Sports

  • The Psychology Behind Gambling (and Everyday Traders)

    Vegas and Wall Street share a lot in common. 

    Over Time … The House Wins

    Casinos only offer to play games that they expect to win.  In contrast, gambling customers play even though they know the odds are against them.

    Why does this happen?  The rush of a win, the chance of a big win, and random reinforcement are common factors that incent people to play lotto, go to a casino, or try to trade.

    Chemicals like adrenaline and dopamine play a part as well.  Even in a sea of losses, your body can't help but crave the chemical reward of even a small win, 

    The "House" knows this and engineers an experience that takes advantage of it.  

    In the case of casinos, every detail is meticulously crafted to extract you from your money – from carpet patterns to the labyrinthian layouts, the music, the lights and even the games themselves. 

    Here is an infographic that lays it out for you. 

    Casino-psychology-infographicBojoko via DailyInfographic

    Most people aren't gamblers … the fear of losing big inhibits them.  However, when people were instructed to "think like a trader," they showed considerably less risk-aversion when gambling. 

     

    The illusion of control convinces us we can overcome the statistics. 

     

    When you almost get it right – when you miss the jackpot by one slot on a slot machine, when you just mistime a trade to get a big win – you're more likely to play longer, and place bigger bets … because you're "so close". 

    It's human nature to want to feel in control. 

    This is why you find a lot of superstitious traders & gamblers. If you wear this lucky item of clothing … if you throw the dice in this particular way … if you check your holdings at this time every day … you have control. 

    There is a big difference between causation and correlation. 

    It is not hard to imagine that the majority of a trader's activities do little to create a real and lasting edge.  

     

    Skill vs. Luck

    There are games of skill, and there are games of chance.

    In a casino, poker and blackjack are considered games of skill.  In contrast, slot machines are considered a game of chance.

    In trading, predicting markets is much different than using math and statistics to measure the performance of a technique.

    Much of what we do is to figure out how to eliminate the fear, greed, and discretionary mistakes humans bring to trading.

    In trading, "Alpha" is the measure of excess return attributed to manager skill, rather than luck or taking on more risk.

    We believe in Alpha-by-Avoidance … Meaning much of what we do is figure out what to ignore or avoid so that the majority of the games we play are games of skill rather than games of chance.

    Are you playing the right game?

     

  • Here Are Some Links For Your Weekly Reading – July 22nd, 2018

    213298

     

    Here are some of the posts that caught my eye recently. Hope you find something interesting.

    Lighter Links

     

  • An Investment Guaranteed to Pay Dividends

    I think about investments a lot … that makes sense given my profession.

    Yet, as my kids get older, there is an investment I made that paid-off in a big way … and I want to share it with you.

    Like many parents, I wanted to teach my children that, to a large extent, they control what happens to them. One of the first ways I did that was to set up a "compensation system" for them to earn video games.

    Some parents try to limit the amount of time their kids spend watching TV or playing video games. I tried something different.  Instead, my kids earned their games by reading books.  Here is a photo from way back then.

     

    BZandH_edited

     

    Paid With Play.

    Here's how it worked. When they were younger, 10 books was enough to earn a small game. When they finished a book, it was their right, and my obligation, to take them to the bookstore for us to pick up the next book together. Likewise, when they finished the requisite number of books, it was their right, and my obligation, to take them to the computer store or game store for them to choose any game they wanted.

    When they finished a hundred books, they got a bonus of earning the next game system. That meant if they had a Nintendo, they could now also get a PlayStation 3 or Xbox 360.

    How Can You Encourage a Jump to the Next Level?

    There came a point when I wanted one of my sons to start reading grown-up books. He was comfortable reading a certain type of book, and didn't want to read the kind of books that I read.  So, I created a bonus system that counted a particular book as three books.  I didn't force him; I just let the easier path to a reward "whisper" in his ear what to read. Once he finished that, he never went back to teen fiction.

    It Is a Great Way to Learn About Your Kids.

    I also used the bookstore visits to get a sense of how the boys were doing. For example, I might say "I notice that you read five books in that series, maybe you'd like this book".  Or, "That sure is a lot of science fiction; what was the last biography you read?"  For the most part, though, I didn't care what they read.  The key was to get them to want to choose certain books for their own reasons.  Ultimately, their preference meant they were learning to love reading.

    It Puts Them In Control of Their Destiny and Rewards.

    My younger son likes competition. He also broke or misplaced many things. So, in order to earn back the Game Boy unit that he lost, I challenged him to read five books in five days. These weren't easy books either. It was designed to stretch him, and also to teach him that he could read a book a night. The bet was that he either finished all the books in the allocated time, or none of them counted towards games or Game Boys. On the other hand, if he read a book a night for two weeks, not only would he get to have his Game Boy back, the books would count towards a game too. It worked like a charm, and we were both happy.

    So, Who Got the Better Bargain?

    As they started to get into their teenage years, I needed to up the ante a little. So, 500 books meant they got a laptop of their choice. Both boys cashed in … and probably felt like they were taking advantage of their dad.

