Mad as a box of frogs

[WompRat]

There is far too much craziness to post anything sensible today, so I will just post a quote I like about speculators instead.

‘I would like you to imagine a national coin-flipping contest. Let’s assume we get 225 million Americans up tomorrow morning and we ask them all to wager a dollar. They go out in the morning at sunrise and they all call the flip of a coin. If they call correctly, they win a dollar from those who called wrong. Each day the losers drop out and on the subsequent day the stakes build as all previous winnings are put on the line. After ten flips on ten mornings, there will be approximately 20,000 people in the United States who have correctly called ten flips in a row. They each will have won a little over $1,000. Now this group will probably start getting a little puffed up about this - human nature being what it is. They may try to be modest, but at cocktail parties they will occasionally admit to attractive members of the opposite sex what their technique is and what marvelous insights they bring to the field of flipping.

Assuming that the winners are getting the appropriate rewards from the losers, in another ten days we will have 215 people who have successfully called their coin flips 20 times in a row and who, by this exercise. each have turned one dollar into a little over $1 million. $225 million would have been lost, $225 million would have been won. By then this group will really lose their heads. They will probably write books on “How I Turned a Dollar into a Million in Twenty Days Working Thirty Seconds a Morning.” Worse yet, they'll probably start jetting around the country attending seminars on efficient coin-flipping and tackling skeptical professors with, “If it can’t be done, why are there 215 of us?" But then some business school professor will probably be rude enough to bring up the fact that if 225 million orangutans had engaged in a similar exercise the results would be much the same—215 egotistical orangutans with 20 straight winning flips.’

- Warren E. Buffett

[NorbyTheGeek]

Brilliant.  Thanks for that. 

[JimboToronto]

A keeper for sure.

[oda.krell]

Pretty amusing read, thanks OP

Doesn't really apply to Bitcoin (or any other market) though, right? Sure, there are plenty people that get rich simply by luck, but the Buffett example is that of a coin -- presumably a provably fair coin, meaning there is nothing to predict about tossing that coin besides the fact that either outcome is equally likely.

That's hardly what happens in markets. Why would human behavior, guided by (depending on your philosophical assumptions) free will or quasi-deterministic processes suddenly become completely random just because it is group behavior rather than that of one individual. Sure, there's some noise and randomness, but almost certainly not to the point where there is no prediction possible.

Meh. Unnecessary rant, I guess. After all, this is the speculation subforum. Surely noone here thinks the market is nothing but a coin toss.

[NorbyTheGeek]

Doesn't really apply to Bitcoin (or any other market) though, right? Sure, there are plenty people that get rich simply by luck, but the Buffett example is that of a coin -- presumably a provably fair coin, meaning there is nothing to predict about tossing that coin besides the fact that either outcome is equally likely.

I think the point is that some self-proclaimed "experts" get lucky and profit based on their whims rather than any real market research or logic.  But they certainly think their strategy is sound because it's worked so far.

[amencon]

Pretty amusing read, thanks OP

Doesn't really apply to Bitcoin (or any other market) though, right? Sure, there are plenty people that get rich simply by luck, but the Buffett example is that of a coin -- presumably a provably fair coin, meaning there is nothing to predict about tossing that coin besides the fact that either outcome is equally likely.

That's hardly what happens in markets. Why would human behavior, guided by (depending on your philosophical assumptions) free will or quasi-deterministic processes suddenly become completely random just because it is group behavior rather than that of one individual. Sure, there's some noise and randomness, but almost certainly not to the point where there is no prediction possible.

Meh. Unnecessary rant, I guess. After all, this is the speculation subforum. Surely noone here thinks the market is nothing but a coin toss.

I'd be willing to bet that for most speculators here there is sufficient complexity and number of variables to render their predictions about as accurate as guessing coin flips.

[I_bitcoin]

This is also a great quote for those who claim to predict the future value of stocks and sell their advice.

[elasticband]

I agree, no one can tell the outcome of a coinflip just like no one can firmly predict bitcoin and for those who win there will always ve loosers

[niothor]

This is also a great quote for those who claim to predict the future value of stocks and sell their advice.

Wait , you're not interested in buying a book on how to win 10 millions on forex? I'm trying to sell it for 10$ instead of gaining myself 10 millions with my knowledge.
=))))

[oda.krell]

Pretty amusing read, thanks OP :)

Doesn't really apply to Bitcoin (or any other market) though, right? Sure, there are plenty people that get rich simply by luck, but the Buffett example is that of a coin -- presumably a provably fair coin, meaning there is nothing to predict about tossing that coin besides the fact that either outcome is equally likely.

That's hardly what happens in markets. Why would human behavior, guided by (depending on your philosophical assumptions) free will or quasi-deterministic processes suddenly become completely random just because it is group behavior rather than that of one individual. Sure, there's some noise and randomness, but almost certainly not to the point where there is no prediction possible.

Meh. Unnecessary rant, I guess. After all, this is the speculation subforum. Surely noone here thinks the market is nothing but a coin toss.

I'd be willing to bet that for most speculators here there is sufficient complexity and number of variables to render their predictions about as accurate as guessing coin flips.

Agreed. But the fact that there is only 1 competent brain surgeon among 1000s of people doesn't make brain surgery any less of a well-founded method.

There difference is though, I agree, that trading allows delusion to thrive :D

[Spaceman_Spiff]

Pretty amusing read, thanks OP

Doesn't really apply to Bitcoin (or any other market) though, right? Sure, there are plenty people that get rich simply by luck, but the Buffett example is that of a coin -- presumably a provably fair coin, meaning there is nothing to predict about tossing that coin besides the fact that either outcome is equally likely.

