The root of the problem is not the complexity of the unseen risks – it is the complexity of the organization. Thus, the finely tuned approach to risk – the approach that would seem optimal in any one world – may in the long run be suboptimal. Continue reading Complexity and the organization.
The engineer reacts to nature but nature does not generally react to the engineer. But: The laws of finance react to the financial engineers’ creations, rendering risk calculations invalid. This is closely related to what George Soros calls ‘the concept of reflexivity’. Loosely speaking, there appears to be a feedback loop (positive or negative) between … Continue reading Financial Engineering and Nature
Die Ironie (griechisch εἰρωνεία eironeía, wörtlich „Verstellung, Vortäuschung”) ist eine rhetorische Figur, bei der sich der Sprecher verstellt und damit dennoch die Erwartung verbindet, dass der wahre Sinn seiner Äußerung verstanden wird. Continue reading Die Ironie (griechisch εἰρωνεία eironeía)
Innovation increases complexity (derivatives – conditional, non-linear payoffs). Simple systems (models) can give rise to complex, even unpredictable dynamics, an interesting converse to the point that much of the complexity of our world can be made to appear simple, with concise physical laws and equations (see Lorenz, dynamic system, weather forecast, rounding error). Continue reading Innovation and Complexity
Goodhart’s law: as soon as reliance is placed on a relationship, the significance of the relationship changes. Continue reading Goodhart’s Law
A quote attributed to Margaret Thatcher. Continue reading “The problem with socialism is that eventually you run out of other people’s money [to spend].”
Daniel Kölsch - Saxophones, Clarinet & Flute 