
A Bitter Ending - Hooke
http://www.chronicle.com/article/A-Bitter-Ending/238990?key=8KXTREb5_9Vj7FgHzdRcFslErlxHaaxTUIOQGnu0ivAHf-Z6vY9xuY4nPO_6HhIGRFJpa3VPT1FSNGZUUmsyU1gxaWxHSWNSVTJmMDZyV2NXcEV5OHNPd3poaw
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tsunamifury
I had a chance to talk to Danny about two years ago in Berkeley. I had
randomly run into him at an event a friend hosted. We chatted briefly and I
asked him one question: "Your research deconstructed the way I think, both
instinctually and logically, leaving me with very little basis to make
judgements. How would you propose we make decisions."

He responded after sighing a bit empathetically, "I'm not sure, but I think
you should just constantly ask your friends and keep talking with people about
your decisions."

I thought this was a great bit of wisdom that I keep at heart. I've noticed
that people who isolate their decision making, esp in critical scenarios, more
often than not make bad choices. He highlighted that diversity of friends,
constant networked thinking, and the humility to take feedback are the real
keys to overcoming the pitfalls his work highlights. He didn't say you had to
take their feedback exactly, or always change your mind -- just keep talking
about it though.

~~~
dharmon
This is a useful insight, but with caveats.

As an investor, my livelihood depends on my ability to consistently make sound
decisions. And fortunately, decisions are not set in stone, so I have
opportunities to negate poor ones.

I have thought a lot about how to improve my decision-making. One is what you
are talking about, sharing my decisions and thought processes with others. An
obvious conclusion (to me) is that doing so on the internet is horrible, as
there is no real ability to filter opinions on my part, with no background
knowledge of those giving feedback. Yet they can still sow seeds of self-
doubt.

But even talking with friends can be tricky, as you have to account for their
backgrounds and biases. Sometimes it's easy. For example, if I'm looking at
real estate, something I know little about, I would heavily count the thoughts
of my friend who is a REIT analyst. Other times it is not clear how much to
weight their opinion. A Bayesian approach seems to work here.

Another idea which I find as effective, if not more, is constantly turning the
decision over in my own mind. I am not the same person I was yesterday. My
thought processes in the morning, after a cup of coffee, are different than
Friday evening, after a few beers. It is definitely different after a period
where the market is up ("I'm an invincible genius!") vs. down ("I'm a moron!
Maybe I should go back to writing code...") By revisiting over a span of time,
you can gather new insights solely based on where your head is at any given
time.

And at the end of the day, you have to honestly evaluate the results of your
decisions. If I discount the opinions of others and follow my own intuition,
but consistently lose money, then well, I should revisit some part of the
process. Surprisingly many are unable (unwilling?) to do this.

~~~
qwrusz
I dig this comment. I think it speaks to the idea that when it comes to
improving one's decision-making skills it's important to share your opinions /
decisions with others when possible _and also unabashedly share how you
reached your opinion_

Unabashed openness in how and why you think something appears to be the
hardest part for people. Maybe because it includes saying things like "I don't
know" or saying to a group of people a sentence like "My opinion on _xyz_ is
based on intuition, I apologize I can't point to a more scientific reason for
my opinion right now but just because something is a gut feeling doesn't mean
it is incorrect". This kind of talk is especially difficult in corporate
environments where, in general, managers or aspiring leaders saying something
like "I don't know" is verboten.

Q: You mentioned you are an investor. It wasn't clear what type of investing
you do or if you do this professionally or if you're a one-man shop. But you
also said something about getting feedback on decisions on the internet? (I
also saw you said it is horrible :). I'm just curious where on the internet
could you even have tried this getting feedback as an investor? While I don't
know of a professional investment firm that would allow employees to discuss
live investment decisions on the internet assuming it happens anyway; is there
a website or something where professional investors discuss investment
decisions and their theses online?

I work in finance and invest professionally (I don't call myself an investor
though maybe because most of the money belongs to other people). Anyway my
experience has been (both at my current fund and previous fund) the PM
decision-making processes and managing risks like bias or miscalculation are
taken so so seriously now: There is a formal internal procedure for decisions
that lead to investment portfolio changes _and_ an external company/consulting
firm is hired specifically to evaluate and improve decision making by humans
and machines. Decision making has fallen into the "risk management" category
and it is not taken lightly.

~~~
dharmon
Sometimes my wife and I will go for walks and I talk her through my thinking
on whatever I'm currently looking at. Even though she's not a finance person,
just sharing my thought process with a super smart person helps me identify
flaws or develop insights.

I'm a one-man shop investing my own money (in plain jane public markets), so I
have no restrictions on discussing.

Value Investor's Club is good, as is Corner of Berkshire and Fairfax. I use
Seeking Alpha because these people are amazing at digging up data. I just
ignore the analysis cause it's usually pretty weak.

I see people share their theses on these sites and places like Reddit and from
the inconsistent quality in feedback they get I decided it would not be a
valuable thing for me to do. To each their own, I guess.

Crazy how institutionalized risk management is (hopefully it is beyond just
VAR these days). My risk management is a little folksy by comparison: what's
the most I could lose here? how likely is that to happen? and how much am I
willing to lose?

Are you an analyst at a fund?

~~~
qwrusz
Thanks. I took a first quick look at the 3 sites you mentioned and will check
them out again. I can see the value investing tilt and how that lends itself
more to such discussion forums; as value investing can sometimes have this
cool sort of "story telling" component to it where sharing one's trade idea or
"story" about a company, and getting feedback on that and hearing other folks'
tell their story ideas does make sense. But I also see what you mean about
quality and noise being issues that can make these sites not very practical
and potentially may end up hurting more than helping.

