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How the Beatles’ ‘Revolver’ Gave Brian Wilson a Nervous Breakdown

When Brian Wilson first heard the Beatles’ 1965 album Rubber Soul, he was so astonished by the album that the next morning, he went straight to his piano and started writing “God Only Knows” with his songwriting partner Tony Asher.

Wilson knew that Rubber Soul — an album that contained the most mature songwriting from John Lennon, Paul McCartney and George Harrison yet, and exhibited the beginnings of a studio effects revolution — was a glimpse into the future of rock music, and that the Beatles were at the forefront. As cofounder of the Beach Boys, he knew that music was changing and for his group to stay on top in the industry, he would have to make something just as good, or better.

The result was Pet Sounds, released May 16, 1966. It was the Beach Boys’ greatest artistic achievement; one that would never be reached by the group again.

But for the Beatles, 1966 would prove to be just the beginning of an explosion of artistic and technological innovation that would not just change the group, but would alter rock music forever. Revolver — which turns 50 this month — was the culmination of that innovation. And it almost didn’t happen.

More here – Cuepoint

Vision Mercedes-Maybach 6

Things Change

cap

Noise Versus Information Versus Decision Making

One of the growing problems I have noticed over the years with trading is the increasing amount of data that is available to traders. In the good old days we had the reverse problem, getting any information was difficult. Even finding out the closing prices in the US could be tortuous. The internet has completely reversed this problem with not only every world market available to traders at an instant but the powerful analytics of tools such as Bloomberg terminals have begun to filter down to the masses. This presents a unique problem because increasing the amount of information does not increase the fidelity of decisions being made. As an example I got bounced the graph below this morning  for comment.

surpassSource – Dave Wilson

The graph shows that US pension funds are increasingly beginning to rely upon cash as a means by which to fund their obligations. The interpretation that was put to me was that this meant that Pension funds were becoming disinterested in equities as a growth or funding mechanism for their obligations. The extension of this was that there was less and less cash being dropped into the market and the market would respond by falling. This is a valid narrative but a narrative is only a story used to explain historical data. An alternative narrative might be simply that it reflects the ageing population of fund members and as the demographics of the fund shift so to does the strategy that funds that. However, that too is merely a story.

The point that troubles me is that that this information conveys in some a strategic advantage when in fact it is simply data and this is the issue that bedevils traders – sorting data from information. However, there is a secondary issue and that is whether the information you are receiving in some way adds fidelity to your trading decision. It doesn’t matter whether the information is of a macro nature or is perhaps more tactical in nature, the overwhelming question is whether it adds to your decision making. Decision making is a bounded utility, it is bounded by time, the quality of the information you receive and your cognitive ability. These can never be infinite but implicit within this is that decision making is a somewhat quick and dirty process that has to managed and the information upon which you are making a decision has to be managed. This is why models and systems tend to perform better than people do. More information does not make for a better decision. As a real world example consider the case of the heart attack model developed by US Navy cardiologist Lee Goldman. Goldman built a simple visual model that enabled particularly submarine medics to decide whether a heart attack was taking place. As you can imagine getting someone quickly off a submarine is not an easy task. This model might have sat in relative obscurity if it had not been taken up by Cook County Hospital in Chicago. Previously diagnosing a heart attack with the hospital had relied upon a battery of tests (data) combined with the opinion of whichever cardiologist was on duty. Short of funds and looking at ways to streamline treatment options the hospital implemented Goldman’s simple model. There was naturally concern that the outcome for patients might be compromised by using such a simple linear model with only four metrics. Intriguingly health outcomes for patients didn’t change. More data or noise did not mean better outcomes.

So before you go plastering your chart with indicators each with supposedly magical ability or you fork out for a Bloomberg terminal ask whether what you are adding actually adds to the fidelity of your decision making or whether it is fulfilling another need.

Send Me Another Expert

Now that the jingoistic gush fest that is the Olympics is over we can all recover from the notion that every Australian athlete who actually performed up to expectations was a genius and that those that failed to do so still had a big future in front of them (most likely in hospitality) we can sit down at look at the notion of predictions. One of the interesting things about social science style events such as the Olympics is that they bring forth a number of predictions and as the games were approaching I collected a number of these predictions for future reference. Knowing full well that most would miss the mark – some spectacularly as you can see by the chart below.

prediction

Event  such as politics, economics and sport are extraordinarily hard to make predictions about because of their extraordinarily chaotic nature and in the case of sport the reliance upon humans not being human. Consider the recent Brexit vote; forecasters had the Stay vote as being on track for winning. Right up until the time it didn’t. Likewise predictions surrounding the FTSE were equally off the mark. When it became apparent that the Leave vote was going to win the common refrain from experts was that the FTSE would drop through the floor. It has now moved higher than before the referendum.

The utter failure of forecasters to do better than guessing has been known for a long time and was first brought to widespread attention by Phillip Tetlock in the 1980’s. He found that  forecasters performed little better than groups of knowledgeable amateurs and it is the loudness of their argument that carries the day. Not only are expert forecasters wrong most of the time but they are also unable to self correct or learn from their failures. One of the great things about science, particularly quantitative fields such as mathematics and physics is that it is self correcting and this self correction brings about a unique form of internal consistency. Social sciences because they are in part driven by personality lack this functionality – there is no capacity for self correction. To get a sense of this consider the graph below which tracks the stockmarket predictions of Marc Faber.faber-timeline

As you can see Faber has been predicting a stockmarket crash of biblical proportion every year since Moses played full back for the Mount Sinai Under 11B’s. What is interesting about this sort of prediction and its absolute failure is that if you Google Marc Faber you get an endless stream of news sites reporting breathlessly on his latest prognostication.  Yet none report on his consistent failure, failures that have undoubtedly cost investors a small fortune.  What is more intriguing is that Faber has no mechanism for correcting his internal failure, there seems to be no acknowledgement of previous errors. This is not a failing unique to him, virtually everyone in the public arena who makes predictions that are consistently wrong fail to acknowledge their errors. This failure to acknowledge error is a natural human phenomenon – we all act to defend our egos and in the case of public guesswork we tend to fall in love with our guesses. This is why you will never see a politician admit that they are wrong, leaving aside that most are self serving, self obsessed marginal sociopaths.

As the market reminds me everyday i actually know very little about trading and I rely upon the market to tell me what it knows. Trouble for traders occurs when they start to think they actually know something.

The Monty Hall Problem

Imagine that you’re on a television game show and the host presents you with three closed doors. Behind one of them, sits a sparkling, brand-new Lincoln Continental; behind the other two, are smelly old goats. The host implores you to pick a door, and you select door #1. Then, the host, who is well-aware of what’s going on behind the scenes, opens door #3, revealing one of the goats.

“Now,” he says, turning toward you, “do you want to keep door #1, or do you want to switch to door #2?”

More here – Pricenomics

Jaguar F type R AWD vs Porsche 911 Turbo S

General Advice Warning

The Trading Game Pty Ltd (ACN: 099 576 253) is an AFSL holder (Licence no: 468163). This information is correct at the time of publishing and may not be reproduced without formal permission. It is of a general nature and does not take into account your objectives, financial situation or needs. Before acting on any of the information you should consider its appropriateness, having regard to your own objectives, financial situation and needs.