Chart Fun | For All Ape All
“Logicians have but ill defin’d
As rational the human kind;
Reason, they say, belongs to man,
But let them prove it if they can…
…Thus, at the court, both great and small
Behave alike, for all ape all.”
— Excerpts from The Logicians Refuted, Jonathan Swift
Most of us remember Jonathan Swift from Gulliver’s Travels. Swift was a keen observer of the human condition. I first read Gulliver’s Travels as a kid, and enjoyed the story. I re-read the story when I was older, and understood the satire that was so beautifully embedded in the story.
One of my favourites by Jonathan Swift is a poem, The Logicians Refuted. In a few wonderful lines, Swift concerned himself with rationality and herd behaviour. How many could have predicted that words penned centuries ago would predict human behaviour to this day?
Truth Values Matter — I?
The past few months have seen many rumblings in Indian financials land. The latest concerned an investigative outlet — Cobrapost — that alleged fraud at a leading housing finance company (HFC). The piece created a furore and was followed by a rapid selloff of the said HFC’s stock and bonds, and triggered asset sales and credit rating downgrades.
The HFC, valued at 2.5x book value not-so-long-ago, is now valued at less than 0.5x book. Holders voted with their feet and market participants abandoned the company.
Do truth values matter? Chart Fun time.
For fun, I ran a Twitter poll in the aftermath of the story, posing the above question. One gentleman chided me for not including a less than 0.25% option!
A majority of participants thought only a minority understood the content fully. Yet, there was widespread abandonment of the company.
Good is assumed to be good until an external force changes perceptions.
Bad is assumed to be bad until an external force changes perceptions again.
Omit or Commit?
Situation in a picture.
Which course would you take? How close to the ‘truth’ would you be willing to get?
Truth Values Matter — II?
Play time.
You are faced with the following proposition:
Country V holds an election. The incumbent declares victory. The opponent raises doubts on the process, and declares himself the victor; assuming power.
A set of countries back the incumbent. A different set of countries back the opponent.
If democracy is the guiding light, the election outcome (however rigged it may have been) indicates that the incumbent needs to be the accepted victor. If democracy has been violated, does the opponent have a valid claim?
You have to play judge and choose one over the other.
And, you have to commit real capital to this situation (as a businessman and/or investor).
Which candidate would you choose?
The binary-outcome proposition is a subset of a larger set of messy multiple-outcome propositions.
In such situations, what is truth?
More importantly, does truth matter?
Perception is like the autobiography we write in our heads. Penned exquisitely to our tastes, erased, rewritten, until the story exactly fits our self image.
Truth values of events tend to matter over longer timescales. Over short horizons, meanwhile, prices react to perceived truth values. Our biases tend to supersede rational considerations. Since digging into the actual truth takes time and much effort, our muscle memory coaxes us to take cues from the herd.
The herd, in turn, takes cues. From us.
In the space between perceived truth and actual truth lies a void, filled with potentially profitable opportunities.
Time serves as the catalyst that ultimately unifies the two truths.
However, there is a tiny problem here.
What if no one agrees, or bothers, with the actual truth?
If you wager on the actual truth and few agree, time becomes a pallbearer of opportunities.
The only path to profitable outcomes then, is to influence the herd to believe in your version of the actual truth!
Until then, in the courts both great and small, we shall behave alike;
For all ape all.
