Posts filed under “Philosophy”

Hume, Causation & Science

There is a very interesting article in Wired this month, ostensibly about the tribulations of the modern scientific method, big pharma’s drug development approach, etc. But within the article is an excellent digression about the complexities of causation:

“Causes are a strange kind of knowledge. This was first pointed out by David Hume, the 18th-century Scottish philosopher. Hume realized that, although people talk about causes as if they are real facts—tangible things that can be discovered—they’re actually not at all factual. Instead, Hume said, every cause is just a slippery story, a catchy conjecture, a “lively conception produced by habit.” When an apple falls from a tree, the cause is obvious: gravity. Hume’s skeptical insight was that we don’t see gravity—we see only an object tugged toward the earth. We look at X and then at Y, and invent a story about what happened in between. We can measure facts, but a cause is not a fact—it’s a fiction that helps us make sense of facts.”

I am not sure I completely endorse Hume’s perspective, but I recognize the very insightful Truth he discovered about the concept of causation: We humans love a grossly over-simplified narrative. It is the way we evolved. There are situations where long contemplation before taking action an be fatal — using shortcuts is effective and functional; it helps us to make snap decisions in the wild:

“The truth is, our stories about causation are shadowed by all sorts of mental shortcuts. Most of the time, these shortcuts work well enough. They allow us to hit fastballs, discover the law of gravity, and design wondrous technologies. However, when it comes to reasoning about complex systems—say, the human body—these shortcuts go from being slickly efficient to outright misleading.

A century and a half after Hume, Belgian psychologist Albert Michotte conducted studies in the 1940s, discovering “the launching effect,” a universal property of visual perception. The human visual process is filled with cognitive extrapolation. We construct our understanding of the world visually with much less data than we realize.  Michotte showed how people rationalize what they see, creating false narratives that facilitate navigating the world:

“There are two lessons to be learned [from Michotte's experiment's]. The first is that our theories about a particular cause and effect are inherently perceptual, infected by all the sensory cheats of vision. (Michotte compared causal beliefs to color perception: We apprehend what we perceive as a cause as automatically as we identify that a ball is red.) While Hume was right that causes are never seen, only inferred, the blunt truth is that we can’t tell the difference. And so we look at moving balls and automatically see causes, a melodrama of taps and collisions, chasing and fleeing.

The second lesson is that causal explanations are oversimplifications. This is what makes them useful—they help us grasp the world at a glance. For instance, after watching the short films, people immediately settled on the most straightforward explanation for the ricocheting objects. Although this account felt true, the brain wasn’t seeking the literal truth—it just wanted a plausible story that didn’t contradict observation.”

Of course, those survival aids don’t work well when it comes to complex risk analysis in financial markets:

“This mental approach to causality is often effective, which is why it’s so deeply embedded in the brain. However, those same shortcuts get us into serious trouble in the modern world when we use our perceptual habits to explain events that we can’t perceive or easily understand. Rather than accept the complexity of a situation—say, that snarl of causal interactions in the cholesterol pathway—we persist in pretending that we’re staring at a blue ball and a red ball bouncing off each other. There’s a fundamental mismatch between how the world works and how we think about the world.”

This has come up repeatedly over the years — especially with regard to the financial crisis and the Big Lie. It is not too generous to say that these folks are not evil, they merely carry the vestiges of evolution — a flawed analytical engine of which they seem wholly unaware of.

For the rest of us, there is self-enlightenment. If we develop some awareness of these analytical errors, or our cognitive foibles, we can at least stand a fighting chance to go beyond erroneous perceptions towards truer understanding:

“The good news is that, in the centuries since Hume, scientists have mostly managed to work around this mismatch as they’ve continued to discover new cause-and-effect relationships at a blistering pace. This success is largely a tribute to the power of statistical correlation, which has allowed researchers to pirouette around the problem of causation. Though scientists constantly remind themselves that mere correlation is not causation, if a correlation is clear and consistent, then they typically assume a cause has been found—that there really is some invisible association between the measurements.”

In other words, yes, we can figure out actual causation.

Where I part ways with Hume is in looking at causation analysis as merely competing stories tying two facts together. It is larger than that, there is Causation-in-Fact. At the very least, we can eliminate the narratives that are demonstrably false. But to do so, we need to avoid the over simplifications, the correlation errors, the misapplied data, and recognize the complexity of causation in the world of finance.

For investors, the alternative is to live in a world of expensive cognitive errors . . .


Trials and Errors: Why Science Is Failing Us
Jonah Lehrer
Wired January 2012

Category: Philosophy, Psychology

The Coming Money Trust (1912)

via Mises, we get this awesome critique of the Fed, circa 1912 (The Federal Reserve was created in 1913): > > Thanks, James! Source: U.S. Money versus Corporation Currency (1912) Alfred Owen Crozier

Category: Federal Reserve, Philosophy

Andrew Napolitano on GOP Candidates

Andrew Napolitano believes that Ron Paul is the only GOP candidate who, if elected, won’t go to war or tell Americans how to live.