That's hardly what happens in markets. Why would human behavior, guided by (depending on your philosophical assumptions) free will or quasi-deterministic processes suddenly become completely random just because it is group behavior rather than that of one individual. Sure, there's some noise and randomness, but almost certainly not to the point where there is no prediction possible.

Meh. Unnecessary rant, I guess. After all, this is the speculation subforum. Surely noone here thinks the market is nothing but a coin toss.

I'd be willing to bet that for most speculators here there is sufficient complexity and number of variables to render their predictions about as accurate as guessing coin flips.

chaos theory FTW

[the_sunship]

enjoyable post, which reminds me once again not to flip my coins anymore - just buy and hold them.

thank you!

[wizby]

going furthermore in to conspiracy...

but what about gravity forces of so much coin flipping in itself? can it flip the world? or shake it a bit for some amusement for others?

[PenAndPaper]

Only that speculation isn't a coinflip. If you want to make an analogy with a zero sum game it's more like poker.
It is a game of chance but skill moves the chances in favor or against you. That's why it takes time to make profit or to lose. (Of course you need your bankroll to be enough to deal with variance). But who am i to argue with Buffett  

[jimhsu]

There's nothing wrong with taking the other side of the bet ... :p

When the 20x head flipper shows up ... bet on tails. Psychology will take care of the rest.

And never bet everything, either way.

[PenAndPaper]

There's nothing wrong with taking the other side of the bet ... :p

When the 20x head flipper shows up ... bet on tails. Psychology will take care of the rest.

And never bet everything, either way.

Unfortunately a coin doesn't have any feelings or memory or anything else besides 50% chance for either heads or tails.

[GigaCoin]

There is far too much craziness to post anything sensible today, so I will just post a quote I like about speculators instead.

‘I would like you to imagine a national coin-flipping contest. Let’s assume we get 225 million Americans up tomorrow morning and we ask them all to wager a dollar. They go out in the morning at sunrise and they all call the flip of a coin. If they call correctly, they win a dollar from those who called wrong. Each day the losers drop out and on the subsequent day the stakes build as all previous winnings are put on the line. After ten flips on ten mornings, there will be approximately 20,000 people in the United States who have correctly called ten flips in a row. They each will have won a little over $1,000. Now this group will probably start getting a little puffed up about this - human nature being what it is. They may try to be modest, but at cocktail parties they will occasionally admit to attractive members of the opposite sex what their technique is and what marvelous insights they bring to the field of flipping.

Assuming that the winners are getting the appropriate rewards from the losers, in another ten days we will have 215 people who have successfully called their coin flips 20 times in a row and who, by this exercise. each have turned one dollar into a little over $1 million. $225 million would have been lost, $225 million would have been won. By then this group will really lose their heads. They will probably write books on “How I Turned a Dollar into a Million in Twenty Days Working Thirty Seconds a Morning.” Worse yet, they'll probably start jetting around the country attending seminars on efficient coin-flipping and tackling skeptical professors with, “If it can’t be done, why are there 215 of us?" But then some business school professor will probably be rude enough to bring up the fact that if 225 million orangutans had engaged in a similar exercise the results would be much the same—215 egotistical orangutans with 20 straight winning flips.’

- Warren E. Buffett

Ahh Warren Buffet, the king of Buy and Hold.

[joshv06]

Good stuff. A lot of "I told you so"' going around. It gets old. Suddenly, when BTC crashes, all the amazing speculators that we previously mumbling and talking at the side of their mouths come out yelling.

[amencon]

Pretty amusing read, thanks OP

Doesn't really apply to Bitcoin (or any other market) though, right? Sure, there are plenty people that get rich simply by luck, but the Buffett example is that of a coin -- presumably a provably fair coin, meaning there is nothing to predict about tossing that coin besides the fact that either outcome is equally likely.

That's hardly what happens in markets. Why would human behavior, guided by (depending on your philosophical assumptions) free will or quasi-deterministic processes suddenly become completely random just because it is group behavior rather than that of one individual. Sure, there's some noise and randomness, but almost certainly not to the point where there is no prediction possible.

Meh. Unnecessary rant, I guess. After all, this is the speculation subforum. Surely noone here thinks the market is nothing but a coin toss.

I'd be willing to bet that for most speculators here there is sufficient complexity and number of variables to render their predictions about as accurate as guessing coin flips.

Agreed. But the fact that there is only 1 competent brain surgeon among 1000s of people doesn't make brain surgery any less of a well-founded method.

There difference is though, I agree, that trading allows delusion to thrive

True enough I suppose.  I don't know enough to refute that some players have strategies that will garner statistically positive alpha, only that I haven't seen any obvious examples to date.

[jimhsu]

There's nothing wrong with taking the other side of the bet ... :p

When the 20x head flipper shows up ... bet on tails. Psychology will take care of the rest.

And never bet everything, either way.

Unfortunately a coin doesn't have any feelings or memory or anything else besides 50% chance for either heads or tails.

Exactly, the fact that everyone is "betting heads" makes betting tails a "outsized" bet, even though the underlying probability says otherwise. Aka reverse gambler's fallacy. Probability is one thing, risk:reward is something different.

Part of "buy low, sell high" is looking like an idiot for more time than you can imagine.

That said, the analogy doesn't apply that well because markets are not purely stochastic, but processes with memory.