Friday 2016-11-11

People ask me how I feel about the 2016 presidential election results, and to tell you the truth, I am not too happy.

I should have made money, and I didn't. The US election was just like the UK BRexit vote, and it should have been abundantly clear to me that it was an asymmetric bet worth making. So what's going on? First let's review what I should have done, and then try to figure out how to not miss these in the future.

To recap, the BRexit vote was also a relatively asymmetric bet as the market had priced in a BRemain result. Had the result been BRemain, there wouldn't have been much upside to the market. However, even though the odds of BRexit occurring were low, the downside to the market would be significant.

In that situation, you want to be short the market. When you're wrong, it won't cost much, and when you're right, you make a slew of cash.

The same thinking applies to the US presidential election. Since the market tanked when the FBI looked into the Weiner emails, and then recovered when the FBI closed that investigation, we know that the market had priced in a Hillary win. A quick confirmatory glimpse at any of the prediction markets would have also shown Hillary to be the odds-on favorite.

I should have shorted that market as well, and I didn't. So how is it that I can see the money-making bet in SolomonsLines and not see it here?

One possible solution is to have a mental checklist for every news article read. Another is to re-architect my news-reading process into something that looks like my book-reading process. And yet another is to find another trader for periodic BS sessions. So now I have even more experiments to run....

People talk about Technical Debt -- when working on a project, it's all the shortcuts you took instead of actually doing the job the fully correct way -- and how it perniciously eats away at overall efficiency of work on a project.

People don't really talk about Experimental Debt -- all the things you should be trying because the cost/benefit of them is heavily skewed to the Good -- while it seems equally pernicious.