Just posted a summary and my notes from John Galls' wonderful book Systemantics, a wonderful (and funny) book on how systems work

Some of my favorite lines....

taylorpearson.me/bookreview/sys…
SYSTEMS IN GENERAL WORK POORLY OR NOT AT ALL More technically stated: COMPLICATED SYSTEMS SELDOM EXCEED FIVE PERCENT EFFICIENCY
SYSTEMS TEND TO MALFUNCTION CONSPICUOUSLY JUST AFTER THEIR GREATEST TRIUMPH

Toynbee explains this effect by pointing out the strong tendency to apply a previously-successful strategy to the new challenge....
THE ARMY IS NOW FULLY PREPARED TO FIGHT THE PREVIOUS WAR For brevity, we shall, in the future, refer to this Axiom as Fully Prepared for the Past (F.P.F.P.)
PERFECTION OF PLANNING IS A SYMPTOM OF DECAY
A TEMPORARY PATCH WILL VERY LIKELY BE PERMANENT. Systems generally Don’t Go Away.

Since they occupy space, our landscape is now littered with the bleached bones and rotting carcasses of old attempted solutions to our problems: THE OLD SYSTEM IS NOW THE NEW PROBLEM
In Zen, there is a saying, “If you meet the Buddha on the road, kill him!”

After the initial shock, one understands that someone who claims to have achieved Buddha-hood obviously has not done so. The claim refutes itself.
The Naming Effect

(1) large Systems really do not do what they purport to do and that

(2) people in large Systems are not actually performing the function ascribed to them
We should have no trouble understanding that: IF A SYSTEM CAN BE EXPLOITED, IT WILL BE.

Nor will we cavil at its twin: ANY SYSTEM CAN BE EXPLOITED
COMPLEX SYSTEM THAT WORKS IS INVARIABLY FOUND TO HAVE EVOLVED FROM A SIMPLE SYSTEM THAT WORKED
A COMPLEX SYSTEM DESIGNED FROM SCRATCH NEVER WORKS AND CANNOT BE MADE TO WORK. YOU HAVE TO START OVER, BEGINNING WITH A WORKING SIMPLE SYSTEM
WHATEVER THE SYSTEM HAS DONE BEFORE, YOU CAN BE SURE IT WILL DO IT AGAIN
THE INFORMATION YOU HAVE IS NOT THE INFORMATION YOU WANT. THE INFORMATION YOU WANT IS NOT THE INFORMATION YOU NEED.

THE INFORMATION YOU NEED IS NOT THE INFORMATION YOU CAN OBTAIN.
the person (or System) who has a problem and doesn’t realize it has two problems, the problem itself and the meta-problem of Unawareness

IF YOU’RE NOT AWARE THAT YOU HAVE A PROBLEM, HOW CAN YOU CALL FOR HELP?
IF AT FIRST YOU DON’T SUCCEED, TRY, TRY AGAIN is a dangerous, two-edged precept which, if wrongly understood, can become the basis for a lifetime career of Struggling-and-Failing.
More in line with the spirit of the Creative Tack is the newer admonition: IF SOMETHING ISN’T WORKING, DON’T KEEP DOING IT. DO SOMETHING ELSE INSTEAD
SYSTEMS RUN BEST WHEN DESIGNED TO RUN DOWNHILL —or, in the vernacular:

GO WITH THE FLOW In human terms, this means working with human tendencies rather than against them.
LOOSE SYSTEMS LAST LONGER AND FUNCTION BETTER
PLAN TO SCRAP THE FIRST SYSTEM: YOU WILL ANYWAY
A SYSTEM THAT IGNORES FEEDBACK HAS ALREADY BEGUN THE PROCESS OF TERMINAL INSTABILITY
IF IT’S FOR DIGGING A HOLE IT SHOULD PROBABLY LOOK SOMETHING LIKE A SHOVEL (B) IF IT LOOKS LIKE A SHOVEL, TRY USING IT FOR DIGGING A HOLE
GREAT ADVANCES DO NOT COME OUT OF SYSTEMS DESIGNED TO PRODUCE GREAT ADVANCES
IF IT’S WORTH DOING AT ALL, IT’S WORTH DOING POORLY
IN ORDER TO SUCCEED IT IS NECESSARY TO KNOW HOW TO AVOID THE MOST LIKELY WAYS TO FAIL
Creative reframing is the art of substituting useful metaphors for limiting metaphors.
IN ORDER TO REMAIN UNCHANGED, THE SYSTEM MUST CHANGE
Tempered, moderate pessimism is the hallmark of the seasoned Systems-student.
IN DEALING WITH LARGE SYSTEMS, THE STRIVING FOR PERFECTION IS A SERIOUS IMPERFECTION.