    I got what I wanted, though; both my boys love reading.  And know that they can accomplish anything they put their minds to … one step at a time.

     

    100109-Boys-at-the-Cowboys-

     

    That's an investment that pays dividends for a long time.

      

    Fullsizeoutput_3ee3

  • Inspiration Comes in Many Forms

    Once a year, I go to the World BBQ Championship at Memphis in May. 

    It's three days of friends, food, fun, and bad puns (like #AporkalypseNow and  #MeatDrinkAndBeMerry).

    You've heard the phrase  "Put your money where your mouth is …"  This year we sponsored a tent and brought some of the Capitalogix team to enjoy the festivities. 

     

    32857207_10155541357303321_8738522511773270016_n

     

    Here's a look at what was cooking in our tent.  It had a Brazilian "churrasco" flair. 

     

    150518 Memephis in May
    Our Grill Master was Blake Carson, who took a traditional Brazilian Steakhouse cooking style – and innovated upon it – creating the Carson Rodizio kit (which started as a Kickstarter project).  

    It is a multi-rotisserie rack that converts your favorite backyard grill into an open and spinning Brazilian style Steakhouse.  It's clever, functional, and cool … and it's been used to win multiple barbecue championships.

    I love to experience an entrepreneur's mind at work.  

    It's not always about what you add.  Sometimes, it is about what you take away.  Less is often more. 

    Here is a one-minute interview I shot with Blake last year.

     


     

    For more on Carson Rodizio, here is their Facebook page.

    Innovation, like opportunity, is all around you.

    But it's not there for you if you don't see the opportunity, and seize it.

  • Are You As Good As You Once Were?

    Toby Keith has a song that claims: “I ain't as good as I once was … But I'm as good once, as I ever was.”

     

    Fullsizeoutput_3f5c

     

    Probably not … but it was fun to get back in the Shot Put circle at Duke University.

    I was there for Graduation Weekend.

    Apple CEO Tim Cook today delivered the 2018 commencement address. Here is a video.

     

    Cook challenged students to "think different" rather than accept the status quo, and to leave the world better than they found it, by following in the footsteps of leaders like Steve Jobs, Robert F. Kennedy, and Martin Luther King Jr.

    An excerpt from his speech:

     

    The pace at which progress is possible has accelerated dramatically. Aided by technology, every individual has the tools, potential, and reach to build a better world. That makes this the best time in history to be alive. Whatever you choose to do with your life, wherever your passion takes you, I urge you to take the power you have been given and use it for good. Aspire to leave this world better than you found it.

    I didn't always see life as clearly as I do today. But I've learned that the greatest challenge of life is knowing when to break with conventional wisdom. Don't just accept the world you inherit today. Don't just accept the status quo. No big challenge has ever been solved, and no lasting improvement has ever been achieved, unless people dare to try something different. Dare to think different.

    I was lucky to learn from someone who believed this deeply—someone who knew that changing the world starts with following a vision, not a path. He was my friend and mentor, Steve Jobs.

    Steve's vision was that great ideas come from a restless refusal to accept things as they are, and those principles still guide us at Apple today. We reject the notion that global warming is inevitable—that's why we run Apple on 100 percent renewable energy. We reject the excuse that getting the most out of technology means trading away your right to privacy. So we choose a different path: collecting as little of your data as possible, and being thoughtful and respectful when it's in our care.

     

    Cook graduated from Auburn University and got his MBA at Duke's Fuqua School of Business in 1988.  He is a member of Duke's Board of Trustees.

  • Hyper-Reality: The Future of Augmented Reality?

    Our physical and virtual realities are beginning to blend.  Animation is becoming more realistic.  Virtual and augmented reality are becoming more affordable. Wearables are becoming pervasive.  And, the internet of things will soon overtake the Internet.

    We're moving towards a world where technology envelops every aspect of our lives … figuratively and literally. 

    The following (still fictional) video is thought-provoking.  What happens when these new technologies are used to influence behavior, decision-making, and even your identity?  

     

    Keiichi Matsuda via Vimeo

    Virtual reality (VR) and augmented reality (AR) are not new fields – but, they are evolving quickly. Technology and infrastructure are getting to the point that AR and VR will become common for us.

    You have already started to see it (from Google Glass, to the NBA, and of course, to porn). 

    "Not too far in the future you will begin to see the integration of AR and VR together eventually leading to having your favorite performer on your lap, in your bedroom doing a custom performance for you and responding to your verbal and physical cues."

    – Anna Lee, HoloFilm Productions

    Your doctor or nutritionist could help you make better choices for you.  Your therapist or coach could help you perceive and respond differently to the challenges life presents you.  Marketers could better influence your purchases.  Employers could better monitor and measure your performance and productivity. And governments will not be far behind … doing what they do.

    Like many things, these technologies make possible awesome new capabilities (if used well) and horrific consequences (if abused or used in authoritarian ways).