Category: Philosophy, Video

Context, Causation, Correlation

In this weekends Barron’s, Michael Santoli asks this question: “Is it possible that an Obama victory wouldn’t, in itself, be unfriendly to market returns? Re-election of an incumbent is rarely jarring for financial markets and usually requires an improving domestic economy. And second presidential terms are about legacies, rather than heavy-handed policy-making. It’s fair to…Read More

Category: Markets, Philosophy, Politics

Externalities Abound (Risk Complexity, too)

This morning, I want to address the issue of externalities, and managing risk in an era of ever-increasing complexities. Equity investors deal with a variety of risks: Earnings, Business Cycles, Execution, and Valuation. These are the traditional risks that are, for want of a better word, ordinary. Whether you want to call them typical or…Read More

Category: Bailouts, Investing, Markets, Philosophy, Psychology

How to Increase Productivity and Enjoy Life More

The “Sprinter” Method of Increasing Productivity

Tony Schwartz notes:

Our most fundamental need as human beings is to spend and renew energy.


When I began to crash in the early afternoon following my red-eye flight, I took a 30-minute nap in the room we have set aside for that purpose in our office. The nap didn’t give me nearly enough rest to fully catch up, but it powerfully revived me for the next several hours.

At the other end of the spectrum, exercise … positively influences our cognitive functioning, and our mood.

The truth is that we ought to be exercising nearly every day, ideally for at least 45 minutes, including strength training at least twice a week.


The secret to optimal well-being and effectiveness is to make more rhythmic waves in your life.To build the highest level of fitness, for example, it’s critical to challenge the heart at high intensity for short periods of time, and then to recover deeply.

The bigger the amplitude of your wave — the higher your maximum heart rate, and the more deeply you recover — the more flexibly you can respond to varying demands and the healthier you likely are.

The same rhythmic movement serves us well all day long, but instead we live mostly linear, sedentary lives. We go from email to email, and meeting to meeting, almost never getting much movement, and rarely taking time to recover mentally and emotionally.

Even a little intentional recovery can go a long way. It’s possible, for example, to clear the bloodstream of cortisol just by breathing deeply — in to a count of three, out to a count of six — for as little as a minute. Try it right now. See if it changes the way you feel.

Paradoxically, the most effective way to operate at work is like a sprinter, working with single-minded focus for periods of no longer than 90 minutes, and then taking a break. That way when you’re working, you’re really working, and when you’re recovering, you’re truly refueling the tank.

Making rhythmic waves is the secret to getting more done, in less time, at a higher level of engagement, with a better and more sustainable quality of life.

Schwartz explained last year:

In the renowned 1993 study of young violinists, performance researcher Anders Ericsson found that the best ones all practiced the same way: in the morning, in three increments of no more than 90 minutes each, with a break between each one. Ericcson found the same pattern among other musicians, athletes, chess players and writers.

For the first several books I wrote, I typically sat at my desk for 10 or even 12 hours at a time. I never finished a book in less than a year. For my new book, The Way We’re Working Isn’t Working, I wrote without interruptions for three 90 minute periods, and took a break between each one. I had breakfast after the first session, went for a run after the second, and had lunch after the third. I wrote no more than 4 1/2 hours a day, and finished the book in less than six months. By limiting each writing cycle to 90 minutes and building in periods of renewal, I was able to focus far more intensely and get more done in far less time.

The counterintuitive secret to sustainable great performance is to live like a sprinter. In practice, that means working at your highest intensity in the mornings, for no more than 90 minutes at a time before taking a true break. And getting those who work for you to do the same.

Obviously, it’s not possible for every employee to work in multiple uninterrupted 90-minute sprints, given the range of demands they face. It is possible for you as a leader and managers to make a shift in the way you manage your energy, and to better model this new way of working yourself. Make it a high priority to find at least one time a day–preferably in the morning–to focus single-mindedly on your most challenging and important task for 60 to 90 minutes. Encourage those who work for you to do the same.

In addition, encourage your employees to take true renewal breaks intermittently through the day. It’s possible to get a great deal of renewal in a very short time. Try this technique, for example:

Build a more rhythmic pulse into your workdays and you’ll increase your own effectiveness and your satisfaction. Support this way of working among those you manage and you’ll fuel both loyalty and huge competitive advantage.

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Category: Philosophy

New Year’s Resolution: MIT OpenCourseWare

Exercise, Lose Weight,  Quit Smoking or Drinking, Pay down debt, Stop [insert nasty habit here] . . . The typical New Year’s resolutions are well intentioned but hollow gestures, forgotten by February. May I suggest something that might be longer lasting and more fruitful resolution? Knowledge. Pick an area of study that truly interests you,…Read More

Category: Philosophy

Handbook for Life: 52 Tips for Happiness and Productivity

Around this time of year, people begin making New Year’s resolutions. They are invariably doomed to failure for the same reason most diets don’t work: One-offs fail to change the underlying habits and beliefs that drive our daily behaviors. That is why I found this list of Zen Habits by Leo Babauta so enchanting. The…Read More

Category: Philosophy, Weekend

This Small Blue Marble

NASA calls the photo below (via Good) “the most detailed true-color image of the entire Earth to date.” It is a spectacular reminder of the small blue marble called planet Earth, and what we humans can accomplish when we cooperate and work together towards a common goal. Regardless of your beliefs system or chosen faith,…Read More

Category: Philosophy, Science, Technology

QOTD: Give a man a gun . . .

A friend sends this quote, which I really like but have been unable to verify: ‎ “Give a man a gun and he can rob a bank. Give a man a bank and he can rob the world.” -Jim Trotter Can any one confirm that is a real quote by Mr. Trotter?

Category: Legal, Philosophy