diversification reflex

Risk selection is not about blind diversification, it is about right kind of diversification.

At Urbanstat, once we geocode our clients' policies, the resulting geographical visualisation dazzles the risk managers who have been thinking in the tabular format for years. Rightly so, they feel as if they have been blind for years. 

Their first reaction often has to do with how the company can finally handle their diversification goals more accurately. Now that they can see everything on a map, they can modify their sales goals to create the perfectly-uniform geographic distribution they have been after.

Of course, this uniformity business is exactly the opposite of Urbanstat's thesis. The whole point of our geographical approach is to bring out the unseen non-uniformities and help insurers adjust their portfolio allocations accordingly.

Blind diversification works well only after all the known unknowns are factored out. Left with the remaining unknown unknowns, there is in fact nothing to do but to distribute all the bets evenly.

Everything else being equal, the density of bets in a certain region should be lesser than the one in a less risky region. After all why assume greater risk for the same price unless all the sale opportunities in the less risky region are exhausted?

socialness, consciousness and smartness

Degree of Socialness

While humans can easily handle fourth-order intentionality chains like "I think that X thinks that Y thinks that Z thinks something", nonhuman primates seem to be capable of handling only first or second-order intentionality chains. This difference is thought to correspond to our greater social skills. (No wonder why “four” is often taken as an optimum number of active characters in any given movie scene. Spectators desire to be stimulated to the upper bound of their capabilities.)

The degree of mind-simulation capability determines the size of the Dunbar's number, which for humans is 150 and defined as the "cognitive limit to the number of people with whom one can maintain stable social relationships—relationships in which an individual knows who each person is and how each person relates to every other person."

Some people are apparently even capable of handling sixth-order intentionality chains. In other words, they are both physically and mentally six degrees away from any other person in the world. (i.e. They can mentally simulate their entire social network one-intentionality-chain at a time.)

Children start to demonstrate theory of mind at roughly around the same time that they start to recognise themselves in the mirror. “You have to be aware of yourself in the first place in order to begin to take into account what other people may know, want, or intend to do,” Gallup says. He notes that people with schizophrenia often cannot recognise themselves in the mirror, and they struggle with theory of mind as well.

What Do Animal See in a Mirror? - Chelsea Wald

We understand others via empathy which is the ability of put oneself in other's place. Hence, it is not surprising that you are able to recognise yourself in the mirror only once you are able to formulate first-order intentionality chains. (You are literally projecting yourself onto your reflection.)

In the time between the original Homo species and ourselves, the brain doubled in size. A disproportionate share of that growth occurred in the frontal lobe, and so it stands to reason that the frontal lobe is the location of some of the specific qualities that make humans human. What does this expanded structure do to enhance our survival ability to a degree that might have justified nature's favouring it? ...In addition to regions associated with motor movements, the frontal lobe contains a structure called prefrontal cortex. "Prefrontal" means, literally, "in front of the front" and that's where the prefrontal cortex sits, just behind the forehead. The prefrontal cortex is responsible for planning and orchestrating our thoughts and actions in accordance with our goals, integrating conscious thought, perception and emotion; it is thought to be the seat of our consciousness.

Subliminal - Leonard Mlodinow (Page 102-103)

The fact that the size of a species' neocortex as a percentage of its whole brain is correlated with the size of its social group implies that the relationship between self-consciousness and intentionality chains extends to higher orders too.

By the way, isn't it poetic that we feel a tender desire to touch our foreheads with the loved ones? We are literally trying to merge our consciousnesses!

Degree of Consciousness

Since consciousness is just a model of the brain itself (as pointed out in the previous blog post), we expect the volume reserved to consciousness (presumably the neocortex) to grow at the same rate as the volume of the whole brain (what is being modelled). Relative increases in the size of the neocortex as a percentage of the whole brain could be due to improvements in the fidelity of the models themselves. 

Hence, one could define "higher degree" of consciousness as any of the following equivalent statements:

• Higher fidelity cognitive models

• Less information being lost during the cognitive modelling processes

• Higher number of nested past selves one can be cognisant of at any given moment in time

Armed with this definition, the conclusion of the previous section can be rephrased as follows: The more "copies" of ourselves available to us at any given moment in time, the deeper we can simulate other minds. In other words, conscientiousness and consciousness are in some sense the same thing.

Degree of Smartness

Remember the old blog post on empathy and truth?

