Randomness

Here is an interesting question; if you know the past, can you guard against a similar event in the future? You know that the great depression took place. A lot of research has been done to understand what led to the great depression, and a lot of research has been done to understand how to get out of the great depression. In fact, the current chairman of the Federal Reserve is a specialist on the great depression. So, after all that, do you think it can happen again. With all this acquired knowledge, would we see it coming and be able to guard against it?

This question has been occupying me lately, and I am leaning towards a no. I don't think we'll see it coming. We may know how to guard against that specific event, but I am starting to believe that history never repeats itself. Events may seem similar, but there are infinite combinations of how they are triggered, how we react to those triggers, consequences, possibilities, and, of course, conclusions. If history never repeats, then studying history may not provide much value other than protecting us from that exact event.

My other opinion is that the world is getting more interconnected and more complicated. By this I mean that connections are forming that we may not realize exist or are even correlated. The world of the past will never happen again, and if the event of the past happens in the current world, the consequences will be quite different than before. Unfortunately, some other event may take place that may bring us the same type of devastation. Basically, my theory is that history can never repeat itself because the world is continuously changing.

There is some kind of random under-tone to the world. Some people call it luck, others misfortune. Let's say you trade stocks. You've read all there is about the company. You think you understand the fed, the government, the currency, etc... You believe very strongly in the financials of this company. You buy the stock. First it goes up, but then it drops like a rock. It seems that this company was dependent on the knowledge of a single engineer who was hit by the train. An unforeseen circumstance knocked you out of the market. What is that circumstance, is it randomness. Can you foresee it? Can you calculate its probability of occurrence? Do you understand its impact? I don't know, but it doesn't seem likely especially with our current understanding of probability. What is more likely is that we may get a safe feeling of security due to our acquired knowledge or perhaps our previous fortune, and this if nothing else will lead us to ruin.

The other item I wanted to cover was noise. This blog is noise. CNN is noise. In fact, a large part of the internet is noise. First off, the question is whether more information is noise or valuable artifacts. And if more information is noise, is it harmful? Does having more information actually increase your probability of making a wrong decision? Can you measure what information is valuable and what is noise. These statements seem very counterintuitive. What I am basically saying is that knowledge may actually be bad for you. Our brains seem to have adapted to this by actually reducing the large amounts of knowledge into manageable chunks. A lot of knowledge is simply forgotten, other knowledge gets reduced into some basic concepts and understandings. Does learning everything there is to know about a company such as all their news statements, their financial statements, statements made by their peers, etc... somehow takes away from the bigger picture?

If anyone out there has an answer, please, do write a comment.