Epsilon Theory In Full

Epsilon Theory In Full

 

The soul of Epsilon Theory is our long-form content, a library of hundreds of pieces written by Ben, Rusty and others over the course of the last 5+ years. These are the print-and-take-home-for the weekend notes that made Epsilon Theory what it is today.

Figaro

By Rusty Guinn | October 23, 2018 | 5 Comments

In Part 4 of the Three-Body Alpha series, we explore how Narrative may shape the tendencies of certain trend-following strategies – and how investors should respond. We also talk Tesla, if you’re into that sort of thing.

They ALL Came in Through the Bathroom Window

By Rusty Guinn | October 23, 2018 | 5 Comments

When reading news, especially financial news, be vigilant for strings of causality. Most financial events are extremely overdetermined.

O God, Make Me Humble

By Rusty Guinn | October 22, 2018 | 9 Comments

We have built industry standards around minimizing the appearance of risk. As a result, we now have an epidemic of ability-signaling, when what we really need is humility.

Funding Secured

By Ben Hunt | October 21, 2018 | 2 Comments

Shifting Common Knowledge on Saudi Arabia has infected the narrative around SoftBank’s Vision Fund, which in turn places unicorn valuations at risk.

The Tells of Fiat News

By Rusty Guinn | October 20, 2018 | 1 Comment

The mechanics of effective storytelling and the tells of Fiat News are very similar. Add knowledge of them to your news-reading arsenal.

The Grammar of Risk

By Rusty Guinn | October 19, 2018 | 4 Comments

Take it from a list of terrible pop songs (and one OK, if overrated song from the Doors): lessons that provide an answer instead of a process are usually lessons badly taught and badly learned.

Investment Diligence and the Cornelius Effect

By Rusty Guinn | October 18, 2018 | 8 Comments

Nobody likes to admit it, but the investment industry hires and invests with the smartest-seeming people that seem sufficiently likable. And it doesn’t work.

Putting the Real Back Into Realpolitik

By Ben Hunt | October 18, 2018 | 4 Comments

“Order should not have priority over freedom. But the affirmation of freedom should be elevated from a mood to a strategy.” Yes, please.

Saudi Arabia and the Common Knowledge Game

By Ben Hunt | October 16, 2018 | 26 Comments

An historic night it was.A pleasure to have a private dinner with the Crown Prince of Saudi Arabia, Mohammed bin Salman, his royal family and…

Locusts’ Lament

By Rusty Guinn | October 15, 2018 | 4 Comments

There is a huge gap in the narrative and language used to describe private equity and hedge funds. Even when it is correct, it calls for caution in our discussions and decision-making.

Why Ben Sasse Loses the Game of You

By Ben Hunt | October 15, 2018 | 7 Comments

The Ben Sasse Cartoon does not match the Ben Sasse life, and that’s a politically existential problem here in the Widening Gyre.

Dogs, Dog Food, and the Curse of Some Talent

By Ben Hunt | October 14, 2018 | 20 Comments

The thing is, Butch, right now you got ability. But painful as it may be, ability don’t last. You came close but you never made it. And if you were gonna make it, you would have made it before now.

We Were Soldiers Once … And Young

By Ben Hunt | October 13, 2018 | 38 Comments

Two emails from soldiers, both asking questions that I can’t answer alone. We need a pack.

When Good Words Go Bad

By Rusty Guinn | October 13, 2018 | 2 Comments

Sometimes the meanings of words change. Sometimes that doesn’t mean anything. Sometimes it does.

Why Am I Reading This NOW? 10/12/2018 Edition

By Rusty Guinn | October 12, 2018 | 0 Comments

A brief selection of stories from my daily news routine that made me wonder: “Why am I reading this now?”

Complacency and Concern in Robo-Land

By Rusty Guinn | October 11, 2018 | 3 Comments

When it comes to robo-advisors, there is a wide gulf between common knowledge within the industry and without. I’m not sure what that means yet, but it means something.

The Narrative Giveth and The Narrative Taketh Away

By Ben Hunt | October 11, 2018 | 1 Comment

The growing strength and coherence of Narrative Machine visualizations show the creation of powerful common knowledge around inflation, where everyone knows that everyone knows that inflation is rearing its very ugly head.

Notes from the Diamond #2: Until the Truth Comes Out

By David Salem | October 11, 2018 | 2 Comments

Part 2 of a multi-part series that seeks to enhance readers’ deployment of both human and financial capital through the exploration of parallels between money management and professional baseball.

Gell-Mann Amnesia

By Ben Hunt | October 10, 2018 | 5 Comments

“Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray’s case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them.

In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.”

Et in Arcadia ego

By Rusty Guinn | October 10, 2018 | 4 Comments

Your time horizon is not infinite. Your institution’s time horizon is not infinite.