TEDx: Risk Schmisk

[trendie]

An interesting TEDx on risk.
Broad subject, but lots of resonances with trading.
It really deals with the reasons we tend to mis-allocate reasons for failure.
Talk revolves around the quote by Yass, a fund manager of Susquehanna.

"The biggest risk is that you have a losing strategy when you think you have a winning strategy."

And how people, whilst having a losing strategy seek to delude themselves for the reason for failing.
Covers Self-serving Bias:
Good outcomes are attributed to good decisions.
Bad outcomes attributed to bad luck, (news, spikes, opening gaps, etc)

Covers mis-diagnosing risk management for failure, instead of losing strategy.
(good outcome = signal. bad outcome attributed to noise)

Example: start-ups.
No start-up goes broke believing their product is rubbish, only that they didnt have enough start-up capital, etc.

I think it has some good, broad insights applicable to trading.

 

[sminicooper]

An interesting TEDx on risk.
Broad subject, but lots of resonances with trading.
It really deals with the reasons we tend to mis-allocate reasons for failure.
Talk revolves around the quote by Yass, a fund manager of Susquehanna.

"The biggest risk is that you have a losing strategy when you think you have a winning strategy."

And how people, whilst having a losing strategy seek to delude themselves for the reason for failing.
Covers Self-serving Bias:
Good outcomes are attributed to good decisions.
Bad outcomes attributed to bad luck, (news, spikes, opening gaps, etc)

Covers mis-diagnosing risk management for failure, instead of losing strategy.
(good outcome = signal. bad outcome attributed to noise)

Example: start-ups.
No start-up goes broke believing their product is rubbish, only that they didnt have enough start-up capital, etc.

I think it has some good, broad insights applicable to trading.

Thanks for that – well worth watching even if it only restates what is well-known already to those who've bothered to do the research.

The TED series of video presentations are very good and this one is no exception. You've made an excellent summary for those who've not got the time/inclination to watch – the point about a losing strategy is well made: it goes somewhat against the grain of the "best advice" that you've got to let a strategy run and it will go through bad periods. Bit tough if you've got a crap strategy!