Wednesday, September 16, 2009

Kafka, Surrealism and Trading

There are quite a few interesting stories breaking today, but since readers can find most of them somewhere else, I thought I might focus on a story many may have missed that I think is excellent fodder for short-term traders and long-term investors alike.

Science Daily has a thought-provoking piece out today with an intriguing title: Reading Kafka Improves Learning, Suggests Psychology Study. The article summarizes the findings of Travis Proulx and Steven J. Heine, whose Connections from Kafka: Exposure to Meaning Threats Improves Explicit Learning of Artificial Grammar is slated for publication in the September edition of Psychological Science.

Science Daily captures the essence of the research findings as follows:

“The idea is that when you're exposed to a meaning threat – something that fundamentally does not make sense – your brain is going to respond by looking for some other kind of structure within your environment,” said Travis Proulx, a postdoctoral researcher at UCSB and co-author of the article. “And, it turns out, that structure can be completely unrelated to the meaning threat.”

Proulx and Heine’s research demonstrate that subjects who were exposed to literature that was absurd, nonsensical or surrealistic performed much better when tested shortly thereafter for pattern recognition skills than control subjects who read similar material that was easy to comprehend.

So…how does this apply to trading? I am going to stretch the rather narrow conclusions drawn by Proulx and Heine and suggest that traders/investors need to get out of their comfort zones more often. They need to look at new asset classes they are unfamiliar with, new markets, new trading vehicles, new fundamental information, new chart patterns, etc. Perhaps they should even venture out from the comfortable realm of Mozart and Monet to Schoenberg and Dali.

Keep pushing the envelope and don’t worry if new pathways look chaotic at first. The more you get out of your comfort zone, the more that zone begins to widen and the better you will be at recognizing important patterns and opportunities across that zone.

13 comments:

steveplace said...

Godel, Escher, Bach. Will blow your mind.

http://www.amazon.com/Godel-Escher-Bach-Eternal-Golden/dp/0394756827

Ophir said...

Meaning Threat = Current Market ("something that fundamentally does not make sense")

Patrick said...

GEB is one of the best books I´ve ever read.

keithpiccirillo said...

Great.
Other ideas, crossword puzzles, and combing one's hair with your opposite hand, and similar mind altering experiences. LOL.

Anonymous said...

What is the sound of one hand clapping?

Escher said...

That is what life should be..exploring the new and becoming delighted in the discoveries.

jgpietsch said...

Nice... now go write a book or something.

Raj said...

If this includes the Simpsons and the Pythons (absurd, nonsensical AND surrealistic), I'm pretty much there!

David Merkel said...

GEB was one of my favorite books as a young man, but it is understandable, teaching a lot about the limits of logic and math.

Anonymous said...

The chart patterns for natural gas looks bullish and investors could benefit through the purchase of the commodity and/or through call options. New thinking may be required to believe this since natural gas has sharply decreased since last July.

Anonymous said...

Great post. I've often pushed the idea that immersing yourself in the market is similar to immersing yourself in a new culture in a foreign country. You have to strip away everything you know about yourself and society to begin to appreciate and understand things. Just like the market, when immersing yourself in a foreign culture, biases and pre-conceived notions get in the way of learning and progress. Any other world travelers, immigrants, expats, or traders care to comment?

Caveat Bettor said...

I'm wondering if a preference for Dali and Schoenberg may inversely correlate with testosterone levels, which from other studies, we know to be positively correlated with risk returns.

Bill Luby said...

A fascinating premise, CB. I think you might be on to something.

Somewhat ironically, I'd consider Dali and Schoenberg to be 'high risk' art (at least from the perspective of the artist,) but I can see where preferences for these two might be negatively correlated with testosterone levels.

Perhaps this is a question for Brett Steenbarger, et al.

Cheers,

-Bill

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