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More from @TaylorPearsonMe

26 Apr
The rapid sell-off in Bitcoin last week is a good example of how exogenous market factors can trigger endogenous market structure factors leading to a cascading sell-off.

This phenomenon is an important part of markets and (IMO) underappreciated.
In the case of Bitcoin, Phase 1 of the sell of was that there was a large hashrate drop which triggered a wave of selling.

However, that also forced a lot of overlevered players to cover their levered long positions (or they got liquidated), causing a second leg down.
I think this is important because the common understanding of price movements is that they are reflective of investors saying "I have updated my beliefs about the future value of this asset and am buying/selling based on that."
Read 12 tweets
23 Apr
I’ve been (rental) house hunting for the last couple of months. I don’t really know anything about real estate investing, but I’ve been trying to read up (John T. Reed’s Best Practices for the Intelligent Real Estate Investor is my favorite so far).
It’s been interesting seeing the market and how homes are priced.

Factors which the market seems to price really efficiently include:
-Square footage
-Neighborhood
-Amenities/Finishes
-View
However, there are a lot of factors that (in my experience) have very high quality of life implications and basically don’t seem priced in at all.
Read 19 tweets
22 Apr
One thing I've changed my mind on in the last few years is the risks presented by leverage.

My historical thinking and most people's thinking tends to be too black and white and leads to sub-optimal decisions.
To give an extreme example, what is riskier:

1. having 100% of your (unlevered) portfolio in Tron and XRP

2. Having 1.5x leverage applied to a highly diversified portfolio of stocks, bonds, commodities, and illiquid alternatives
I think basically everyone would agree the first is riskier (don't @ me XRP people).
Read 6 tweets
22 Apr
The way you get rich has changed as technology has evolved.

"In 1960, most of the people who start startups today would have [[gotten a job]]. You could get rich from starting your own company in 1890 and in 2020, but in 1960 it was not really a viable option."
The labor market, like any other market, is dynamic.

Just because something worked for a prior generation, doesn't mean it will work for the next.
If anything, it is less likely.

In financial markets, the best performing strategy over the past 20 years is usually one of the poorest performing strategies over the next 20 because it gets crowded and returns deteriorate.

The same is true of the labor market.
Read 5 tweets
20 Apr
Love this analogy: product management (or just company management) is like running an options book

In both cases, you have to think about your "portfolio" level exposures.
Too many crazy initiatives is like buying a bunch of exotic deep OTM options.

Even if it's positive expectancy long-term but you're likely to bleed to death before you find out.
Too many predictable, boring initiatives is like being a systematic vol seller.

It works well for a long time until disruption theory plays out and you get smoked all of a sudden.

Nokia/Blackberry getting smoked by Apple probably a good example.
Read 4 tweets
20 Apr
Great podcast from @AttainCap2 and @rcmAlts with Roy Niederhoffer.

They touch on
-Why US stocks looked so unattractive just before their largest bull run
-The danger of stock/bond correlation
-The Sharpe ratio of your fire insurance

podcasts.apple.com/us/podcast/mak…
"In 1983 when I had some money from my computer software business, I look back at Track Records and the stock market was completely unchanged in real terms for a dozen years.

And I just like why would anybody invest in the stock market? I want to be in the bond market."
"My whole career, until recently, has been spent in a falling rate environment. And it's only now that we're starting to see the potential for bonds and stocks and moving the same direction.

And that throws off this whole 60/40 idea that you should have stocks and bonds and...
Read 6 tweets

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