Verum Insights...

“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 information you can obtain costs more than you want to pay”

“The word 'risk' derives from the early Italian risicare, which means 'to dare'. In this sense, risk is a choice rather than a fate. The actions we dare to take, which depend on how free we are to make choices, are what the story of risk is all about. And that story helps define what it means to be a human being.”

“Our lives teem with numbers, but we sometimes forget that numberss are only tools. They have no soul; they may indeed become fetishes.”

“Game theory says that the true source of uncertainty lies in the intentions of others.”

“Time matters most when decisions are irreversible.”

“life is a collection of similarities rather than identities; no single observation is a perfect example of generality.”7 likes

“So we pour in data from the past to fuel the decision-making mechanisms created by our models, be they linear or nonlinear. But therein lies the logician's trap: past data from real life constitute a sequence of events rather than a set of independent observations, which is what the laws of probability demand.[...]It is in those outliers and imperfections that the wildness lurks.”

“Fear of harm ought to be proportional not merely to the gravity of the harm, but also to the probability of the event.”

“The essence of risk management lies in maximizing the areas where we have some control over the outcome while minimizing the areas where we have absolutely no control over the outcome and the linkage between effect and cause is hidden from us.”

“Time matters most when decisions are irreversible. And yet many irreversible decisions must be made on the basis of incomplete information.”

“Shefrin and Statman hypothesize the existence of a split in the human psyche. One side of our personality is an internal planner with a long-term perspective, an authority who insists on decisions that weight the future more heavily than the present. The other side seeks immediate gratification. These two sides are in constant conflict.”

“In the first sense, probability means the degree of belief or approvability of an opinion—the gut view of probability. Scholars use the term “epistemological” to convey this meaning; epistemological refers to the limits of human knowledge not fully analyzable.”

“Vast ills have followed a belief in certainty.”

“One winter night during one of the many German air raids on Moscow in World War II, a distinguished Soviet professor of statistics showed up in his local air-raid shelter. He had never appeared there before. “There are seven million people in Moscow,” he used to say. “Why should I expect them to hit me?” His friends were astonished to see him and asked what had happened to change his mind. “Look,” he explained, “there are seven million people in Moscow and one elephant. Last night they got the elephant.”

“This is the essence of risk aversion—that is, how far we are willing to go in making decisions that may provoke others to make decisions that will have adverse consequences for us.”

“We are prisoners of the future because we will be ensnared by our past.”

“The real trouble with this world of ours is not that it is an unreasonable world, nor even that it is a reasonable one. The commonest kind of trouble is that it is nearly reasonable, but not quite. Life is not an illogicality; yet it is a trap for logicians. It looks just a little more mathematical and regular than it is; its exactitude is obvious, but its inexactitude is hidden; its wildness lies in wait.”

“Markets look a lot less efficient from the banks of the Hudson than from the banks of the Charles.”

“We are by now well into the eighteenth century, when the Enlightenment identified the search for knowledge as the highest form of human activity. It was a time for scientists to wipe the metaphysical dust from their eyes.”

“You never get poor by taking a profit." It would follow that cutting your losses is also a good idea, but investors hate to take losses, because, tax considerations aside, a loss taken is an acknowledgment of error. Loss-aversion combined with ego leads investors to gamble by clinging to their mistakes in the fond hope that some day the market will vindicate their judgment and make them whole.”

“So we pour in data from the past to fuel the decision-making mechanisms created by our models, be they linear or nonlinear. But therein lies the logician's trap: past data from real life constitute a sequence of events rather than a set of independent observations, which is what the laws of probability demand.[...]Even though many economic and financial variables fall into distributions that approximate a bell curve, the picture is never perfect.[...]It is in those outliers and imperfections that the wildness lurks.”

“The earliest known work in Arabic arithmetic was written by al-Khowârizmî, a mathematician who lived around 825, some four hundred years before Fibonacci.11 Although few beneficiaries of his work are likely to have heard of him, most of us know of him indirectly. Try saying “al-Khowârizmî” fast. That’s where we get the word “algorithm,” which means rules for computing.12 It was al-Khowârizmî who was the first mathematician to establish rules for adding, subtracting, multiplying, and dividing with the new Hindu numerals. In another treatise, Hisâb al-jabr w’ almuqâbalah, or “Science of transposition and cancellation,” he specifies the process for manipulating algebraic equations. The word al-jabr thus gives us our word algebra, the science of equations.13”

“Discontinuities, irregularities, and volatilities seem to be proliferating rather than diminishing. In the world of finance, new instruments turn up at a bewildering pace, new markets are growing faster than old markets, and global interdependence makes risk management increasingly complex. Economic insecurity, especially in the job market, makes daily headlines. The environment, health,”― 

“We could turn this assertion around and state that a decision should involve the strength of our desire for a particular outcome as well as the degree of our belief about the probability of that outcome.”

“The real trouble with this world of ours is not that it is an unreasonable world, nor even that it is a reasonable one. The commonest kind of trouble is that it is nearly reasonable, but not quite. Life is not an illogicality; yet it is a trap for logicians. It looks just a little more mathematical and regular than it is; its exactitude is obvious, but its inexactitude is hidden; its wildness lies in wait.3”

“The prevalence of surprise in the world of business is evidence that uncertainty is more likely to prevail than mathematical probability.”

“[The] utility resulting from any small increase in wealth will be inversely proportionate to the quantity of goods previously possessed.”

“The prospect of getting rich is highly motivating, and few people get rich without taking a gamble.”

“Trade is also a risky business. As the growth of trade transformed the principles of gambling into the creation of wealth, the inevitable result was capitalism, the epitome of risk-taking.”

“The Commanding General is well aware that the forecasts are no good. However, he needs them for planning purposes.”