Workbook Draft – “Making Good Decisions” – Vol. 1 – Part I: Our Shared Humanity – “Real Stories” vs. “Good Stories”
A reader of the prior post looked at the pdf file, and noticed the subject matter of the fifth Reading Notes workbook in Volume 3:
- Reading Notes from Volume 1 – Part V: From “Trust Them” to “See for Yourself” with John Ioannidis, and Beyond: The “Fast & Slow” Retractions of Daniel Kahneman.
This topic led – among other things - to the one week posting pause in order to take the time to read, and to think about its consequences:
- The retraction of “Priming” studies from Daniel Kahneman’s 2011 book “Thinking Fast & Slow” shakes foundations, especially for readers in the financial industry.
See link to the 2017 story shown below:
The non-reproducibility of results in the Social Sciences does not come from individual failures, even though those do exist as shown by Dan Ariely’s 2004 paper “Effort for payment A Tale of Two Markets”, and his 2012 paper “Signing at the beginning makes ethics salient and decreases dishonest self-reporting in comparison to signing at the end”.
See link to the 2021 story shown below:
The non-reproducibility of results in the Social Sciences, such as Financial Economics and Behavioral Finance, comes from foundational flaws.
This pattern of “Good Story” [a popular view with foundational flaws] vs. “Real Story” [a “Repair Program” that fixes one or more flaws] appears in all areas of knowledge documented in Volume 1 – Part I, including: Cosmology, Humanities, Biology, Chemistry, and Physics.
- For instance, Volume 1 – Part II & Part IV show how Ergodicity Economics works as a repair program for the foundational flaws that come from the unexamined use of “Expected Value” in Financial Economics.
All popular “Good Stories” seem to have flaws, as well as alternatives that solve some of their “Puzzles, Paradoxes, & Anomalies”.
- The foundational flaws in Behavioral Economics have become visible, but the matching repair program has yet to come into focus.
Further, the problem looms larger than Behavioral Economics.
- For instance, Augustine Brannigan’s 2021 book “The Use and Misuse of the Experimental Method in Social Psychology” show that the lack of reproducibility of “Priming” studies extends to Social Psychology in general.
This situation puts all that we think we know in this field into question, including famously accepted results from Solomon Ash, Stanley Milgram, and many others.
- The retraction of “Priming” turns Social Psychology into a collapsing “Jenga” tower, and great opportunities come from such spectacular collapses.
The foundational flaws of Behavioral Economics come from using “Small Worlds” statistical tools to measure sample averages with data from empirical experiments based on simplified, and frequently deceitful, proxies for the “Large World”.
- The confounding variables from the clinical ambiguity of individuals in the “Large World” swamp the “Evidence” that may or may not exist in the sample averages.
Analytical “Evidence” from sample averages that excludes wholistic [synthetical] “Perspectives” from individual clinical ambiguity explains the recurring failure of top-down, scaled-up decisions based on popular “Good Stories”, and the wisdom of hedging risk with bottom-up, small scale commitments to any and all stories.
- Life does not optimize the present, instead it spreads bets across the board, “Good Stories” as well as “Real Stories”, so that something, anything, gets to survive for the next step.
Seeing the hidden “Real Story” behind the popular “Good Story” improves “Predictions”, thus “Motions” for individual, business, and investment decision-making.
- Thus, a “Repair Program” direction comes into focus: Can we capture individual clinical ambiguities by using the balance sheet as an analytical tool to measure the “Perspective” that comes from the specific “assets” and the “liabilities” that derive from an individual’s knowledge, connections, and occupation?
Developing…
”CTRI by Francois Gadenne” writes a business book in three volumes, published serially on Substack for public peer-review. The book connects the dots of life-enhancing practices for the next generation, free of controlling algorithms, based on the lifetime experience of a retirement age entrepreneur, & continuously updated with insights from reading Wealth, Health, & Statistics research papers on behalf of large companies as the co-founder of CTRI.