There we claimed that empathy allows one to get closer to truth since understanding takes place through causal statements like "A -> B" and these statements can be internalised only by literally putting ourselves in places of whatever A and B are. In other words, mental simulation of inanimate phenomena uses the same principle as that of social phenomena.

The aim of science is not things themselves, as the dogmatists in their simplicity imagine, but the relations among things; outside these relations there is no reality knowable.

- Henri Poincare

What the great mathematician Poincare is saying here is that all understanding is relational. A and B literally have to be taken as black boxes. The only thing that we can probe is the relationship between them as depicted by the arrow sign "->". (Note that this is the essence of Category Theory.)

In some sense, the conscious self is the most canonical black box at our disposal. (We can not peek into the pronoun "I".) By projecting ourselves onto A, we temporarily replace A with "I" to gain an understanding of A's relationship with other objects.

Summing up, the degrees of all of the following are correlated via the notion of empathy:

• Socialness - as defined by the experimentally-measurable maximum-length of intentionality chains one is capable of simulating

• Consciousness - as defined by the experimentally-inaccessible maximum-number of nested past selves one can be cognisant of at any given moment in time

• Smartness - as defined by the experimentally-measurable maximum-length of causality chains one is capable of simulating

domains of cognition

Did you know that emotions correspond to certain bodily states which precede the actual experience of emotions? (Read this interview with Lisa Feldman Barrett) 

Similarly, the instructions we send back to the body upon feeling a certain emotion embark on their journey before we become conscious of them.

The complete correspondence between physical phenomena and cognitive models is as follows:

• Environment <-> Perceptions
• Body <-> Emotions
• Brain <-> Consciousness

By definition, modelling involves reduction in information content. Just like we can not perceive our environment at its entirety, we can not be conscious of every single activity going on inside our brains. (Remember that evolution optimises for survival, not understanding.)

The discovery of the unconscious was traumatic. Similarly, we resisted the idea that there could be stuff out there that lie beyond our perceptions. (e.g. micro organisms, atomic particles, electromagnetic waves) Each such traumatic cultural acceptance process was followed by an outburst of mesmerisation and imagination. A grand belief in mystery reemerged and many speculative phenomena got ascribed to the newly discovered inaccessible realms.

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The cognitive models exhibit nestedness, just like the physical phenomena they model. But the order of nestedness is inverted and the relationships are mediated via causality rather than spatiality.

• Environment > Body > Brain
• Perceptions <- Emotions <- Consciousness

Perceptions are affected by emotions. The domain of attention changes as the emotional state does.

Both emotions and perceptions are affected by the states of consciousness. For instance, you experience a lot more stuff when you are awake than when you are deep asleep.

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You may be wondering how a brain can model itself. Would that not amount to creating a recursive loop? The model of the brain is part of the brain and therefore it too needs to be inside the model. But how can a model be inside itself?

In the timeless world of mathematics, recursions instantly turn into monstrous creatures. But in the world of physics, recursions take place in time and their behaviour get tamed.

A model of the brain at time t contains a model of the brain from time t-1. In other words, consciousness is like a Russian matryoshka doll which has (due to the enormous information loss happening at each step of modelling) a very small number of nested units.

extremity of randomness

Hell is not the most tormenting space. Limbo is.

Uncertainty is unbearable for the human psyche. Torture methods that involve randomisations are the worst. For instance, releasing water droplets onto someone's forehead at random intervals apparently drives people insane. (Disordered raindrops have a calming effect on rough oceans. It has the opposite effect on brain waves since our natural resting state itself is actually pretty wavy.)

Reward mechanisms also perform best when they involve randomisations: 

Whether the subject is a pigeon, rat, or person, Skinner found, the strongest way to reinforce a learned behaviour was to reward it on a random schedule.

- How Designers Engineer Luck Into Video Games (Simon Parkin)

In other words, randomisation has an overall amplification effect, making the negative more negative and positive more positive.

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Although we are not good at psychologically guarding ourselves against randomised suffering, we are very good at offloading our psychological suffering onto random factors. (For instance, we consistently underestimate the role of chance in our successes and overestimate it in our failures.)

We can not offload the pain associated with randomised suffering back to random factors because stories can be deformed only after the fact, not when they are unfolding in realtime.

truth and happiness

Happiness hides inside echo chambers, meanwhile truth lies outside the boxes. Happiness is a calm stasis. Truth is an endless struggle. These two concepts are as incompatible as any two concepts can get.

