How We Form Beliefs

Reading Time: 3 minutes

 

“When I ask my audiences this question, they generally say it’s just something they heard but they have no idea where or from who.  Yet they are very confident that this is true.  That should be proof enough that the way we form beliefs is pretty goofy.” – Annie Duke

The quote above pertains to the belief that male baldness is passed down from the maternal grandfather.  Turns out, your Mom’s Dad is just “a variable” in explaining baldness, not “the variable”.  People’s belief in this is based on hearsay, not objective evidence of a meaningful sample size.  The point Duke is making in “Thinking in Bets” is that we form our beliefs rather indiscriminately.

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The Curation Economy

Reading Time: 4 minutes

 

We live in a world of proliferating choice.  A search for “men’s socks” on Amazon.com yielded over 80,000 results. 80,000+! Did anyone reading this ever anticipate having to choose between tens of thousands of options for socks, let alone anything else? I certainly did not.

This sparked my curiosity about a variety of other everyday items one might need:

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Shopping for the Groceries

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In First is Worst in NFL Draft, the discussion hinged around the personnel department and draft strategy.  But there’s more to winning Super Bowls than trying to obtain the best players.  Those players have to develop into better players.  They also have to execute on their role in the strategy outlined by the coaching staff.

The groceries matter

In his 3rd season as the Patriots Head Coach, The Big Tuna and Robert Kraft, then a “green” NFL owner, had a falling out.  The rift was caused by differences of opinion on personnel decision making.  Reportedly, Parcells wanted to draft Tony Brackens in 1996 but was over-ruled by Kraft, leading to the team selecting Terry Glenn.  By the time the Pats reached Super Bowl XXXI, there was a media frenzy stirring over The Tuna’s imminent departure.  New England lost the game.

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The Paradox of Choice

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Choice, the ability to make up your mind and change it, affects both natural and synthetic happiness differently.  The freedom to choose among multiple attractive futures and find the one you will most enjoy is the friend of natural happiness.  Natural happiness is derived from getting what you want.  However, the freedom to choose and change your mind is the enemy of synthetic happiness.  Synthetic happiness is how you deal with not getting what you want.

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Ted Williams

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Ted Williams has a special place in my heart.  As one of the all-time Red Sox greats and a favorite of my Dad, he is best known as the last major leaguer to finish the regular season with a batting average (BA) of .400 or better.  He accomplished this feat in 1941 with an average of .406 marking the 28th occurrence of this rare accomplishment (including competing pro leagues in the late 1800s).

Over time, the .400 batting average has gone the way of the dinosaur.  It’s been over 75 years since it was last accomplished.  In the 1890’s it was achieved 11 times, including 5 players who had a BA over .400 in the 1894 season.  Through the first 65 years of pro baseball, its occurrence has risen and fallen, eventually being snuffed out since Ted Williams made it happen.

Why?

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First is worst in NFL Draft

Reading Time: 5 minutes

 

Starting from the Top

The objective in the NFL is to win Super Bowls.  In order to win Super Bowls, you have to win significantly more games than you lose, in most seasons.  Winning games requires scoring more points than you surrender to the opponent.  Outscoring your opponent requires some combination of better personnel, strategy, and execution (which I think of as the interaction between personnel and strategy).  With the annual NFL Draft approaching, this piece focuses on the personnel part of the equation.   Continue reading “First is worst in NFL Draft”

Continuous Improvement

Reposting guest content from Fintech startup Essentia Analytics.

Reading Time: 4 minutes

 

As an allocator with many years of experience, I’ve seen hundreds of equity strategies – in every flavor and size.  

Truth be told, once you’ve accounted for the different style and market cap biases (which can anyway be accessed via much cheaper passive vehicles), you’re left with a fairly homogenous group of experts in terms of idea generation and analysis.

This makes it a huge challenge to find an active strategy that one believes has high odds of outperformance.

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Consilience

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What is consilience?

Consilience is the concept that evidence from independent and uncorrelated sources can converge to create stronger conclusions.  It’s commonly described as requiring independent methods of measurement.  A simple example is the difference between measuring the distance between two objects with a laser and a tape measure.  If the two measurements are the same you can have a higher degree of confidence the measurement is correct.  If they are not in agreement, the average of the two is your best best.  Adding additional forms of measurement would further increase confidence in the accuracy.

This example is simple enough and probably sounds like overkill.  Why would you measure the living room with more than one form of measurement?  The facts are you wouldn’t.  Units of measure are standardized and reliable which creates a high degree of certainty in your result.  But there’s more to the story.

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