Victor Niederhoffer on Being Wrong

Introduction (via Slate)

Niederhoffer’s e-mails suggested a man already obsessed with wrongness. In them, he referenced the statistical concept of path dependence; shared a series of proverbs about the game of checkers (of 5,000 such proverbs, he hazarded, about 250 concerned error); meditated on the difference between Type One mistakes (excessive credulity) and Type Two mistakes (excessive skepticism) (he himself is much more prone to Type One, he says: “I’m tremendously gullible”); observed that “one should be careful of multitasking or multiromancing”; sent me the citations for hoodoo in the Oxford English Dictionary (a hoodoo is something or someone that brings bad luck); and noted that the harpooner in Moby Dick would have made a great interview subject for this series. Finally, he pointed out that the word error< has no antonym. “In retrospect,” he wrote, “I know much too much about errors and much too little about the opposite, whatever it is.”

Interesting Excerpts (via Slate)

I’ve heard that Soros, among others, cautioned you against the Thai investment. Why didn’t you listen to the naysayers?

Well, Soros would be the first to tell you that his predictions are completely random. He never says anything that doesn’t jibe with his current position or his hoped-for outcome. And he’s chronically bearish. He’s chronically thinking that the world needs a central planner to put it to rights and that the market itself is too prone to disaster.

How did it feel to be so wrong in such a high-stakes situation?

It was my first real taste of total disaster. I had pretty much lived a charmed life until that time. I had won some awards as the best-performing fund the previous year, and I had never had a customer lose money with me. I had an unprecedented, too-good-to-be-true kind of record.

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22. June 2010 by Miguel Barbosa
Categories: Curated Readings, Finance & Investing | Leave a comment

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