It is not a coincidence that the world's greatest oppressors have oppressed in the name of truth.

We have a natural inclination to care about happiness, not truth. Structures that require us to care about truth (e.g. company boards, research institutions) are cognitively repugnant since their very functionality is based on constancy of cognitive dissonance.

Truth emerges from balance and integration across many points of view, and therefore is boring. Truth in fact should be boring. (That is why the click-bait way of doing science is so dangerous.) Hence it never goes viral. You literally need to put a fight to spread truth around. Happiness on the other hand is automatically viral because it gets amplified with further synchrony.

stages of writing

Each post here goes through several stages:

Seeding

The idea is almost never born when I am sitting down in front of the screen for the purpose of writing here. It is born either in an irrelevant context completely spontaneously or while I am reading or talking about something related. At this stage, I quickly jot down something on Simplenote without paying attention to form or grammar.  I often mix Turkish and English and let everything pour out with minimal friction. This allows me to have maximum linguistic access to the initial raw and fluid idea.

Maturating

I let these drafts mature for weeks and sometimes for months. (I can do this because most of the material I write here is not based on current events.) As I mentioned in a previous post, test of time is the best way of separating the wheat from the chaff. 

Pruning

At random intervals I go back to the pipeline of drafts and delete those that no longer seem original, insightful, useful or sensical.

Harvesting

This is the most painful stage for me since I am not terribly good with words. First, I select some drafts that are ready to be harvested. Second, I decide on a single language for each draft. (For some reason, I find myself choosing Turkish for dirty, emotional and passionate stuff, and English for clean, logical and calm stuff.) Third, I flesh out the draft in the most readable and minimal form. While writing the post, I start interacting with the text itself. Things get deleted, new insights get born. This is a truly chaotic process which can be mastered only through repeated practice. (As you get better at it, you find yourself being lured away by anti-theses and enlightened by missing symmetries lurking inside the textual structure.)

Polishing

I return to the published posts a few days later to see if they can be improved further. I often end up modifying, adding and deleting a few sentences here and there.

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‘Why am I putting this idea here?’ ‘Might it not be better in an earlier section of the piece?’ ‘Should I be giving a definition here rather than simply an illustration?’ Such questions can help craft a compelling and coherent piece of text, though they can be tiresome and even painful. This is why, unlike being in flow, writing is not particularly autotelic. One writes not because writing is rewarding, but rather because one feels compelled, or one has something one needs to say, or even, because it will feel so good when it’s done. As Billy Joel told The New York Times in 2013: ‘I love having written; but I hate writing.’

- Against Flow (Barbara Gail Montero)

producing electrons

Many Turkish conglomerates invested in electricity production. Some of these projects imploded for obvious reasons. What is amazing is that these conglomerates see no risk in producing electricity, while they see tremendous risk in producing new technologies for producing electricity.

Quantum Mechanics says that you can not distinguish one electron from another. In other words, a market can not get more commoditised than this. Since everyone is a small player, a producer can not exert any control over the market price neither. The only way it can increase profit margins is by controlling the costs, in other words, by innovating on the production side.

başarının tanımı (take 2)

Burak - Bir şeyi merak ettim. Başarılarınızı tasdik ettirmek veya sadece iyi hissetmek için başkalarının takdirini arzular mısınız? Doğru düşündüğünüz yolda, kimse bir şey demese de ilerler misiniz?

Tarık - Bence yaptığın şeyin başarılı olduğunu düşündüğün anda zaten beyninde simüle ettiğin "diğerlerinin" takdirini alıyorsun / aldığını düşünüyorsun. Hayat temelinde anlamsız. Üst üste bindirilmiş, birbirine bağlanmış Quantum Field'lardan ibaret. Başarı, mutluluk gibi kavramlar ya şu anki toplumsal dinamiklerin ya da geçmişte yaşanan toplumsal dinamiklerin (evrimin yarattığı taşıyıcı araçlarla) bugüne taşınması sonucu ortaya çıkan kavramlar.

Burak - Yani o zaman, sen bu olagelen kavramların bilincinde ve bilfiil ihtiyacındasın, ama yüzeyde pek göstermiyor, kendi içinde mastürbasyon yapıyorsun :)

Tarık - Aynen. Dilin kendisi bile sosyal bir olgu zaten. Matematik dışındaki dilin tamamı, daha doğrusu. (Anlam içeren şeyler zaten matematik dışındaki kümede üretiliyor.) Yani birbirimizin hayatını anlamlı kılıyoruz. Matematiksel Quantum Field'lar bir sikimi anlamlı kılmıyor.

