The fallacy machine

Jurov linkedⁱ an otherwise excellent article, discussing a discussion of a particular sort of self-selecting... organised fringe behaviour (OFG).ⁱⁱ Muy meta, verdad ?

The discussion being discussed proceeds quite sensibly, like so :

The Seven Deadly Sins of Biotech Investing:

[...]

2. Find a good Internet message board to discuss how great an investment the biotech stock you just purchased really is. When spending time on this message board, be sure to read closely all posts from those who are the most vocal proponents of the biotech stock you own. These people demonstrate their commitment by never writing anything critical. No one wants to attend a church where the preacher has doubts. The best posters will write at length about how the science behind the biotech stock you own has no rival and will completely change the world we live in. Lucky for you the world does not know this yet; you are one of a select few!ⁱⁱⁱ

3. If/when you do read "outside" material -- best found by looking for links helpfully posted on your favorite Internet biotech stock message board -- be sure to highlight and read again and again those passages confirming your beliefs in the biotech stock you just purchased. If you have time, copy and paste those same passages to your favorite Internet stock message board to show your fellow longs how to conduct proper "DD." By doing this, you will celebrate together the riches to come.

[...]

4. Company-issued press releases are the best way to stay current and informed on the positive progress being made by the biotech stock you just bought. Don't bother reading SEC filings like 10-Ks, 10-Qs, proxies or registration statements. Like scientific papers, these SEC filings are overly wordy and filled with obtuse numbers and technical jargon. Also, the SEC is well known to be in the back pocket of the hedge funds, which explains why the SEC filings of the biotech stock you just bought are often filled with risk factors and other information used as ammunition by short sellers and bashers.

As you can see, I've followed the percepts of 2, being selective in my quotations. And now, let's move on to the discussion of this discussion :

No other part of the market seems to attract wildly devoted cultists like small biopharma stocks do; it's really something to see. And they must keep spawning, because many of them end up getting blown up, big-time, by their favorite stocks, only to be replaced by another cohort of true believers.

Let me point out that "no other part of the market", for it interests me.

So, no other part of the market behaves like this part of the market we're discussing, except all parts of the market do. Mining and mineral exploration stocks certainly display the same behaviour^iv, Bitcoin lolstocks^v certainly do... heck, according to Buffett all of the technology sector finds itself in this situation, he's stuck buying tomato sauce and chewing gum companies^vi. He probably thinks no other part of the market behaves like these do, too.^vii

You see, the exact problem being discussed, casually displayed by its very discussion! It's almost as if the problem itself were a virus of the language^viii, and no matter what the approach was, as long as you're discussing it you got it! Even if you're merely being "ironic", or trying to be critical, no matter how you approach this problem, as long as you're touching it you're under charge.

The cause would be that your brain is not a tool of yours, here to help you think. Your brain is a tool of the species', temporarily being fed by you but feeling no further obligations to your own best interest or even survival past whatever would best serve the species in general. And so it engages in behaviours that are clearly against your own best interest, simply because they serve the more general goals of "exploring the space of possibilities", or "doing due diligence and evaluating obscure stocks" or "securing that beach head". And if questioned on the matter, happily swears up and down that it did not, and does not, and would not, and could never, like the typical unfaithful wife, in the rare circumstances the matter will even be considered - rare circumstances indeed.

Obviously the problem can be managed, like thieving employees can be managed, like lying whores can be managed, like any dishonest thing with a known interest can be managed. All it takes is for you to know how to manage, and that's an endless discussion we have scarcely the time for here. But it does all start with the Babylonians, their seals and their religion, as Nick Szabo aptly points out.

1. Well he stole it from BB, how about that, you put all the hard work into DD and then shorts come later and steal your investment! [↩]
2. Let's call them that to avoid the loathed idiocy label, although it is in fact proper, that's exactly what idiocy is. [↩]
3. This would be one of the many fundamental reasons the old forum is not salvageable. Sensible men, even should they like a waterfront, make not their house in the river, but uphill a little from it.

   In this metaphor, the "common man" (let's call him that to avoid the same label, although...) is the river. You don't want to find yourself in the midst of the common man for the same reason you don't want to build in running water : it has infinite hitpoints, and it's not afraid to use them! Nor is it intelligent enough to use them for any other purpose than wearing down your house and eventually washing it out into the sea. So unless you're running a mill or hydro plant or some other sort of scam, best go uphill a little.

   And what does uphill mean other than... something which requires an iota more effort than none at all ? The one place water spilled on the floor can not possibly reach (unless and until propped by very large volumes of other bits of water) is your coffee table. Not that it's very tall or anything, just... tall enough. Pretty much anything is tall enough for water. [↩]

4. More accentuated, wants my brain to say. Do you know why ? Because I've spent a degree of magnitude more time reading up on mining stocks than on biotech stocks (which I pretty much ignored for the past decade or two). Do you know what the author would say ? He'd say that I'm wrong, because he's in the inverse situation.

   Or he might say that perhaps I have a point, if he too spent some time reading up on mining stocks. Which then indicates that we have common interests. You recall being 12, and your first question to new kids you might have met (for instance while your whore of a mother paid house calls and you were stuck hanging out with the richer kids of the host while your mommy slipped into her crotchless pantyhose and open top maid uniform and bent over for their daddy, or for any other reason) was something about what shows they watch/games they play/etc ? Same exact fucking principle at work : your brain compares your biases to other idiots' biases to try and create groups (both in the positive and in the negative). Because that is how groups are created, in primates. Because that's advantageous, not for the individual primates in question, but for the primate species : let emergently organised sets of biases compete so then some can run others out so then they can become culture and provide "all the benefits of thinking" without having to actually use the brain.

   Because the brain is fucking lazy, just like you are : rather than code (and debug!) it'd much prefer to let individual computers crash and burn until they figure it out by themselves, then release a patch. [↩]

5. As opposed to anything on MPEx. [↩]
6. The two are not as chemically distinct as you'd like to imagine. [↩]
7. And if he doesn't think so - he's still making a lot of noise claiming it. [↩]
8. Have you read the all essences ? You should. [↩]