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.
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?
How Does America Use Its Land?
America is big and pretty heavily populated. Surprisingly, 28% of the land is owned by the government (check out this YouTube video).
As you might guess, the eastern US holds almost no federal land while the Western US has states that are primarily federal land (Nevada is 84.9% federal land).
Bloomberg had an interesting series of infographics that covered America's land use and relative profitability.
To start, can you guess what takes up the most space ...
Cows.
Over 41% of the land in the contiguous US revolves around livestock and livestock feed. The farmland used to feed us is an afterthought in comparison - it makes sense when people talk about cows' environmental effect.
Urban areas make up only 3.6% of land use - but four out of five Americans live there (and this area accounts for about 40% of GDP).
The map below gives us a rough idea of the split of U.S. land.
Dave Merrill and Lauren Leatherby via Bloomberg
Urban growth is outpacing other categories, but we're also doing a good job of repairing forestland. According to The Land Report magazine, the land owned by the top landowning families has grown to be larger than Florida - and is continuing to grow.
There are a couple extrapolations that you can make from this information - but I'm curious ... what do you take from this?
Posted at 08:55 PM in Business, Current Affairs, Food and Drink, Healthy Lifestyle, Ideas, Market Commentary | Permalink | Comments (0)
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