16/ And for more educational threads on business, money, finance, and economics, check out my meta-thread below. Turn on post notifications so you never miss a thread!
With Bitcoin's return to the spotlight, debates on its long-term viability are raging. Its proponents contend @nntaleb's Lindy Effect says the technology is here to stay.
But what is the "Lindy Effect" and how does it work?
Here's Lindy Effect 101!
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1/ First, a few definitions.
The Lindy Effect is a theory that the future life expectancy of specific non-perishable items, like a technology or idea, is proportional to their age.
Put simply, the longer it has already lasted, the higher the likelihood it will continue to last.
2/ The term "Lindy effect" is a reference to Lindy's, a New York deli frequented by comedians in the 1960s.
While author Albert Goldman used the term "Lindy's Law" in a 1964 article, it was mathematician Benoit Mandlebrot who moved the dialogue towards the current definition.
Many of the world's greatest thinkers and doers - from @naval and @elonmusk to @nntaleb and @chamath - tout the importance of first principles thinking.
But what is "first principles thinking" and how does it work?
Here's First Principles 101!
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1/ First, a few definitions.
A "first principle" is a foundational assumption or proposition - it is foundational in that it cannot be deduced from other assumptions or propositions.
Think of a first principle like an element. It cannot be broken down further. It is pure.
2/ "First principles thinking" (or "reasoning from first principles") is a problem-solving technique that requires you to break down a complex problem into its most basic, foundational elements.
The idea: to ground yourself in the foundational truths and build up from there.
With a wave of complexity and unknowns smashing into the financial and political worlds, the elegant simplicity of Occam's Razor is primed for a revival.
But what is Occam's Razor and how does it work?
Here's Occam's Razor 101!
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1/ Occam's Razor is a classic problem-solving principle and mental model.
It says that when you are weighing alternative hypotheses, the one with the fewest necessary assumptions should be chosen.
Put simply, the simplest explanation is often the best one.
Simple is beautiful.
2/ The benefits of Occam's Razor can be extensive.
Going with the hypothesis with the fewest number of necessary assumptions means it is easier to prove/disprove. There are fewer assumptions to vet in your process.
It allows one to follow the critical path to an outcome.
In 1637, the Dutch Republic erupted into a speculative fever over an unlikely item...the tulip.
Tulip Mania has become a legend synonymous with market euphoria and bubbles. But is this tale all it's cracked up to be?
Who's up for a story?
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1/ The tulip is a spring-blooming flower native to the valleys of the Tien Shan Mountains in Central Asia.
It is believed to have been introduced to Europe in 1554, when an ambassador of the Holy Roman Emperor sent tulip bulbs and seeds to Vienna from the Ottoman Empire.
2/ Tulips gained in popularity as people were attracted to their rich color and ability to grow in sub-optimal conditions.
They soon became a coveted status symbol for the wealthy.
The Semper Augustus, with its colorful, flame-like streaks, was the most desired of them all.
With the media in election frenzy, it has become increasingly difficult to find the signal amidst all the noise. We encounter a classic @nntaleb "noise bottleneck."
But what is a "noise bottleneck" and how does it work?
Here's Noise Bottleneck 101!
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1/ First, a few definitions.
What do the terms "signal" and "noise" actually mean?
The "signal" is the meaningful, relevant information you are trying to detect and absorb.
The "noise" is the irrelevant information that interferes with our ability to detect the signal.
2/ In simple terms, "signal" is good, "noise" is bad.
With this in mind, the natural human inclination tends to be to consume more information. We believe that more information consumed equals more signal consumed.