    Similar issues are being dealt with in the fields of BioEthics and AI Ethics. In addition, there is a growing discussion of the impact these technologies will have on society. 

    We live in interesting times! 

    Related articles
    What Effect Will VR and AR Have on B2B Customer Service?
    Rumors of the demise of augmented reality developers have been greatly exaggerated
    Get ready for augmented reality *everything*
    Remember Google Glass? It just got its first update in 3 years. Seriously.
    Chinese police are using facial-recognition glasses to scan travelers
    23 concepts that show what Apple's futuristic smart glasses might look like (AAPL)

  • Here Are Some Links For Your Weekly Reading – February 18th, 2018

    12112017 Robot
    Here are some of the posts that caught my eye recently. Hope you find something interesting.

    Lighter Links:

    Trading Links:

  • Why You Can’t Predict March Madness

    Last year, I shared some facts about March Madness. For example, the chances of a perfect bracket are  at 1 in 9,223,372,036,854,775,808. For those who don't wanna do the math that's 9.2 quintillions. 

    This year, 16-seed UMBC (The Chesapeake Bay Retrievers) beat 1-seed Virginia, and left no perfect brackets after only 28 Games. 

    As we came into the Elite Eight, nobody picked all eight. Almost nobody predicted No. 3 Texas Tech making it this far … and there were 17,304,320 digital brackets this year. 

    Is there any way to accurately predict something with this many potentialities and this much discord?

    Different factors can feel like they provide an edge … knowing the history of teams, their ranks, how often they've been to the Final Four, or how great their coach is … but even that knowledge can lead you astray. You'd think an NCAA analyst might have a better shot at a perfect bracket than your grandma or co-worker, but several of the highest-ranked brackets this year were guesses. 

    325 NCAAvia ESPN

    It's fun guessing when you're making bets on college basketball, but what if this is your livelihood …

    Prediction is hard … especially about the future.

    The way people fill out their brackets often mimics the way investors pick trades or allocate assets. Some use gut feel, some base their decisions on rank and past performance, and some use predictive models … and some of us get disappointed when Duke loses.

     Apparently, humans aren't as great at prediction as we think we are. 

  • Avoiding Death by Snowmobile

    I was in Saskatchewan, Canada last week for my first-ever snowmobiling experience.

    When I got there, everyone was in great spirits. Apparently, this is a sport done with day drinking, lots of laughter, and abandon.

    We split into groups: Insane, Merely Crazy, and the Turtles.

    I figured I was relatively safe with the Turtles. Still, I have to admit that I was a little nervous. The machines are capable of gliding over the snow at speeds approaching 200 miles per hour. And, I heard stories that 70 percent of these outings ended in some form of injury. Those are some sphincter-tightening things to put together.

    The scenery was majestic.

    H3RjQ7AVRMKn2rTScL4S6A

    Fullsizeoutput_3b5e

    But I didn't notice till it was over.  Humans are deletion creatures. That means they can hold seven things (plus or minus two) in their memory. Everything else gets filtered or deleted. For example, in chess, a grandmaster can focus on the portion of the board that is most proximately related to winning. A novice, however, wastes their buffers with thoughts like "the horsey-thing goes up two and over one."

    While everyone else was focused on having fun, I focused on how to make the sled do something. There were no instructions that said click this, press that. Here's the brake, or, the three most important things to remember are … 

    I quickly learned two rules. The first, you have to lean in the direction that you want to turn (otherwise the sled tips over). By the way, it took me a few iterations to figure this one out. 

    Here is a picture of me just after they dug me out from under the sled.

     

    Fullsizeoutput_3bc0

     

    The second rule is to try to stay on the sled. I never quite figured that rule out fully. 

    I guess you can be skillful, you can be lucky, or you can pray.

    Luckily, I saw Father Rac before we started.   My question was whether he was here to bless the participants or perform last rites.

     

     

    Fullsizeoutput_3bc2

     

    After a nice conversation, he said he'd pray for me.

    In my industry, we call that hedging.

    I did last longer than the sled.  It had to be towed.

    Meanwhile, I still have ten fingers and ten toes, ended the day vertically, and had a ton of fun.  Victory!

    I’ll suck less next time.

  • Super Bowl Tickets

    Guys

     I know it's late notice, but a friend of mine has two tickets for the Super Bowl in Minneapolis, MN at the new U. S. Bank Stadium on Sunday, February 4th. They are box seats and he paid $3,500 per ticket, which includes the ride to and from the airport, lunch, dinner, a $400.00 bar tab and a pass to the winner's locker room after the game.

     What he didn't realize when he bought them last year was that it's on the same day as his wedding.

     

    1282018 Superbowl 2

     

    story hat-tip to JW.

     

    If you are interested, he is looking for someone to take his place. It's at St. Paul's Church at 3 p.m. Her name is Ashley. She's 5'4", about 115 pounds, a good cook, loves to fish and hunt and will clean your truck. She'll be the one in the white dress.

     

    Saw this and thought it was funny. 

     

    Who do you think is going to win the Superbowl? Patriots or Eagles?