As a fellow amateur, I greatly appreciate your recent posts trying to understand the events of the last few months, as well as your willingness to publicly and humbly acknowledge your ongoing uncertainty and to update your beliefs based on new evidence. I feel that you may be being too hard on yourself here though—some comments below.
Investors weren’t failing to synthesize the early information or waiting for someone to yell “fire!” They were waiting to see confirmed international community spread, rather than just a few cases popping up here and there.
The coincidence of faster spread of COVID-19 internationally and the beginnings of the stock market crash suggest that hard evidence of community spread of a deadly disease is the world’s evidential benchmark for an economic downturn.
As you point out, the onset of international community spread does seem to be the tipping point for the stock market crash. But the possibility that it might spread beyond China/East Asia must have been apparent throughout Jan and early Feb. Why was this not reflected in market volatility? VIX also stayed very flat until Feb. 20, the same time the markets started to decline. Wei Dai pointed out that this was a contributing factor to the gains on his options trade. I could see stocks themselves remaining high until there was evidence of international community spread, but VIX/option prices at the time suggest markets failed to price in any substantial chance of this happening until it had actually happened.
To argue otherwise is to say that it should be obvious COVID-19 was highly contagious based on some other form of evidence. That’s not impossible.
I think there was a lot of evidence COVID-19 was highly contagious based on the reports from China. What was unclear at the time was 1. if China could control the initial outbreak successfully, and 2. if a few cases did spread, could other governments identify and quarantine incoming cases to prevent escalation to full community spread. Markets may have greatly underestimated the chances of these two scenarios playing out the way they did.
This kind of intellectual work is extremely difficult; only a few people care about it enough to make the attempt, so I’m getting far less feedback than I would for other activities.
Totally agree. Predicting is hard, and predictions often look foolish with the benefit of hindsight. In this case, even understanding the past with the benefit of hindsight is challenging! But still worth doing, to try to understand the world better (or at least less wrongly).
A major league baseball player who hits a home run has far more in common with an MLB player who hits a foul ball than a child who hits a home run.
True—but the only way for a child to reach the majors is through continued practice. Keep swinging!
I would take this a step further and say that once maze levels are high enough, it essentially becomes a requirement to care (or at least pretend to care) about advancing in the hierarchy. Instead of advancement being something that some employees might want and others might not want, it becomes almost an axiom within the organization that everyone must strive for advancement at all times. But although advancement can be a natural thing to want, it’s certainly not a universal thing to want. And for people like me who aren’t strongly motivated by their place in the hierarchy, this can lead to a lot of conflict, stress, and low morale.
When I was a kid (maybe around 10) I learned about the Peter Principle, how everyone in an organization gets promoted to the level of their incompetence. I thought that was one of the saddest things I’d ever heard. Why would everyone try so hard to get promoted to a role they weren’t good at? Just for the extra money? I decided that when I started working, I would rather stay in a role I was good at and enjoyed on a day to day basis than get promoted to a managerial role which already sounded awful, even if it meant staying at a lower salary.
Once in the maze, however, I found it a lot harder to stay in my happy, productive role than I was expecting. I constantly felt pressure to want to get promoted. But I secretly didn’t want to, because that would mean spending less time doing the actual hands-on work that I liked and more time spent in the maze world interacting with other managers. This led to a lot of tension with my bosses. They couldn’t comprehend why anyone wouldn’t be excited about getting promoted. Higher level jobs were just better; why couldn’t I see that? But to me, they weren’t better and I couldn’t get them to see my perspective. Ironically, their desire to promote me incentivized me to be less productive than I would have been otherwise—if we had been able to come to an agreement where I could stay in my desired role, I would have been more motivated to work harder without the fear of accidentally getting promoted too quickly.
This was all very frustrating and confusing to me for a long time. Eventually I came across the Moral Mazes sequence and the Gervais principle, which together seemed to explain a lot of what I was experiencing and ultimately gave me the courage to leave that organization.
Anyway, that’s my story of working in a maze—happy to discuss further if this was useful or informative.