Burak - Muhtacız birbirimize ve sözlerimize...

Tarık - Muhtaçlık bence one-point-more bir ilişki. Topluma karşı durmak bayağı stresli, zor bir süreç... Ergenlik yaşları bunun bir simülasyonu resmen. Aile içi simülasyonu, daha doğrusu. İlk ailene karşı durmayı öğreniyorsun. Tabi bu korunaklı bir simülasyon, ailen ebeni sikmez çünkü hiç bir zaman. Topluma kafa tumak ise one-point-more bir olay.

Toplumu ileri götüren insanların büyük bir çoğunluğu başarısız damgası yemiş adamlar hayatlarında. Mozart öldüğünde mezarına sadece 2-3 müzisyen gelmiş. Galileo'yu az daha asıyormuşuz, Alan Turing'i kısırlaştırmaya kalkmışız. Buradan anla işte başarının toplumsal bir olgu olduğunu ve zamanla değişebileceğini.

Kapitalizmin yükselişi de toplumsal değer yargılarındaki paradigmatik kırılımlara denk geliyor. Şu an startupların yükselişi de... Toplum girişimciliğe status yükledikçe gençler saldırıyor. Eskiden yatırım bankacılığına saldıran mallar şimdi startuplara saldırıyor. Sivrisinek gibi bir nevi... En iyi okullardan mezun tipler bu tarz dinamiklere daha kötü kendilerini kaptırıyorlar, çünkü zaten o okullara girmek için yırtınmak da benzer patolojilerin ürünü.

Bu arada startuplara ve inovasyona verilen toplumsal değer ekonominin kötü gittiği dönemlere denk geliyor genelde. Toplum kendini inovasyonla krizden kurtarmaya çalışıyor.

Umut - Hayırdır Burak, büyük kararların arifesinde misin :)

Tarık - Evet Burak, hayırdır? Kafan karışıksa toplumun istediğini yap, mutlu olacaksın. %100 garantili!

Çınar - Bence Tarık güzel özetlemiş ama başkalarını siklemediğin ve tamamen kişisel tatmin üzerinden yaptığın çok şey var. Ayrıca takdir demokratik değil. Elalemin seni takdir etmesi belki önemli olmayabilir. Belki yakınındaki 1-2 kişi dünyalar demek... Belki de bu sayı bazı konularda sıfıra iniyor ve olay tamamen kişisel zevk meselesine dönüyor.

Bence iş daha çok parasal ve profesyönel konularda kitleselleşiyor ve dolayısıyla takdir edilmek başarıyla eş anlamlı hale geliyor.

Tarık - Aynen. Sana yakınlığına göre kişinin seni takdir ediyor olmasının önemi artıyor herhalde. O yüzden insanlar çevrelerini benzer kafada insanlarla sarmayı seviyorlar, cemaatlere katılıyorlar vs. Yani ya adapte oluyorsun ya da adapte olmana gerek kalmamasını sağlıyorsun.

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P.S. Başarının tanımı (take 1) için bu bağlantıyı takip edin.

oppression, depression and selection

Political oppression creates selective pressures on the wanna-be politicians. Only the politically savvy can survive the oppressor and rise up to bring him down. Similarly economic depressions create selective pressures on the wanna-be entrepreneurs and breed great entrepreneurial talent.

This is essentially why the best politicians and entrepreneurs always come from the most fucked up countries. Developed countries should open their doors to them without exerting further selective pressures via tough immigration policies. It is almost guaranteed that these guys will flourish given the right favourable environments.

originality and friction

Ideas are amazingly overvalued in the startup world.

Even in precise and theoretical disciplines (e.g. math, physics), a tremendous amount of propaganda is required to get an original idea accepted. Some of the greatest ideas get pushed into the fringes and stay there for decades, either to be rediscovered later by someone with more social capital or to be entirely erased from the collective memory.

In the imprecise and pragmatic world of startups, it should be even tougher for an original idea to propagate since there are additional executional hurdles on top of the already existing social frictions. (If an entrepreneur encounters only executional hurdles, then he should question the originality of his ideas.)

Hence there is no need to panic about a truly original startup idea to be stolen etc.