Comments on The Psy-Fi Blog: Peak Oil, The Revenge Of Planet Earth?

Hi Nick I love that Pascal Wager post, just shows...

2009-11-23T17:44:16.581Z

Hi Nick

I love that Pascal Wager post, just shows how you can use the thing in multiple ways. Bangs straight up against the Tragedy of the Commons, too. There is, of course, the slight problem that the (S, H) possibility might lead to a runaway heat death and there we tip over into the infinity multiplied by anything equals something or other. Depending on how you frame the problem you get different answers (i.e. PW is personal and relative not global and normative). However the main point, as you astutely note, is whether it’s possible to make money out of this by predicting how people will react.

No, there’s no reading list: years of reading and thinking. Recent good reads were Traffic by Tom Vanderbilt and Buyology by Martin Lindstrom. Lots and lots of academic papers and central bank reading as well. I do a lot of travelling: good job really :)

Yes it certainly is. One particular point I guess ...

2009-11-23T13:51:32.992Z

Yes it certainly is. One particular point I guess is to consider what 'quadrant' the Pascal's risk occurs in - from http://www.edge.org/3rd_culture/taleb08/taleb08_index.html

Haha, I hadn't picked up on the analogy until reading through your reply :)

A particularly insightful post that I saw regarding AGW was on Slashdot of all places - http://politics.slashdot.org/comments.pl?sid=1451926&cid=30179562

Now, without getting into the is-it-or-isn't-it of climate change debate, I think it is a great example of how our perception of, and strategies for dealing with risk are flawed. I guess that is why there is money to be made.

Keep up the good work. Do you have a reading list that you're working through?

Nick

Hi Nick Very valid point. Of course it also depe...

2009-11-22T08:46:21.934Z

Hi Nick

Very valid point. Of course it also depends on the value you put on that which might be lost - so you might argue that even if there's a very small chance (C) of a very nasty event (E) then C*E would still be a significant risk so, if you put a big enough value on E then the alternatives don't look too hot.

That's essentially the way Pascal used the wager - obviously he couldn't compute the probability of eternal damnation but for him personally the theat of this so vastly outweighed the temporary pleasure of a lifetime of hedonism that it made his choice easy. There's a fairly obvious analogy there that I declined to use :) However, the fact that Pascal's risks are personal calculations does make the use of it pretty dubious for this type of risk analysis but it does help put the issues in a personal context.

You're right of course, that humans are terrible at estimating risk, but it's a two way street - we overestimate the likelihood of quite commonly occurring (but still personally unlikely) events and underestimate the probability of rare but devastating ones. So approximately 100 children a year are abducted by strangers in the US while the (single) Indian Ocean tsunami killed 230,000 people. Meanwhile overreporting of rare events (and the illusion of control) also skews our risk perception - far more people die on the roads each year than in plane crashes, yet what do we worry about?

It's bloody hard this risk stuff ..

Hello, Great post, as usual. One point regarding ...

2009-11-21T23:42:35.269Z

Hello,

Great post, as usual. One point regarding Pascal's Wager - of course if you don't have any way of estimating the likelihood of the outcome (extinction in this case) is it meaningful to use it?

An awful lot is justified in this way on the altar of 'minimising risk'. Humans are terrible at estimating risk in the first place, as we've seen, and you've posted about before :)

Nick

As a geologist I get less concerned about global w...

2009-11-20T09:44:38.004Z

As a geologist I get less concerned about global warming than others, like my daughter. Where did the carbon in oil and coal come from? The atmosphere of the Carboniferous Period. The world has been there before.

Woody nailed it! As you know, I am not a fan of t...

2009-11-19T15:35:02.862Z

Woody nailed it!

As you know, I am not a fan of the Efficient Market Theory or of Buy-and-Hold Investing. I have an article at my site entitled "Woody Allen's Take on the Efficient Market Theory" in which I argue that many of us believe in this idea because we feel that we have to believe in something and we are not aware of anything better. So, like Woody said about his friend who was asked by a psychiatrist why he didn't just tell his brother that he really isn't a chicken, we keep on doin' because we "need the eggs."

I think that pulling in observations from songs or jokes or popular culture can be a big aid to understanding in the investing field. Otherwise, things go around in circle. Sometimes it's only the stuff from outside the usual sources of insights that can work their way up past our radar screens and help us to entertain forbidden thoughts.

Rob