I have a colleague who eats lunch with his wife 2-3 times a week and I have
seen how much it helps him at work on those days. She is not a finance person
but she is super smart and consistently offers unique perspective (I have
asked if we can hire her).

Connected idea (and admittedly I don't do this often as I probably should) but
in general talking to a smart non-finance person about a finance idea can have
tons of benefits for a trader:

1) You get to simplify things when you explain and can't use bullshit
ambiguous obscuring "finance speak" vocab ( _leverage delta asymmetry you
say?...Nope_ )

2) There is this hard to explain benefit when no one is trying to "win" in a
discussion. By "win" here I mean, we debate finance shit in the office all the
time, every day all day, and it's genial and effective and all that, but
everyone is vested in it and there is this tint of guys trying to "win at
discussions" or show off knowledge or be more right or they just want to have
had a part in it (sorry hard to explain this, it's not alpha male posing,
rather it's people want to help and want to feel they have contributed to
things, like if this was a movie being made everyone wants their name in there
when the credits roll, that's ok but it can be counterproductive).

Someone willing to help and listen and maybe offer insight, without
consciously or subconsciously caring about credit or getting anything in
return is quite hard to find, but it's a real gift when you find such a
person... _AND it 's a gift worth giving if you can be such a person to
someone else._

Yes way past "VaR", only really hear that term in government or regulatory
stuff, internal risk management would never use such unclear, inexplicit
terminology like "value" or "risk" nor simplify bad serious events to a number
or two. I like your style, it's not folksy, how many US dollars could someone
lose is fundamentally THE risk and the rule in finance that matters.

Spent years as an analyst, now in more of a management role, supervising and
training the new younger analysts who don't hate flying yet and who apparently
learned nothing in school relevant to working in asset management in the real
world. I still do financial analyst work mainly in special situations as they
come up. Yes, mid-size multi-strat fund, I co-babysit the credit L/S desks for
now. Might semi-retire if the office keeps talking about politics all day. No
patience for it :)

------
mherrmann
Kahneman summarises his and Amos's findings in the book "Thinking fast and
slow" [1]. It's a fascinating tour of their discoveries. I'm not normally
interested in psychology. But this book is awesome.

[1]:
[https://www.amazon.com/gp/product/0374533555/ref=as_li_tl?ie...](https://www.amazon.com/gp/product/0374533555/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=0374533555&linkCode=as2&tag=mherrmann-20&linkId=b7b110d61223b9f9720708ac77ff3c77)

------
mcguire
" _At a conference back in the early 1970s, Danny was introduced to a
prominent philosopher named Max Black and tried to explain to the great man
his work with Amos. "I’m not interested in the psychology of stupid people,"
said Black, and walked away._"

~~~
justicezyx
In that response, Mr. Black proved their research. In this case, I think it's
the auto-system in charge (cannot remember it's I or II).

------
chrisherd
The article reads better than the book, which is unfortunate because all of
Michael Lewis' work has been fascinating.

~~~
stablemap
It's focused on the resulting economics but I've heard great things about the
book _Misbehaving_ by Thaler. The remarks under "Outtakes" here give some
context:

[http://www.misbehavingbook.org](http://www.misbehavingbook.org)

~~~
ccmonnett
I'm reading this now and enjoy it very much, it's a very fast read by
economics book standards. That is, though, because it's not dense with theory
for better and for worse.

If your expectations are "reasonably entertaining book that's reasonably
informative" and you're remotely interested in econ _or_ behavior, it really
hits the spot.

------
karmakaze
"Amos was perplexed by their inability to admit defeat... He wanted to find
something to shut people up. Which of course you can never do."

Not central to the story but a very good thing to always keep in mind.

------
jhoechtl
It leaves a bit the impression of Amos being a rather unpleasant power-hungry
person, letting no one beside him come up. Was he known for being supporive to
his students even when they challenged him?

~~~
mcguire
I don't know about that, or about the conflict between Amos and Danny, but

" _Amos wrote an article, addressed directly to economists, to repair
technical flaws in prospect theory. "Advances in Prospect Theory," it was
called, and though Amos did much of the work on it with his graduate student
Rich Gonzalez, it ran as a journal article by Danny and Amos. "Amos said that
it had always been Kahneman and Tversky, and that this had to be Kahneman and
Tversky, and that it would be really strange to add a third person to it,"
said Gonzalez._"

...would piss the crap out of me, if I were the student.

Edit: Reading more about them,my perception is that Amos was like the "rock
star" programmer who can do great things, but who is impossible to work with.

~~~
zevets
Academia brings out the worst in people. It is a culture where the primary
reward is ego, and this article is a testament to its noxious power.

Amos not crediting his student is unforgivable.

~~~
abrax3141
Um. Can you say "Self refuting flame?!"

~~~
zasz
No, because he's rebuking Tversky and not talking himself up at all.

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participant71
Well, what happened between Amos and Danny in the months before Amos's death?

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i336_
That was an awesome article to read, but it's missing one thing: examples of
their work!

Is there anywhere online that presents an overview of their arguments and
theories?

~~~
s_p_lee
Mentioned elsewhere in these comments is Daniel Kahneman's book "Thinking,
Fast and Slow." It's a great read and full of concrete examples.

~~~
i336_
Okay, thanks!

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joericky233223
There is no mention of the conflict in "Thinking fast and thinking slow". This
is really shocking.

