Buffet means. It's like in the late 90's with regards to Long Term Capital Management hedge fund: "At the beginning of 1998, the firm had equity of $4.72 billion and had borrowed over $124.5 billion with assets of around $129 billion. It had off-balance sheet derivative positions with a notional value of approximately $1.25 trillion." http://en.wikipedia.org/wiki/Long-Term_Capital_Management http://en.wikipedia.org/wiki/Long-Term_Capital_Management Eventually most of this was lost within a few months of volatility caused by events not taken into account by its computer models, and the fund was ultimately liquidated, losing its investors much of their $1 Billion investment. The fund used models determined by some of the smartest around including economics Nobel prize winners. This team background then enabled them to raise a lot capital, which was subsequently extremely levered. From how I understand it, another problem of LTCM (besides for the flaw in the model not taking into account an extremely rare occurence) was due to the fund venturing into different types of trades that weren't fully thought-out once all the arbitrage opportunities ran out in the program's designated purview. Another aspect of Buffet's hesitancy with "black box" trading can be found in this hedge fund manager's interview: http://news.ycombinator.com/item?id=310284 http://news.ycombinator.com/item?id=310284, that is, the programmers doing the modelling generally have the same type of educational backgrounds and thus the trading patterns and performance of their 'boxes' are all similar, thereby giving none a competitive advantage over the other. At the end of the day, simplifying things, is it better to trust a brain and its computer extension or just a brain? In Buffet's case, being the equivalent in investing of grandmaster Garry Kasparov in chess, he sticks with his brain. Anyone else might want to run with the computer if they can't get shares in Berkshire Hathaway. I think LTCM were just very unlucky and a bit reckless, but could have done very well, if only they had more conservative exit points in winding up the fund. But, the main gist of my previous comment was that it didn't add much to the thread in terms of discussion, but rather just brought a point in the article to people's attention. And just from that, I couldn't see all the mod points justified. I guess this goes back to my style of modding which is: "I'll mod this up or down, but only if it's under or over valued." ;)
- gills 18y ago
  I modded it up. I'm a geek. We poke fun at ourselves to keep our egos in line. No, really, you can grab almost any answer you want from data if you tweak the algorithm. Throw in some misplaced incentives for the geeks and the traders and voila! you have a flawed model telling you housing can only go up up UP!. Snake oil comes in many forms.

by dpatru 18y ago

deleted 18y ago

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deleted 18y ago
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SirWart 18y ago

As a corollary, beware of geeks who think they know the right course of action for Treasury right now.

adrianwaj 18y ago

It's a good quote here by Buffet, amazing one can repost in the thread like that word-for-word and cop 15+ Karma points for it. All the non-Geeks here mod this one up? Using Buffet's analogy, why bother innovating when one can just imitate? On the extreme, the imitators resent the innovators and hate the idiots. The innovators see the imitators as an unfortunate evil.

known 18y ago
Innovators != Inventors
run4yourlives 18y ago
I don't think you're quite understanding what he's saying there. It's just a fancy way of saying the data can be made to support any opinion, so beware of something that has all this data to back it up, but still smells fishy on the surface.
- adrianwaj 18y ago
  I sort of know what Buffet means. It's like in the late 90's with regards to Long Term Capital Management hedge fund: "At the beginning of 1998, the firm had equity of $4.72 billion and had borrowed over $124.5 billion with assets of around $129 billion. It had off-balance sheet derivative positions with a notional value of approximately $1.25 trillion." http://en.wikipedia.org/wiki/Long-Term_Capital_Management http://en.wikipedia.org/wiki/Long-Term_Capital_Management Eventually most of this was lost within a few months of volatility caused by events not taken into account by its computer models, and the fund was ultimately liquidated, losing its investors much of their $1 Billion investment. The fund used models determined by some of the smartest around including economics Nobel prize winners. This team background then enabled them to raise a lot capital, which was subsequently extremely levered. From how I understand it, another problem of LTCM (besides for the flaw in the model not taking into account an extremely rare occurence) was due to the fund venturing into different types of trades that weren't fully thought-out once all the arbitrage opportunities ran out in the program's designated purview. Another aspect of Buffet's hesitancy with "black box" trading can be found in this hedge fund manager's interview: http://news.ycombinator.com/item?id=310284 http://news.ycombinator.com/item?id=310284, that is, the programmers doing the modelling generally have the same type of educational backgrounds and thus the trading patterns and performance of their 'boxes' are all similar, thereby giving none a competitive advantage over the other. At the end of the day, simplifying things, is it better to trust a brain and its computer extension or just a brain? In Buffet's case, being the equivalent in investing of grandmaster Garry Kasparov in chess, he sticks with his brain. Anyone else might want to run with the computer if they can't get shares in Berkshire Hathaway. I think LTCM were just very unlucky and a bit reckless, but could have done very well, if only they had more conservative exit points in winding up the fund. But, the main gist of my previous comment was that it didn't add much to the thread in terms of discussion, but rather just brought a point in the article to people's attention. And just from that, I couldn't see all the mod points justified. I guess this goes back to my style of modding which is: "I'll mod this up or down, but only if it's under or over valued." ;)
gills 18y ago
I modded it up. I'm a geek. We poke fun at ourselves to keep our egos in line. No, really, you can grab almost any answer you want from data if you tweak the algorithm. Throw in some misplaced incentives for the geeks and the traders and voila! you have a flawed model telling you housing can only go up up UP!. Snake oil comes in many forms.