Strange Analogy Time
Feb. 21st, 2005 01:19 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
jducoeurI was struck, while driving to Cooks' Guild yesterday, by the odd similarities between a highway and a stock market. It seems silly, but there's an interesting relationship there.
What originally caught my attention was the way in which trying to zig and zag on a crowded highway resembles market timing. In both cases, you've got someone who is relatively aggressive, grabbing opportunities as they come at him, to try to get ahead. In both cases, it tends not to work unless you're exceptionally well-versed in these things; indeed, a "buy and hold" approach (staying in a single lane unless it's obviously jammed) frequently beats the market-timing one unless you're quite good at assessing the subtleties of the situation. There is an elevated risk in playing the aggressive game: someone trying a guillotine maneuver will often find themselves stuck behind the pack if they're not careful.
The analogy is very loose, but isn't entirely specious. Both of these are examples of a semi-competitive environment where everyone has approximately the same information to work with. In such an environment, different kinds of people will take different approaches, ranging from safe and predictable, to higher-risk with a chance of getting ahead of the pack. I suspect that there are other examples of this kind of situation, each somewhat different but sharing some underlying principles.
Anyway, it's an odd little observation to chew on. In the meantime, it's going to take a while to get past the slightly goofy notion that market analysts and traffic copters fulfill roughly the same job, with the same tendency towards 20/20 hindsight...
What originally caught my attention was the way in which trying to zig and zag on a crowded highway resembles market timing. In both cases, you've got someone who is relatively aggressive, grabbing opportunities as they come at him, to try to get ahead. In both cases, it tends not to work unless you're exceptionally well-versed in these things; indeed, a "buy and hold" approach (staying in a single lane unless it's obviously jammed) frequently beats the market-timing one unless you're quite good at assessing the subtleties of the situation. There is an elevated risk in playing the aggressive game: someone trying a guillotine maneuver will often find themselves stuck behind the pack if they're not careful.
The analogy is very loose, but isn't entirely specious. Both of these are examples of a semi-competitive environment where everyone has approximately the same information to work with. In such an environment, different kinds of people will take different approaches, ranging from safe and predictable, to higher-risk with a chance of getting ahead of the pack. I suspect that there are other examples of this kind of situation, each somewhat different but sharing some underlying principles.
Anyway, it's an odd little observation to chew on. In the meantime, it's going to take a while to get past the slightly goofy notion that market analysts and traffic copters fulfill roughly the same job, with the same tendency towards 20/20 hindsight...
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(no subject)
Date: 2005-02-21 07:11 pm (UTC)(no subject)
Date: 2005-02-21 07:22 pm (UTC)I'm not sure I see the revelation here. Help me out?
(no subject)
Date: 2005-02-21 07:58 pm (UTC)But yes, it looks like two examples of extrapolation from Prisoner's Dilemma, or other such studyable reductions of the competition problem.
(no subject)
Date: 2005-02-22 03:25 am (UTC)